The Independent Institute


Unpopular Individual Mandate Fails to Make People Buy Insurance

Just before Christmas, Congress voted to deficit fund Obamacare by imposing moratoria on a number of Obamacare taxes that are unpopular with interest groups. Left in place was the unpopular individual mandate to buy health insurance, which has no organized interest to lobby against it. Nevertheless, it is the most unpopular part of Obamacare.

The New York Times reports that a number of relatively high-income earners are choosing to remain uninsured, or even drop Obamacare coverage, and pay the fine instead:

Rachel Kulus, 46, opts to keep antibiotics in her medicine cabinet rather than buy health insurance through the California exchange.

“I do not believe it serves the public good to entrench private insurance programs that put actual care out of reach for those they purport to serve,” she said.

Ms. Kulus, who works for a small marketing firm outside San Diego, paid about $300 a month for an exchange plan. But when she injured her back and wanted physical therapy, she was offended to learn she would have to pay for it in full because of her plan’s $6,000 deductible.

“I just went on YouTube and tried to figure it out on my own,” she said. She added that her auto insurance included personal injury protection, so “anything catastrophic will hopefully happen in the car.”

Ms. Kulus estimates that she will pay a penalty of $750 for flouting the individual mandate last year, and $950 in 2016.

(Abby Goodnough, “Many See I.R.S. Penalties as More Affordable Than Insurance,” New York Times, January 3, 2016.)

People’s willingness to swallow the penalty is driven by the fact that the plans are not worth the money. Plus, if they get sick they can enroll without penalty at the next annual open enrollment. (This is something they could not do in the pre-Obamacare individual insurance market. In most states, if they became sick, they would have been charged a much higher than standard premium.)

Unsurprisingly, the ability to wait and enroll when sick means that Obamacare will leave behind far more uninsured people than originally estimated. The Congressional Budget Office’s March 2010 estimate figured 26 million uninsured in 2015 and 23 million in 2019. The March 2015 estimate figured 35 million uninsured in 2015 and 26 million in 2019.

Further, the estimate of the non-elderly population has dropped: In March 2010, CBO figured 276 million in 2015 and 282 million in 2019. In March 2015, the 2015 estimate was 270 million and the 2019 estimate was 275 million. In other words, the CBO’s estimate of uninsured in 2015 has increased over five years from 9 percent of the non-elderly population to 13 percent.

The March 2015 estimate of 26 million uninsured in 2019, an increase of just 3 million from the March 2010 estimate, appears very optimistic. The 2015 estimate deteriorated by 9 million people (over one quarter of the original estimate) as we approached the actual year; and it is hard to see what about Obamacare is going to improve and help attract more enrollees in future years.

The opportunity to repeal and replace Obamacare with patient-centered health reform is as good as it has ever been.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.

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