02/12/2019

Why Repeal Of The Individual Mandate Hasn’t (Yet) Brought ObamaCare’s Death Spiral

Michael Tanner, The New York Post

As you file your tax returns this year, you will be asked whether or not you had health insurance during 2018. If your answer is “No,” you could be subject to a penalty of up to $2,085 per family.

Fortunately, this will be the last year that Americans will face punishment for failing to comply with ObamaCare’s individual mandate. That’s because President Trump’s 2017 tax reform effectively ended the mandate, starting next year. In typical Washington fashion, Congress didn’t exactly repeal the mandate, instead setting the penalty at zero starting in 2020.

The individual mandate was always the least popular part of ObamaCare, and with good reason. The idea that government can force Americans to buy a product is offensive to American liberty. And the mandate itself leads to a host of problems, such as forcing Americans into expensive insurance plans with benefits that they may not want or need.

But repealing the individual mandate while leaving the rest of ObamaCare intact also demonstrates the incoherence of Republican efforts to reform health care. That’s because the individual mandate was part of ObamaCare in the first place primarily as a mechanism for dealing with problems stemming from a much more popular aspect of ObamaCare — its ban against denying coverage for preexisting conditions.

“Preexisting condition” is simply another name for “people who are already sick.” Insurers will necessarily lose money by providing benefits to those sick people. Therefore, they must offset those losses by charging healthy people higher premiums than they otherwise would.

That’s one reason why average premiums shot up under ObamaCare. But faced with these excessively high premiums, younger and healthier Americans may choose to forgo insurance altogether. That could destabilize insurance markets, causing an “adverse selection death spiral” of rising premiums and a smaller, sicker pool of the insured.

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