Mandate Will Not Affect Most

The fight over the individual mandate has been so loud that people may think it will hit nearly everyone, whether they can afford health insurance or not.

But what’s usually overlooked is that the health reform law has so many exemptions that millions of Americans are likely to be off the hook, including a wide range of middle-class Americans. Most Americans already have coverage that satisfies the mandate. And for the rest, the law would create rich subsidies that would help pay for coverage, even for families earning more than $90,000 a year.

In fact, the mandate would be most likely to hit about 25 million people when it takes effect in 2014 — many of whom are younger, healthier people who were taking the chance of going without health insurance even though they might have been able to afford it — according to MIT economist Jonathan Gruber. That’s out of 272 million nonelderly people.

The mandate has become a powerful political symbol of the Affordable Care Act — Exhibit A of what the law’s critics call government overreach. And the Supreme Court will decide whether Congress overstepped its constitutional powers. But the volume of the debate is out of proportion to the number of people who would actually be affected.

“I think this is a point that the law’s supporters haven’t emphasized enough: The mandate really applies to a select set of people,” said Gruber, who consulted on both the national law and Mitt Romney’s health care overhaul in Massachusetts, which has its own mandate.

Even Joe Antos of the American Enterprise Institute, a critic of the law, plays down the actual impact of the mandate.

“I would say it would affect nobody,” Antos said. He said Republicans’ dislike of the requirement has much more to do with their opposition to “the federal government telling you to do something that is your personal business” than the fear that the mandate will force millions of people to buy something they don’t want.

The poorest Americans are technically exempt from the mandate. But under the law’s Medicaid expansion, which also begins in 2014, they would get essentially free coverage anyway — because the program would cover people with incomes up to 133 percent of the federal poverty level. That would be about $30,000 for a family of four if the law were in effect this year.

Those with incomes between 133 percent and 400 percent of poverty — between around $30,000 and $92,000 for a family of four this year — will have to get insurance, but the law provides substantial subsidies to help make it more affordable.

Families at the bottom of this range would have to pay only 3 percent to 4 percent of their income in premiums, while those at the top would have to pay 9.5 percent. The federal government picks up the rest of the tab.

But the law recognizes that premiums may still be higher than even higher- income people can afford. So anyone who would have to pay more than 8 percent of their income for health insurance would be exempt from the mandate — and this includes some who earn near 400 percent of poverty and qualify for some subsidies.

That means there would be a large income range where people wouldn’t have to comply with the mandate at all. A recent Kaiser Family Foundation simulation found that, starting at about $61,000 a year, a family of four would be exempt from the mandate. And the mandate wouldn’t kick in again until a family brought home more than $150,000 a year.

There are also exemptions for certain religious groups that object to medical insurance, Native American tribes and undocumented immigrants who are also ineligible for premium subsidies.
The mandate was designed to ensure that people didn’t avoid paying into the health insurance system when they were healthy. The Obama administration and insurers fear that if the mandate is taken away but the requirement that insurers cover everyone who asks for it stays in place, premiums will skyrocket because only sicker, more costly people will enroll in coverage.

But the number of people who will actually be affected is likely to be relatively small, at least compared with the rest of the population. The Congressional Budget Office estimated that 80 percent of the 272 million nonelderly people would be insured in 2014 even without the law. (Elderly people get coverage through Medicare.)

And a recent analysis by Gruber found that about half of the remainder will be exempt from the mandate. That leaves the roughly 25 million people he believes will have to comply.

In Massachusetts, where the concept was pioneered under the law enacted by Romney, Gruber said it was mostly intended to ensure that wealthier, younger and healthier people paid into the system instead of hoping they could get by without coverage. It also encouraged people who had turned down their employers’ insurance to sign up.

Just 1 percent of the state’s residents paid the penalty in 2009, and 70 percent of people who were uninsured that year were exempt from the requirement.

Some experts question whether the mandate is actually strong enough to have more than a modest effect on enrollment because the federal penalty won’t be that costly — at least compared with the cost of health coverage. When it’s fully phased in, the penalty will be $2,085 or 2.5 percent of family income, whichever is greater.

In contrast, the Kaiser Family Foundation notes that a “bronze” plan — the cheapest health plan people will be able to buy in 2016 — is expected to cost $12,000 to $12,500 for families.