REPORT JULY 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs? Linda J. Blumberg Matthew Buettgens John Holahan Institute Fellow, Health Policy Center Senior Fellow, Health Policy Center Institute Fellow, Health Policy Center Urban Institute Urban Institute Urban Institute ABSTRACT KEY TAKEAWAYS ISSUE: The Tax Cuts and Jobs Act of 2017 eliminated the financial penalty States can implement their own of the Affordable Care Act’s individual mandate. States could reinstate individual insurance mandates to a similar penalty to encourage health insurance enrollment, ensuring replace the federal mandate, as broad sharing of health care costs across healthy and sick populations to Massachusetts and New Jersey stabilize the marketplaces. have done already. If all remaining states implemented individual GOAL: To provide state-by-state estimates of the impact on insurance mandates, the number of coverage, premiums, and mandate penalty revenues if the state were to uninsured would fall by 3.9 million adopt an individual mandate. in 2019 and 7.5 million in 2022. METHODS: Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) is used to estimate the coverage and cost impacts of state- With individual mandates in specific individual mandates. We assume each state adopts an individual place in every state, marketplace mandate similar to the ACA’s. premiums would fall by 11.8 FINDINGS AND CONCLUSION: If all states implemented individual percent on average in 2019. mandates, the number of uninsured would be lower by 3.9 million in 2019 and 7.5 million in 2022. On average, marketplace premiums would Changes in health insurance be 11.8 percent lower in 2019. State mandate penalty revenues would coverage and premium rates amount to $7.4 billion and demand for uncompensated care would be would vary by state. Premiums $11.4 billion lower. The impact on coverage and on premiums varies in would decrease by 21 percent in significant ways across states. For example, in 2019, the number of people New Mexico but by less than 5 uninsured would be 19 percent lower in Colorado and 10 percent lower percent in Alaska. The number of in California if they implemented their own mandates. With mandates uninsured people would decrease in place, average premiums would be 4 percent lower in Alaska and 15 by 19 percent in Colorado and by percent lower in Washington. 10 percent in California. How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?2 BACKGROUND are provided nationally as if every state adopted its own One of the Affordable Care Act’s central aims was to reform individual mandate and for 48 states and the District of insurance markets by sharing health care risks and costs Columbia (but excluding Massachusetts and New Jersey more broadly across the healthy and sicker populations. because they have their own mandates under current law), Strategies to accomplish this goal include modified assuming each state adopts a penalty structure similar to community rating, guaranteed issue, and benefit that of the ACA. We do not anticipate every state taking standards, with the greatest changes made to nongroup this approach, but present findings this way for ease of insurance markets. Spreading risks tends to decrease exposition and as a reference point for understanding the effects of the mandate. (A full description of our methods costs for people with medical needs and increase them is available below.) for healthy people. As a consequence, financial incentives to become and remain insured regardless of health status are necessary to ensure the risk pool is large and KEY FINDINGS stable. The ACA established the individual responsibility Our central estimates assume that state mandates are requirement — also referred to as the individual implemented in each state as soon as the federal penalties mandate — to require most people to enroll in minimum are eliminated in 2019. The effect of a mandate grows over essential health care coverage or pay a tax penalty. The time as health care costs grow relative to incomes; we Tax Cut and Jobs Act of 2017 sets the ACA’s penalties for show some of our results in 2022 to illustrate this. State individuals who remain uninsured to $0, beginning in 2019. mandates would have two central effects. First, more people would retain insurance coverage to avoid the The Congressional Budget Office (CBO) estimated that penalty. Second, premiums in the nongroup market would eliminating the individual mandate penalties would lead be lower because the insurance pool will not lose healthy to an additional 3 million uninsured people in 2019.1 It people that would otherwise drop their coverage without also estimated that premiums in the nongroup insurance a mandate. As a result, even more people will enroll market will increase by 15 percent between 2018 and because of the lower premiums. 