There's no way around it: We are looking at massive hikes in health-insurance rates for coverage under the Affordable Care Act (ACA) unless states take action. That's the consequence, now that Congress and President Trump have repealed Obamacare's individual mandate penalties and the Trump administration is proposing other changes. If the federal law's accomplishments in getting millions more Americans insured are going to be maintained, states must enact their own initiatives.
Last December, when the Republicans repealed the mandate penalty, they touted it as a victory for individual freedom. Now the GOP has its eyes set on "alternative coverage arrangements," including extending short-term health insurance options. They envision these as an appealing alternative to ACA-compliant plans for healthy people because they carry lower premiums -- due to skimpier coverage.
To some, this may sound tempting. However, an Urban Institute report projects that the combination of the mandate penalty repeal along with the availability of these skimpier coverage options will cause an exodus of healthy people from ACA risk pools and lead to premium increases of more than 18 percent; preliminary rate filings in some states are far exceeding that mark. State governments, insurers and consumers should be concerned about what the individual health-insurance market will look like in 2019; these new incentives will exacerbate premium increases because many healthy people will drop out of the insurance risk pools. We need them in the risk pools. Insurance can't just cover the sick.
The fortunate news is that state governments have a number of levers at their disposal to provide incentives for people to maintain ACA-compliant coverage in the absence of a federal mandate penalty. Insurance is still primarily regulated by state insurance commissioners' offices, which can take steps to strengthen the individual markets by regulating health plans and setting enrollment rules.
Some states are drafting legislation with creative approaches to implementing state-based individual mandates. We need to pay close attention to these changes at the state level to see where the successes -- and failures -- lie.
Massachusetts has had an individual mandate since its predecessor to the ACA, known as "Romneycare," was enacted in 2006, and polls indicate that most residents are willing to pay this price for robust coverage in their state. In May, New Jersey passed a state-based individual-mandate law that will go into effect in 2019, making it the second state to have such a requirement. Vermont's legislature also passed a bill that borrows provisions from the ACA to ease the transition to a state-based mandate. Unlike the New Jersey law, there are still details to work out, and it will not go into effect until 2020.
There are other levers. At the end of May, Maryland passed three bills aimed at keeping health-insurance costs down. These laws establish a health care reinsurance program, temporarily fund it by collecting a tax on health insurers that the federal government allowed to temporarily lapse, and apply for a federal waiver to provide long-term funding. They also require a state panel to explore the possibility of an individual mandate. The laws, intended to stabilize premiums, were considered an emergency need: Maryland was looking at health-insurance hikes of 50 percent or higher through its ACA exchange. Other states, including California, Hawaii and Illinois, have introduced or passed laws to regulate the sale of short-term health insurance plans, a provision that some states already had in place.
Different states will require different approaches. The availability of resources to administer enforcement varies widely. Local politics will have a strong impact on the feasibility of implementing an individual mandate, as will the income of residents and local prices of insurance. No matter the approach, state officials have an imperative to recognize the adverse effects that the federal mandate penalty repeal and other actions can wreak on insurance markets and consumer health coverage.
By anticipating these issues and building regulatory mechanisms tailored to their own markets and populations, they can protect the coverage gains from the ACA, prevent their markets from falling into death spirals, and protect their constituents from skimpy and predatory insurance policies and practices.