The Republican tax bill is a betrayal of the president’s promise to provide affordable “insurance for everybody” that is “every bit as good on pre-existing conditions as Obamacare.” Republicans last week passed a tax plan that repeals the Affordable Care Act’s individual mandate under the guise of restoring consumer choice that the law supposedly stripped away. This is a canard: Repealing the individual mandate will curtail insurance options and price many Americans out of the market, all for the sake of a 20% corporate tax rate.
The Affordable Care Act (ACA), more commonly known as Obamacare, prohibits insurance companies from charging higher premiums based on health status and pre-existing conditions. This popular aspect of the ACA comes at a cost: The exchanges need a pool of healthy enrollees to subsidize older and sicker Americans. The individual mandate balances the risk pool by requiring all Americans to buy health insurance or pay a fine, with some exceptions. As people sign up for insurance, the federal government provides income-linked subsidies to defray premium costs. So, despite raising some revenue from mandate penalties, the federal government ends up paying more as premium support. In order to keep the tax bill under its $1.5 trillion ceiling, Republicans proposed to repeal the ACA’s individual mandate—saving just over $330 billion in federal spending over 10 years.
Repealing the individual mandate means fewer people will sign up for health insurance—13 million according to the Congressional Budget Office (CBO)—and the government will pay out less in premium support. The calculus is clear—tax cuts for the wealthiest Americans will be paid for by providing less support for working families to buy health insurance. Indirectly, however, people who need insurance the most—older, less healthy Americans—will subsidize tax cuts via higher premiums.
Without a mandate, the exchange population will trend older and sicker. Without a balanced risk pool, premiums will spike—at least 10% in most years according to the CBO. Importantly, the ACA’s subsidies will mitigate financial hardship for Americans making under 400% of the federal poverty level, about $98,400 for a family of four. But families above that threshold—who are by no means poor, but certainly not rich—will be thrown to the wolves. Although they will not necessarily be paying higher taxes to support corporate tax cuts, they will be stuck paying higher premiums as a result of the mandate repeal. In many cases, families will be priced out of the insurance market entirely—people can’t choose to buy what they can’t afford.
The GOP tax bill is a bomb lobbed in to the heart of the U.S. health care system. It willingly ignores the dynamics of insurance markets. Under the flag of free markets and consumer choice, the bill guts choice for millions of middle-class Americans to pay for regressive tax cuts.
Ezekiel Emanuel is vice provost for global initiatives, Diane v.S. Levy and Robert M. Levy university professor, and chair of the Department of Medical Ethics and Health Policy at the University of Pennsylvania. Aaron Glickman is a policy research analyst in the Department of Medical Ethics and Health Policy at the University of Pennsylvania.