2019. Because of the elimination of mandate penalties, fewer healthy people are estimated to enroll in nongroup insurance; thus, the average nongroup insurance enrollee National Distribution of Health Insurance will be more likely to have higher health care expenses. Coverage, 2019 As a result, premiums will be higher. Other pending If all states adopted a mandate, the number of uninsured changes, such as expansion of short-term, limited- would fall by 3.9 million people, a decrease of 11.4 duration plans, are expected to worsen the nongroup percent (Exhibit 1). The uninsured rate would decline risk pool and increase premiums as well. The changes, from 12.4 percent of the nonelderly (i.e., under age 65) taken together, may lead to some insurers ending or to 11.0 percent. About 452,000 additional people would limiting their participation in ACA-compliant nongroup enroll in employer-sponsored insurance (through their insurance markets.2 Acting on these concerns, some states own employer or a family member’s) with the mandates have considered or passed legislation to implement state- in place. Another 1.2 million people would enroll in specific individual mandates.3 New Jersey enacted its nongroup coverage with subsidies. Another 1.7 million individual mandate on May 30, 2018;4 Massachusetts did so people would enroll in marketplace or nonmarketplace nongroup coverage without federal subsidies. Finally, in 2006, well before the passage of the ACA. 623,000 additional people would enroll in Medicaid This analysis provides estimates of the effects of state- or the Children’s Health Insurance Program (CHIP). In specific individual mandates on insurance coverage, most cases, these will be children; when parents apply nongroup insurance premiums, federal and state for marketplace coverage, they find out their children government spending (including penalty revenue to are eligible for Medicaid or CHIP. (See box below for states), and demand for uncompensated care. Findings comparison with CBO estimates.) commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?3 Exhibit 1. Health Insurance Coverage Distribution of the Nonelderly (thousands of people), 2019 Current Law Compared to Scenario with Individual Mandate Adopted in Each State With state Percentage- Current law individual mandates Change point change Insured 240,186 87.6% 244,093 89.0% 3,907 1.4% Employer 148,665 54.2% 149,117 54.4% 452 0.2% Nongroup (with tax credits) 7,999 2.9% 9,152 3.3% 1,153 0.4% Nongroup (without tax credits) 6,005 2.2% 7,684 2.8% 1,679 0.6% Medicaid/CHIP 68,944 25.1% 69,567 25.4% 623 0.2% Other (including Medicare) 8,574 3.1% 8,574 3.1% 0 0.0% Uninsured 34,130 12.4% 30,223 11.0% –3,907 –1.4% Total 274,316 100.0% 274,316 100.0% 0 0.0% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Health Insurance Coverage by Income, 2019 family has access to affordable employer coverage, they For people with incomes below 138 percent of the federal are not eligible for other public health insurance, and they poverty level,5 the number of uninsured would fall by are legal residents. About two-thirds of the 1.8 million 582,000 people, or 3.8 percent, with the state mandates in additional insured would take up nongroup insurance place (Exhibit 2). The relatively small effect in this group, coverage. The remainder would be roughly split between a 0.7 percentage-point drop in the share of nonelderly people enrolling in Medicaid or CHIP (mostly children people uninsured, occurs because most people in this who would enroll in CHIP) and employer-sponsored cohort are eligible for Medicaid or large marketplace insurance. People who are only eligible for smaller subsidies, depending on where they live. Since they are marketplace subsidies — that is, those at the higher end of eligible for free or very-low-cost insurance with minor or the income scale — or ineligible for subsidies are the most no out-of-pocket requirements and most are exempt from likely to be affected by a mandate, meaning they are most the individual mandate because of income level, they are likely to become uninsured or face significantly larger the least likely to drop coverage when the federal penalties premiums to retain coverage. end and the least likely to take it up when a state penalty is For those with incomes above 400 percent of poverty, put in place. 1.5 million fewer people would be uninsured with the Among people with incomes between 138 percent and state mandates in place, a decrease of 33.4 percent. In 400 percent of poverty, 1.8 million fewer people would be this income group, about 78 percent of the otherwise uninsured with the state mandates in place, a reduction uninsured would take up nongroup insurance coverage of 12.7 percent. People in this income group are eligible with the state mandates. Almost all of the remainder for marketplace subsidies in every state if no one in the would enroll in employer-sponsored insurance coverage. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?4 Exhibit 2. Distribution of Health Insurance Coverage (thousands of people) by Income Group, 2019 Current Law Compared to Scenario with Individual Mandate Adopted in Each State Panel A. Nonelderly with Income Under 138% FPL With state Percentage- Current law individual mandates Change point change Insured 72,529 82.5% 73,112 83.1% 582 0.7% Employer 13,768 15.7% 13,608 15.5% –161 –0.2% Nongroup (with tax credits) 1,806 2.1% 2,085 2.4% 279 0.3% Nongroup (without tax credits) 683 0.8% 868 1.0% 185 0.2% Medicaid/CHIP 53,522 60.9% 53,802 61.2% 279 0.3% Other (including Medicare) 2,750 3.1% 2,750 3.1% 0 0.0% Uninsured 15,421 17.5% 14,838 16.9% –582 –0.7% Total 87,950 100.0% 87,950 100.0% 0 0.0% Panel B. Nonelderly with Income of 138%–400% FPL With state Percentage- Current law