GOP Health Insurance Alternatives May Wind Up Using Penalties Like The Mandate

The Affordable Care Act's requirement that people have health insurance or pay a fine is one of the least popular provisions of the law, and one that Republicans have pledged to eliminate when they repeal and replace Obamacare.

But take a look at some of the replacement proposals that are floating around and it becomes clear that the "individual mandate," as it's called, could still exist, but in another guise.

First, though, the health law's mandate doesn't actually require people to have insurance. Instead, it imposes a tax penalty on most people if they don't have coverage. In 2016, the penalty is the greater of $695 per person or 2.5 percent of household income.

Unpopular as the tax penalty is, it's ultimately what makes possible the very popular provision of the law that prohibits insurers from turning people down for coverage because they have preexisting medical conditions that might make them expensive to insure. The mandate is designed to make sure healthy people buy coverage so that insurers aren't left only with customers who are sick.

President-elect Donald Trump has signaled that he would like to find a way to keep the ban on preexisting conditions. But requiring insurers to accept all comers means they need a way to coax people into buying and keeping insurance before they develop expensive conditions like diabetes or cancer. In other words, they need a mandate.

Health policy wonks point out that the individual mandate was originally a Republican idea, advocated by academics and conservative thinkers as a way to avoid a government-run single-payer system. "The purpose of it was to round up the stragglers who wouldn't be brought in by subsidies," said Mark Pauly, a University of Pennsylvania economist, in a 2011 interview. He co-authored a Health Affairs study in 1991 that aimed to persuade then-President George H.W. Bush to adopt a universal health care requirement.

The drafters of Obamacare incorporated the individual mandate concept because they hoped to get Republicans on board, said Sara Rosenbaum, a professor of health law and policy at George Washington University in Washington, D.C.

Republicans generally accept that some sort of incentive is necessary to help stabilize the insurance market in whatever system they propose as an alternative to the health law. In a policy paper released last summer, House Speaker Paul Ryan proposed creating a one-time open enrollment period during which people could sign up for coverage regardless of their health. As long they stay enrolled in coverage in the individual or group market, they wouldn't be charged higher rates if they get sick. If they don't sign up during that open enrollment period, though, those protections don't apply, and people could face higher premiums and health care costs if they were to buy insurance.

"It's a soft mandate," said Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank. "You must get in now to get this treatment."

But health policy analysts say that a one-time open enrollment period, whether it's one month or three months in length, isn't enough.

"Such stringent limits on open enrollment ignore the complexities of individuals' lives," said Linda Blumberg, a senior fellow at the Urban Institute's Health Policy Center. People lose their jobs, get into car accidents, and they may not understand the implications of dropping coverage for a while. "The penalty on these folks would potentially be enormous," she said.

Another option to nudge people to get insurance is to impose a penalty on premiums if they don't sign up at a designated time, for example, when they turn 26 and no longer qualify for their parents' coverage.

This option would be similar to the rules for Medicare Parts B and D that cover outpatient services and prescription drugs, respectively. People who don't sign up for Medicare Part B when they're first eligible, for example, are charged an additional 10 percent of the premium for every year that they could have enrolled but didn't.

But Medicare is different in important ways from the individual insurance market, said Sabrina Corlette, research professor at Georgetown University's Center on Health Insurance Reforms. When people sign up for Medicare, they're generally enrolling for the rest of their lives. In contrast, people may move in and out of the individual market a number of times over their lives as they change jobs or leave the Medicaid program, for example.

"It's much more difficult to determine what their first opportunity to sign up was," Corlette said.

There are ways to get people to sign up using a carrot rather than a stick, including increasing the subsidies people receive for coverage, said Corlette.

But Trump has not yet signaled much about his replacement plan, including the extent to which subsidies or other financial assistance would be available under a new health care program.

Kaiser Health News is an editorially independent news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. Michelle Andrews is on Twitter:@mandrews110.