Saturday, February 7, 2015

Weakening Obamacare’s Individual Mandate–And the Law

A New York Times article last weekend explained how the administration has moved to lessen the impact of Obamacare’s individual mandate “to avoid a political firestorm.” But there is a cost to taking political cover: President Barack Obama’s executive actions to blunt the mandate’s impact on the public will give future administrations an opportunity further to undermine the mandate and, with it, much of the health-care law.

This tax filing season brings the first enforcement of two main Obamacare provisions: the repayment of excess insurance subsidies received by individuals and the individual mandate. As I wrote in a Think Tank post last month, the complex provisions, and the Internal Revenue Service’s limited resources for customer assistance, are likely to result in headaches for millions of Americans.

To cushion the blow, the Treasury Department has administratively created exemptions to the individual mandate beyond the numerous exemptions written into the Affordable Care Act itself. The Times reported “more than 30 types of exemptions from the penalty for not having insurance.” The administration released data suggesting that, while as many as 6 million people will face the mandate penalty, up to five times as many—15 million to 30 million Americans—will receive exemptions from it.

Creating numerous exemptions for political reasons could cause policy headaches down the road. One could occur if insurers believe the mandate has become ineffective at drawing in healthy individuals and, fearing an influx of costly, sicker patients, decide to exit the exchanges en masse. It’s also possible that a future administration—relying on the Obama administration’s unilateral actions on health care and immigration—could create additional exemptions or other forms of leniency for mandate violators, thereby hastening the insurer exodus.

In the 2008 Democratic primaries, then-Sen. Obama famously opposed the individual mandate, citing its application in Massachusetts: “There are people who are paying fines and still can’t afford [health insurance], so now they’re worse off than they were. They don’t have health insurance and they’re paying a fine.” But after having embraced the mandate in 2009 to ease Obamacare’s passage, the administration is now trying to avoid the political dilemma Mr. Obama described seven years ago. Whether and how it does so will have far-reaching policy implications for voters, future administrations, and the future of the law.

This post was originally published at the Wall Street Journal Think Tank blog.