individual mandates Change point change Insured 90,572 86.5% 92,373 88.2% 1,801 1.7% Employer 64,927 62.0% 65,219 62.3% 292 0.3% Nongroup (with tax credits) 6,193 5.9% 7,067 6.7% 874 0.8% Nongroup (without tax credits) 1,676 1.6% 1,976 1.9% 300 0.3% Medicaid/CHIP 13,904 13.3% 14,239 13.6% 335 0.3% Other (including Medicare) 3,872 3.7% 3,872 3.7% 0 0.0% Uninsured 14,147 13.5% 12,346 11.8% –1,801 –1.7% Total 104,719 100.0% 104,719 100.0% 0 0.0% Panel C. Nonelderly with Income Above 400% FPL With state Percentage- Current law individual mandates Change point change Insured 77,084 94.4% 78,608 96.3% 1,524 1.9% Employer 69,969 85.7% 70,290 86.1% 321 0.4% Nongroup (with tax credits) 0 0.0% 0 0.0% 0 0.0% Nongroup (without tax credits) 3,646 4.5% 4,841 5.9% 1,195 1.5% Medicaid/CHIP 1,517 1.9% 1,526 1.9% 9 0.0% Other (including Medicare) 1,952 2.4% 1,952 2.4% 0 0.0% Uninsured 4,563 5.6% 3,039 3.7% –1,524 –1.9% Total 81,647 100.0% 81,647 100.0% 0 0.0% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Note: FPL = federal poverty level. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?5 Health Insurance Coverage by State, 2019 In Texas, the number of uninsured people would fall With its own mandate in place, California would see a by 483,000. We estimate that 410,000 more people reduction of 389,000 uninsured (10.3%) in 2019 (Exhibits would enroll in nongroup coverage, and 48,000 more 3 and 4). About 60 percent of this decrease is attributable would enroll in employer coverage. Texas has not to otherwise uninsured people enrolling in nongroup expanded Medicaid eligibility under the ACA and has coverage. There also would be an increase in Medicaid and not aggressively undertaken marketplace outreach and CHIP coverage of 167,000 people. enrollment assistance. As a result, coverage gains have been smaller than average. The effects of reinstating the In New York, the number of uninsured would fall by mandate would be relatively small as well. 142,000, with the bulk coming from people taking up nongroup coverage. The effect in New York is smaller in Beyond Massachusetts and New Jersey, two states — percentage terms than in many other states because the Hawaii and Vermont — and the District of Columbia have state offers the Essential Plan (a Basic Health Program), explored implementing their own individual mandates. with lower premiums and cost-sharing for people They would see reductions in the number of uninsured between 138 percent and 200 percent of poverty. This residents of 8,000, 4,000, and 5,000, respectively. plan already encourages greater retention of coverage, regardless of mandates. Exhibit 3 PercentPercent Change in Numberof Uninsured Following Implementation of a State Individual Exhibit 3. Change in Number of Uninsured Following Implementation of a Mandate, 2019 State Individual Mandate, 2019 WA –16.9% NH: –18.8% ME MT ND VT: –12.6% –14.1% –23.7% –22.0% OR –16.7% MN ID –10.8% WI NY MA: 0.0% –15.3% SD WY –10.8% –12.7% –10.2% –15.9% MI –14.1% RI: –19.0% IA PA CT: –16.0% NV NE –10.8% –16.6% –13.3% –11.2% IL OH NJ: 0.0% UT –11.5% –16.0% CA IN DE: –9.8% –11.3% CO –12.6% WV –10.3% –19.2% KS –22.4% VA MD: –15.8% MO KY –12.3% –9.9% –12.2% –21.2% DC: –14.3% NC TN –12.0% AZ OK AR –12.5% –11.0% SC NM –9.9% –16.4% –10.5% State mandate in place –16.0% AL GA MS –9.9% State mandate proposed –8.8% –7.9% AK TX –8.9% LA No state mandate –14.3% –17.4% HI FL –7.4% –11.6% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Note: New Jersey and Vermont have its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. the course of 2019 with implementation in 2020. Data: Urban Institute analysis of both recently passed legislation; Vermont’s legislation requires specification of the penalties during Connecticut,Jersey and Vermont have both recently passed legislation; all considered or are continuing tospecification own legislation. See Daniathe course of 2019 withand Justin Note: New the District of Columbia, Hawaii, Maryland, and Washington have Vermont’s legislation requires consider their of the penalties during Palanker, Rachel Schwab, Giovannelli, “State Efforts to Pass Individual Mandate Requirements AimHawaii, Maryland, and Washington have all considered or are continuing to consider14, 2018. legislation. implementation in 2020. Connecticut, the District of Columbia, to Stabilize Markets and Protect Consumers,” To the Point (blog), Commonwealth Fund, June their own See Dania Palanker, Rachel Schwab, and Justin Giovannelli, “State Efforts to Pass Individual Mandate Requirements Aim to Stabilize Markets and Protect Consumers,” To the Point (blog), Commonwealth Fund, June 14, 2018. Source: Linda J. Blumberg, Matthew Buettgens, and John Holahan, How Would State–Based Individual Mandates Affect Health Insurance Coverage and Premium Costs? (Commonwealth Fund, July 2018). commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?6 Exhibit 4. Difference and Percent Difference in Insurance Coverage (by type of coverage) by State (thousands of people), 2019 Current Law Compared to Scenario with Individual Mandate Adopted in Each State Employer Nongroup Medicaid and CHIP Uninsured Percent Percent Percent Percent Difference difference Difference difference Difference difference Difference difference from from from from from from from from current law current law