Thursday, November 16, 2017

Replacing the individual mandate with auto-enrollment, part II

A week ago, I suggested that the wide availability of free bronze plans in 2018 for subsidy-eligible potential ACA marketplace enrollees opens a window for replacing the individual mandate with auto-enrollment of the uninsured, a measure that's popped up in various Republican bills and conservative repeal-and-replace proposals.

That was tongue-in-cheek, since the House and Senate tax cut bills make it obvious that Republicans are not interested in using current federally budgeted dollars to insure more people. They'd rather give the subsidy money to the wealthy via tax cuts.

That said, a fact brought to my attention by Politico's Dan Diamond does boost the case for auto-enrollment. 80% of the 6.7 million households that paid the mandate penalty in 2016 (for tax year 2015) had incomes below $50,000 -- that is, near the subsidy eligibility threshold for a single person, $48,240. Many of those households with incomes over $50,000 are also doubtless subsidy eligible. (On the other hand, a good number of those with incomes in subsidy range may have been disqualified for subsidies by an offer of insurance from an employer. Kaiser estimates that 3.7 million are rendered subsidy-ineligible for this reason.)

IRS tables show that payers of the mandate penalty in tax year 2015 were pretty heavily concentrated at income levels where free bronze plans are common this year:

According to estimates from Oliver Wyman, in most counties nationwide, a 48 year-old with an income of 150% FPL has access to free bronze coverage in 2018. That threshold is $18,090 for a single adult, $24,360 for two adults and $36,900 for a family of four. My spot check of the counties with highest enrollment in 2017 indicates that free bronze is widely available for 40 year-olds with incomes up to 200% FPL -- $32,480 for a two-person household.

According to Kaiser estimates, 7.9 million uninsured in 2016 were eligible for premium subsidies. At present, Kaiser estimates, 54% of people in this situation can access free bronze plans, and 70% can access a plan for less than the cost of the tax penalty they're subject to if they go uninsured. At the same time, 6.8 million uninsured who are eligible for Medicaid and CHIP (Kaiser's 2016 estimate) could also be auto-enrolled, given political will to overcome formidable logistical challenges (will that is obviously lacking).

Put it all together, and approximately*  12.3 million of the 14.7 million uninsured who are eligible for government help -- 84% -- could be auto-enrolled at no financial loss to themselves.

This year, plans are available at lower cost than in past years for subsidized enrollees, but at much higher cost for the unsubsidized -- 2018 is the second straight year of outsized premium hikes, over 20%. In 2017, Kaiser estimated 6.7 million unsubsidized enrollees were in ACA-compliant plans. A number of them may be priced out of the market this year -- though most of those priced out, as I suggested in my last post, will likely be exempt from the mandate penalty because the cheapest available plan will cost more than the 8.05%-of-income affordability threshold. Nonetheless, I would expect the income distribution of mandate penalty payers to shift upward this year, thanks to higher individual market enrollment at low incomes, and lower enrollment among the unsubsidized.

* Allowing for some slight discrepancy arising from mixing Kaiser's estimates of the uninsured in 2016 with its estimate of the percentage of the current uninsured population that could access free or very cheap bronze plans.

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