current law current law current law current law current law current law Alabama 2 0.1% 42 24.4% 5 0.5% –48 –7.9% Alaska 3 0.7% 10 70.9% 2 1.0% –14 –14.3% Arizona 22 0.7% 67 36.7% 8 0.5% –97 –11.0% Arkansas 4 0.3% 23 31.1% 11 1.2% –38 –16.4% California –10 –0.1% 232 12.8% 167 1.4% –389 –10.3% Colorado 15 0.6% 54 27.9% 32 2.5% –101 –19.2% Connecticut 8 0.4% 17 12.0% 8 1.1% –33 –16.0% Delaware 0 0.1% 6 21.8% 1 0.5% –7 –9.8% District of Columbia 2 0.7% 1 6.7% 2 1.1% –5 –14.3% Florida 24 0.3% 221 12.7% 63 1.7% –307 –11.6% Georgia 11 0.2% 158 34.2% 13 0.7% –182 –9.9% Hawaii 1 0.2% 7 18.1% 0 0.0% –8 –7.4% Idaho 4 0.5% 24 21.5% 7 2.3% –35 –15.3% Illinois 26 0.4% 102 20.4% 15 0.6% –143 –11.5% Indiana 9 0.3% 63 32.2% 6 0.5% –78 –12.6% Iowa 4 0.2% 15 18.7% 2 0.4% –21 –10.8% Kansas 4 0.3% 31 24.6% 2 0.4% –38 –9.9% Kentucky 10 0.5% 28 26.5% 15 1.1% –53 –21.2% Louisiana 8 0.4% 42 30.2% 15 1.1% –65 –17.4% Maine 1 0.1% 13 19.8% 1 0.3% –15 –14.1% Maryland 10 0.3% 43 19.3% 16 1.3% –69 –15.8% Michigan 11 0.2% 83 21.7% –4 –0.2% –90 –14.1% Minnesota 17 0.5% 34 19.7% –4 –0.5% –46 –10.8% Mississippi 2 0.2% 35 47.2% 2 0.3% –40 –8.8% Missouri 9 0.3% 63 25.1% 13 1.3% –86 –12.2% Montana 1 0.2% 9 17.9% 9 3.5% –19 –23.7% Nebraska 5 0.5% 18 17.1% 1 0.3% –23 –11.2% Nevada 5 0.3% 35 35.2% 14 2.2% –54 –13.3% New Hampshire 2 0.3% 13 26.5% 1 0.5% –16 –18.8% New Mexico 5 0.7% 18 35.8% 11 1.5% –34 –16.0% New York 49 0.5% 93 8.0% 0 0.0% –142 –10.2% North Carolina 12 0.3% 122 24.6% 41 2.0% –174 –12.0% North Dakota 3 0.9% 7 16.4% 1 1.3% –11 –22.0% Ohio 21 0.4% 93 30.4% 7 0.3% –121 –16.0% Oklahoma 10 0.6% 53 40.2% 3 0.5% –66 –9.9% Oregon 11 0.6% 34 21.6% 8 0.8% –53 –16.7% Pennsylvania 23 0.4% 98 20.4% 1 0.1% –123 –16.6% Rhode Island 1 0.2% 7 16.6% 3 1.0% –11 –19.0% South Carolina 0 0.0% 56 28.1% 13 1.5% –70 –10.5% South Dakota 3 0.7% 9 21.4% 0 0.3% –12 –10.8% Tennessee 4 0.1% 60 24.6% 38 2.7% –103 –12.5% Texas 48 0.4% 410 37.2% 25 0.5% –483 –8.9% Utah 11 0.6% 29 13.2% 2 0.5% –42 –11.3% Vermont 1 0.3% 3 9.6% 0 0.0% –4 –12.6% Virginia 19 0.4% 112 26.8% 6 0.6% –137 –12.3% Washington 13 0.4% 63 27.8% 28 1.7% –104 –16.9% West Virginia 1 0.2% 14 53.8% 9 1.8% –24 –22.4% Wisconsin 7 0.2% 48 18.5% 3 0.3% –58 –12.7% Wyoming 1 0.5% 11 47.6% 0 0.7% –13 –15.9% Total 452 0.3% 2,832 21.3% 623 0.9% –3,907 –11.7% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Note: Table excludes Massachusetts and New Jersey. Massachusetts has its own individual mandate under current law, and New Jersey’s individual mandate is expected to go into effect in 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?7 Marketplace Premiums, 2019 Exhibit 5 shows the changes in marketplace premiums Exhibit 5. Marketplace Monthly Single Premium by state that would result from each state implementing for a 40-Year-Old Adult, Current Law and with an individual mandate. We use monthly benchmark State Individual Mandates, 2019 single premiums for a 40-year-old to illustrate the effect, With state Percent Current law individual mandates change although the percentage change in premiums would Alabama $630 $550 –13.5% be the same for any age and any coverage level because Alaska $760 $730 –4.4% Arizona $580 $510 –12.2% of the ACA’s fixed age-rating curves and uniform risk Arkansas $410 $360 –13.9% pool. On average, the state mandates would reduce California $470 $410 –12.4% Colorado $510 $430 –15.5% marketplace premiums by 11.8 percent if all states Connecticut $590 $530 –10.2% adopted the ACA’s federal individual mandate structure. Delaware $670 $590 –11.6% District of Columbia $360 $300 –16.0% The impact of the mandate varies somewhat across states Florida $530 $470 –11.1% (Exhibit 6). States with larger shares of healthy people Georgia $560 $490 –13.2% Hawaii $500 $460 –8.4% who have enrolled in coverage under the ACA because Idaho $530 $470 –12.2% of the mandate will experience larger premium declines Illinois $560 $490 –12.3% Indiana $390 $330 –14.9% if it is reinstituted at the state level. For example, states Iowa $850 $740 –12.2% with more people who either receive small tax credits Kansas $550 $480 –13.1% Kentucky $470 $390 –16.7% or no credits (based on higher income levels) will tend Louisiana $540 $490 –10.7% to have large declines. This is because enrollees who pay Maine $630 $560 –10.7% Maryland $520 $450 –13.5% the full premium themselves tend to have lower health Michigan $420 $360 –12.5% care expenses than those getting tax credits. In turn, Minnesota $420 $380 –9.1% people in better health and those who have to pay more Mississippi $540 $500 –7.5% Missouri $580 $510 –11.3% for coverage are most likely to go uninsured without a Montana $580 $520 –11.1% mandate. Nebraska $860 $750 –12.5% Nevada $540 $460 –15.5% New Hampshire $540 $460 –13.7% States with the highest marketplace enrollment rates New Mexico $490 $380 –21.1% tended to attract healthier enrollees even among those New York $550 $490 –9.9% North Carolina $690 $610 –11.7% eligible for tax credits. Therefore, the average health North Dakota $360 $300 –15.4% care risk of the subsidized populations varies by state Ohio $410 $360 –13.1% Oklahoma $730 $650 –11.0% and will lead to differential individual mandate effects. Oregon $450 $390 –13.4% Because of their Basic Health Programs, New York and Pennsylvania $590 $520 –12.8% Rhode Island $360 $310 –14.5% Minnesota can be expected to see less of an effect in their South Carolina $580 $520 –10.7% marketplaces if a mandate were implemented. States South Dakota $560 $490 –12.5% with small nongroup insurance markets are likely to Tennessee $830 $730 –12.2% Texas $460 $400 –13.6% experience large effects from changes in the number of Utah $620 $540 –12.7% enrollees. Premiums would decrease by 21.1 percent in Vermont $570 $500 –11.4% Virginia $590 $530 –11.4% New Mexico and by 15 percent or more in Colorado, the Washington $390 $330 –15.1% District of Columbia, Kentucky, Nevada, North Dakota, West Virginia $600 $510 –15.0% Wisconsin $590 $540 –9.7% Washington, and West Virginia. Premiums would fall Wyoming $970 $860 –11.4% by less than 10 percent in Alaska, Hawaii, Minnesota, Total $530 $470 –11.8% Mississippi, New York, and Wisconsin. Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Notes: Monthly premium amounts are rounded to the nearest $10. Table excludes Massachusetts and New Jersey. Massachusetts has its own individual mandate under current law, and New Jersey’s individual mandate is expected to go into effect in 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?8 Exhibit 6 PercentPercent Change in AverageNongroup Premium Following Implementation of a Exhibit 6. Change in Average Nongroup Premium Following Implementation of a State Individual Mandate, 2019 State Individual Mandate, 2019 WA –15.1% NH: –13.7% ME MT ND VT: –11.4% –10.7% –11.1% –15.4% OR –13.4% MN ID –9.1% WI NY MA: 0.0% –12.2% SD WY –12.5% –9.7% –9.9% –11.4% MI –12.5% RI: –14.5% IA PA CT: –10.2% NV NE –12.2% –12.8% –15.5% –12.5% IL OH NJ: 0.0% UT –12.3% –13.1% CA IN DE: –11.6% –12.7% CO –14.9% WV –12.4% –15.5% KS –15.0% VA MO KY MD: –13.5% –13.1% –11.3% –11.4% –16.7% DC: –16.0% NC TN –11.7% AZ OK AR –12.2% –12.2% SC NM –11.0% –13.9% –10.7% State mandate in place –21.1% AL GA MS –13.2% State mandate proposed –7.5% –13.5% AK TX –13.6% LA No state mandate –4.4% –10.7% HI FL –8.4% –11.1% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Note: New Jersey and Vermont have both recently passed legislation; Vermont’s legislation requires specification of the penalties during the course of 2019 with implementation in 2020. Connecticut, the Districtanalysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Data: Urban Institute of Columbia, Hawaii, Maryland, and Washington have all considered or are continuing to consider their own legislation. See Dania Palanker, Rachel Schwab, and Justin Giovannelli, “State Efforts to Pass Individual Mandate Requirements Aim to Stabilize Markets and Protect Consumers,” To the Pointthe penalties during the course14, 2019 with Note: New Jersey and Vermont have both recently passed legislation; Vermont’s legislation requires specification of (blog), Commonwealth Fund, June of 2018. implementation in 2020. Connecticut, the District of Columbia, Hawaii, Maryland, and Washington have all considered or are continuing to consider their own legislation. See Dania Palanker, Rachel Schwab, and Justin Giovannelli, “State Efforts to Pass Individual Mandate Requirements Aim to Stabilize Markets and Protect Consumers,” Source: Linda J. Blumberg, Matthew Buettgens, and John Holahan, How Would State–Based Individual Mandates Affect Health Insurance Coverage To the Point (blog), Commonwealth Fund, June 14, 2018. and Premium Costs? (Commonwealth Fund, July 2018). Federal and State Health Care Spending, 2019 of subsidized people enroll and federal spending drops The flow of federal dollars would increase to most states somewhat. As a result, relative to current law, federal as more people enrolled in Medicaid or took advantage of health care spending in California would decrease by marketplace premium tax credits (Exhibit 7). In general, $356 million, or 0.7 percent, in Florida by $690 million or 3 with more coverage, there is more federal spending. percent, and in Michigan by $137 million, or 1 percent. On However, in 21 states, federal spending actually declines the other hand, Louisiana would see an increase in federal if there is a mandate in place because of a decrease in health care spending of $92 million or 1.3 percent, and premiums due to healthier people enrolling in nongroup Texas would see an increase of $396 million or 1.4 percent. coverage. With a mandate, average premiums would Spending for the state-financed portion of Medicaid and decrease with the entrance of healthier people into the CHIP would increase by $1.1 billion nationally in 2019 market, and since the premium subsidies are computed (Exhibit 8). The changes in state spending are small in based on a standard premium, the average subsidy would percentage terms across all the states, with 41 states and fall at the same time. In these 21 states, the lower average the District of Columbia experiencing an increase of premium subsidies offset the fact that larger numbers 1 percent or less. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?9 Exhibit 7. Federal Spending ($ millions) Current Law Compared to Scenario with Individual Mandate Adopted in Each State Current law With state individual mandates Difference Tax credits Total Total Total Medicaid and federal Medicaid federal federal Percent and CHIP subsidies spending and CHIP Tax credits spending spending change Alabama 3,695 1,287 4,982 3,718 1,261 4,979 –3 –0.1% Alaska 1,067 113 1,180 1,076 152 1,227 47 4.0% Arizona 9,623 830 10,453 9,693 884 10,577 124 1.2% Arkansas 4,937 258 5,195 4,994 252 5,246 51 1.0% California 42,738 6,856 49,594 43,239 5,999 49,238 –356 –0.7% Colorado 5,328 468 5,796 5,413 492 5,905 109 1.9% Connecticut 4,225 630 4,854 4,256 566 4,822 –32 –0.7% Delaware 1,222 160 1,382 1,228 153 1,382 –1 0.0% District of Columbia 1,404 5 1,409 1,417 5 1,422 13 0.9% Florida 13,777 9,419 23,196 14,020 8,486 22,507 –690 –3.0% Georgia 7,788 2,884 10,672 7,851 2,924 10,775 103 1.0% Hawaii 973 124 1,097 974 136 1,110 13 1.2% Idaho 1,451 519 1,970 1,481 511 1,993 22 1.1% Illinois 7,735 2,107 9,842 7,791 1,994 9,785 –58 –0.6% Indiana 8,061 476 8,537 8,110 461 8,571 34 0.4% Iowa 3,069 536 3,605 3,080 546 3,626 21 0.6% Kansas 1,455 532 1,987 1,461 559 2,020 32 1.6% Kentucky 8,356 442 8,798 8,426 453 8,879 81 0.9% Louisiana 6,736 620 7,357 6,817 632 7,449 92 1.3% Maine 1,405 535 1,940 1,407 490 1,897 –43 –2.2% Maryland 6,067 794 6,861 6,120 749 6,869 9 0.1% Michigan 13,075 1,142 14,216 13,053 1,026 14,080 –137 –1.0% Minnesota 6,411 432 6,843 6,381 421 6,802 –41 –0.6% Mississippi 3,964 434 4,398 3,985 554 4,539 141 3.2% Missouri 6,641 1,484 8,125 6,714 1,574 8,288 163 2.0% Montana 1,966 362 2,329 2,002 318 2,320 –8 –0.4% Nebraska 930 936 1,866 932 888 1,821 –45 –2.4% Nevada 2,815 433 3,248 2,860 413 3,272 25 0.8% New Hampshire 841 221 1,062 843 207 1,051 –11 –1.0% New Mexico 4,954 194 5,148 5,014 196 5,211 63 1.2% New York 23,700 4,418 28,118 23,695 3,919 27,615 –503 –1.8% North Carolina 11,011 4,006 15,018 11,227 3,948 15,175 157 1.0% North Dakota 503 56 559 505 50 554 –5 –0.9% Ohio 13,934 774 14,708 13,977 848 14,826 118 0.8% Oklahoma 3,419 1,293 4,713 3,432 1,347 4,779 66 1.4% Oregon 5,605 611 6,216 5,642 590 6,232 16 0.3% Pennsylvania 14,183 2,337 16,520 14,199 2,137 16,336 –184 –1.1% Rhode Island 1,148 82 1,230 1,158 71 1,229 –1 –0.1% South Carolina 3,883 1,273 5,156 3,942 1,335 5,276 120 2.3% South Dakota 568 217 785 569 211 780 –5 –0.6% Tennessee 7,180 2,221 9,401 7,346 2,324 9,670 268 2.9% Texas 24,360 4,856 29,216 24,476 5,136 29,612 396 1.4% Utah 2,368 1,252 3,619 2,377 1,146 3,524 –96 –2.6% Vermont 1,148 105 1,254 1,150 89 1,239 –15 –1.2% Virginia 4,291 2,558 6,848 4,314 2,485 6,798 –50 –0.7% Washington 7,594 572 8,166 7,710 554 8,264 98 1.2% West Virginia 2,738 198 2,936 2,775 166 2,941 5 0.2% Wisconsin 3,931 1,423 5,355 3,937 1,324 5,262 –93 –1.7% Wyoming 310 257 567 312 272 583 16 2.9% Total 314,586 63,740 378,327 317,100 61,255 378,354 28 0.0% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. Note: Table excludes Massachusetts and New Jersey. Massachusetts has its own individual mandate under current law, and New Jersey’s individual mandate is expected to go into effect in 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?10 Individual Mandate Penalties, 2019 Exhibit 8. State Medicaid & CHIP Spending ($ millions) Exhibit 9 shows the number of tax units (i.e., families) Current Law Compared to Scenario with Individual Mandate that would pay individual mandate penalties in each Adopted in Each State state and the revenue states would collect. While the With state Difference in 2019 penalty structure is assumed to be the same in each state, Current individual Percent low-income states have fewer residents as a percentage law mandates Amount of total Alabama 1,676 1,686 10 0.6% of their total populations who would be subject to the Alaska 715 720 4 0.6% mandate. In addition, low-income families who are subject Arizona 4,006 4,021 15 0.4% Arkansas 1,538 1,549 11 0.7% to the mandate are assessed smaller penalties, so poorer California 27,818 28,063 245 0.9% states will collect less. Also, residents in some states have Colorado 3,132 3,170 37 1.2% Connecticut 2,973 2,989 16 0.5% shown they are less likely to enroll in coverage when Delaware 737 738 2 0.2% the mandate is in place. Nationally, in 2019, 8.8 million District of Columbia 507 509 2 0.5% families would pay individual mandate penalties; the Florida 9,452 9,610 159 1.7% Georgia 3,915 3,945 30 0.8% aggregate penalties would amount to $7.4 billion if every Hawaii 660 661 1 0.1% state instituted its own mandate. This reflects an average Idaho 564 576 11 2.0% Illinois 5,863 5,873 10 0.2% mandate penalty across all states of $830 per family. Indiana 2,758 2,767 9 0.3% Average penalties per family range from a high of $1,270 Iowa 1,601 1,603 2 0.1% in Delaware to a low of $630 in West Virginia. The largest Kansas 1,050 1,054 4 0.4% Kentucky 2,252 2,267 16 0.7% states will collect the most revenue from the penalties. Louisiana 2,843 2,858 14 0.5% Maine 861 862 1 0.1% Maryland 4,132 4,154 22 0.5% Demand for Uncompensated Care, 2019 Michigan 4,668 4,672 3 0.1% Minnesota 4,655 4,662 7 0.1% Demand for uncompensated care would fall by $11.4 Mississippi 1,438 1,446 8 0.5% billion nationally with the implementation of state Missouri 3,974 4,014 39 1.0% mandates (Exhibit 10). Uncompensated care is paid for by Montana 636 645 9 1.4% Nebraska 769 771 2 0.3% federal and state governments as well as through in-kind Nevada 1,172 1,182 10 0.9% donations of care by providers. The effect of the mandate New Hampshire 598 599 0 0.0% New Mexico 1,461 1,474 13 0.9% on uncompensated care is directly related to the decrease New York 16,704 16,708 4 0.0% in the number of uninsured people and the health status North Carolina 5,611 5,715 104 1.9% of the people getting coverage. North Dakota 297 298 1 0.3% Ohio 6,048 6,059 11 0.2% Oklahoma 1,922 1,929 7 0.4% Oregon 2,049 2,057 9 0.4% National Distribution of Health Insurance Pennsylvania 8,867 8,882 15 0.2% Coverage, 2022 Rhode Island 845 853 8 0.9% South Carolina 1,620 1,644 24 1.5% We also estimate the changes in health insurance coverage South Dakota 490 491 1 0.2% that would occur in 2022 if all states adopted individual Tennessee 3,711 3,788 77 2.1% mandates (Exhibit 11). Restoration of the mandate Texas 16,703 16,780 77 0.5% Utah 975 979 4 0.4% at the state level would increase insurance coverage Vermont 679 679 0 0.1% nationally by an estimated 7.5 million people in 2022. Virginia 4,205 4,226 21 0.5% Washington 3,961 3,998 37 0.9% We estimate that the number of people with employer- West Virginia 794 802 8 1.0% sponsored insurance would increase by 2.3 million people Wisconsin 2,666 2,670 4 0.2% compared to there being no mandates in place (other Wyoming 304 306 1 0.5% Total 176,878 178,003 1,125 0.6% than Massachusetts and New Jersey). An additional 1.5 million people would enroll in marketplace nongroup Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. coverage with tax credits, 2.7 million more would enroll Note: Table excludes Massachusetts and New Jersey. Massachusetts has its own in nongroup coverage without tax credits, and 1 million individual mandate under current law, and New Jersey’s individual mandate is expected to go into effect in 2019. more would enroll in Medicaid. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?11 Exhibit 9. Number of Tax Units Paying Individual Exhibit 10. Uncompensated Care by State ($ millions) Mandate Penalties, Total State Penalty Revenue, Current Law Compared to Scenario with Individual Mandate Adopted in Each State and Average Penalty Paid per Unit Paying By State Assuming Mandates Adopted in Every State, 2019 With state individual Number of tax Aggregate Average Current law mandates Difference units paying penalty payments paid per tax penalties collected by states unit paying a Total Total Total (1,000s) ($ millions) penalty Alabama 1,399 1,253 –146 Alabama 151 $120 $790 Alaska 268 241 –28 Alaska 48 $48 $1,000 Arizona 1,983 1,708 –276 Arizona 245 $206 $840 Arkansas 836 694 –142 Arkansas 78 $79 $1,010 California 8,141 7,249 –892 California 908 $920 $1,010 Colorado 1,575 1,283 –292 Colorado 200 $163 $820 Connecticut 717 546 –170 Connecticut 57 $61 $1,070 Delaware 134 115 –19 Delaware 21 $27 $1,270 District of Columbia 108 100 –8 District of Columbia 17 $18 $1,060 Florida 5,207 4,460 –747 Florida 501 $402 $800 Georgia 3,225 2,677 –548 Georgia 398 $315 $790 Hawaii 163 141 –22 Hawaii 55 $48 $870 Idaho 604 480 –124 Idaho 57 $47 $820 Illinois 3,017 2,550 –467 Illinois 307 $244 $790 Indiana 1,445 1,241 –205 Indiana 176 $125 $710 Iowa 652 580 –72 Iowa 79 $63 $800 Kansas 928 798 –130 Kansas 99 $76 $770 Kentucky 720 549 –171 Kentucky 100 $66 $650 Louisiana 1,260 1,092 –168 Louisiana 144 $116 $810 Maine 339 310 –29 Maine 33 $30 $900 Maryland 920 702 –217 Maryland 132 $116 $880 Michigan 2,244 1,826 –418 Michigan 189 $140 $740 Minnesota 1,760 1,544 –216 Minnesota 122 $132 $1,090 Mississippi 1,088 950 –139 Mississippi 112 $100 $890 Missouri 2,044 1,749 –295 Missouri 198 $144 $730 Montana 388 312 –76 Montana 32 $25 $790 Nebraska 483 417 –66 Nebraska 51 $53 $1,030 Nevada 683 560 –123 Nevada 97 $70 $720 New Hampshire 237 188 –50 New Hampshire 40 $33 $840 New Mexico 431 333 –97 New Mexico 72 $50 $700 New York 2,695 2,284 –411 New York 284 $271 $960 North Carolina 2,612 2,184 –428 North Carolina 357 $288 $810 North Dakota 140 95 –44 North Dakota 23 $19 $840 Ohio 1,877 1,518 –360 Ohio 281 $202 $720 Oklahoma 1,822 1,596 –227 Oklahoma 179 $129 $720 Oregon 787 621 –166 Oregon 94 $78 $830 Pennsylvania 1,807 1,388 –419 Pennsylvania 240 $194 $810 Rhode Island 100 74 –25 Rhode Island 19 $14 $760 South Carolina 1,214 1,035 –179 South Carolina 172 $117 $680 South Dakota 277 231 –45 South Dakota 36 $31 $840 Tennessee 1,669 1,429 –241 Tennessee 232 $188 $810 Texas 7,974 6,773 –1,201 Texas 1,187 $947 $800 Utah 765 664 –101 Utah 63 $70 $1,110 Vermont 121 108 –13 Vermont 12 $11 $870 Virginia 2,687 2,233 –454 Virginia 312 $274 $880 Washington 1,674 1,257 –417 Washington 221 $165 $750 West Virginia 350 266 –84 West Virginia 45 $28 $630 Wisconsin 1,196 1,018 –178 Wisconsin 108 $79 $730 Wyoming 211 176 –35 Wyoming 26 $21 $820 Total 72,978 61,598 –11,381 Total 8,849 $7,384 $830 Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2019. 2018. Reform simulated in 2019. Note: Table excludes Massachusetts and New Jersey. Massachusetts has its own Notes: Average penalty amounts are rounded to the nearest $10. Table excludes individual mandate under current law, and New Jersey’s individual mandate is expected Massachusetts and New Jersey. Massachusetts has its own individual mandate under to go into effect in 2019. current law, and New Jersey’s individual mandate is expected to go into effect in 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?12 Exhibit 11. Health Insurance Coverage Distribution of the Nonelderly (thousands of people), 2022 Current Law Compared to Scenario with Individual Mandate Adopted in Each State With state Percentage- Current law individual mandates Change point change Insured 238,239 86.1% 245,736 88.8% 7,497 2.7% Employer 147,268 53.2% 149,534 54.1% 2,266 0.8% Nongroup (with tax credits) 7,798 2.8% 9,269 3.4% 1,471 0.5% Nongroup (without tax credits) 5,165 1.9% 7,891 2.9% 2,726 1.0% Medicaid/CHIP 69,389 25.1% 70,423 25.5% 1,034 0.4% Other (including Medicare) 8,619 3.1% 8,619 3.1% 0 0.0% Uninsured 38,416 13.9% 30,919 11.2% –7,497 –2.7% Total 276,654 100.0% 276,654 100.0% 0 0.0% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2022. In 2022, the largest absolute decreases in rates of new structures would have to be developed to collect uninsured are in large states like California, Florida, individual mandate penalties, making the arrangement and Texas (Exhibit 12). As health care costs get more far less feasible. expensive relative to incomes over time, fewer people tend to purchase insurance and the number of uninsured In addition, the political environment in some states has rises. However, with an individual mandate in place, the been actively hostile to the ACA, making the adoption effect of health care cost growth is lessened because more of state mandates extremely unlikely. Even states that people hold on to their insurance to comply with the have governors and state legislators who are generally mandate. As a result, the effect of the individual mandate supportive of the ACA are likely to find it politically on reducing the number of people without insurance challenging to impose mandate penalties. Still, some states increases over time in percentage terms. are considering such a move. In addition to the individual mandate law passed by New Jersey this year,6 Vermont has DISCUSSION passed a bill into law but must work out penalty amounts and enforcement mechanisms through a working group, If they implement their own individual mandates, states with implementation requiring further legislation. D.C.’s could mitigate the negative impact the elimination of the ACA penalties will have on coverage and premiums. bill is still pending, but may be resolved soon. Connecticut, Massachusetts legislated its own individual mandate as Hawaii, Maryland, and Washington considered bills. part of its 2006 broad-based health reforms; New Jersey These are currently inactive, although there is a chance did so this year. This approach does pose significant that other bills may be considered in the future. Other challenges. For example, Alaska, Florida, Nevada, New states may consider such a step after the consequences Hampshire, South Dakota, Texas, Washington, and of elimination of the federal penalties become evident in Wyoming do not have state income taxes, and thus 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?13 Exhibit 12. Difference and Percent Difference in Insurance Coverage (by type of coverage) by State (thousands of people), 2022 Current Law Compared to Scenario with Individual Mandate Adopted in Each State Employer Nongroup Medicaid and CHIP Uninsured Percent Percent Percent Percent Difference difference Difference difference Difference difference Difference difference from from from from from from from from current law current law current law current law current law current law current law current law Alabama 27 1.3% 55 34.3% –1 –0.1% –81 –12.3% Alaska 12 3.1% 12 101.6% 0 0.3% –24 –21.8% Arizona 72 2.4% 104 67.6% 18 1.0% –195 –19.4% Arkansas 15 1.2% 35 54.4% 19 2.1% –70 –25.3% California 110 0.7% 353 20.8% 360 3.2% –823 –19.6% Colorado 50 2.0% 93 57.1% 66 5.2% –209 –32.8% Connecticut 23 1.3% 32 24.7% 33 4.4% –88 –33.6% Delaware 7 1.6% 10 42.5% 0 0.2% –18 –20.8% District of Columbia 9 2.6% 5 38.0% 5 2.8% –19 –36.0% Florida 123 1.6% 342 20.6% 91 2.5% –556 –18.8% Georgia 87 1.8% 215 49.0% –4 –0.2% –298 –14.4% Hawaii 9 1.2% 12 38.1% 1 0.3% –22 –18.8% Idaho 17 2.2% 39 38.1% 9 3.0% –65 –24.3% Illinois 107 1.7% 167 37.7% 18 0.7% –292 –20.9% Indiana 35 1.1% 88 50.3% 5 0.4% –128 –18.7% Iowa 21 1.3% 28 40.1% –2 –0.3% –47 –21.1% Kansas 32 2.1% 48 42.6% 2 0.6% –82 –19.2% Kentucky 29 1.7% 42 45.4% 36 2.7% –107 –34.8% Louisiana 29 1.6% 63 53.2% –25 –1.8% –68 –15.6% Maine 3 0.6% 17 27.3% 1 0.4% –22 –19.6% Maryland 51 1.6% 72 35.1% 42 3.3% –164 –29.7% Michigan 61 1.4% 115 32.9% –6 –0.3% –170 –24.1% Minnesota 58 1.9% 62 41.3% –9 –0.9% –111 –22.4% Mississippi 17 1.5% 43 64.1% –1 –0.1% –60 –12.7% Missouri 64 2.2% 85 36.3% 12 1.2% –160 –20.6% Montana 7 1.7% 18 40.2% –2 –0.6% –23 –24.0% Nebraska 27 2.8% 30 30.5% 1 0.2% –57 –23.3% Nevada 24 1.6% 54 60.3% 33 5.0% –110 –23.0% New Hampshire 9 1.3% 19 44.5% 0 –0.1% –28 –29.2% New Mexico 18 2.5% 26 60.5% 25 3.3% –68 –27.5% New York 186 2.1% 139 12.5% 25 0.5% –350 –21.9% North Carolina 63 1.5% 174 37.6% 75 3.6% –313 –18.8% North Dakota 12 3.2% 13 36.8% 2 1.7% –26 –39.3% Ohio 88 1.6% 135 51.2% 1 0.0% –224 –26.3% Oklahoma 37 2.1% 67 53.4% 4 0.5% –107 –14.7% Oregon 43 2.4% 58 41.5% 11 1.1% –111 –29.3% Pennsylvania 98 1.6% 148 33.7% –25 –1.0% –220 –26.3% Rhode Island 10 2.2% 11 28.6% 9 3.3% –30 –38.9% South Carolina 27 1.3% 73 38.8% 21 2.3% –120 –16.4% South Dakota 9 2.2% 16 42.1% 0 0.2% –25 –19.6% Tennessee 33 1.2% 96 43.6% 67 4.8% –195 –20.7% Texas 245 2.0% 576 57.8% 30 0.6% –850 –14.3% Utah 56 3.1% 43 19.4% 2 0.6% –101 –22.5% Vermont 4 1.4% 4 11.4% 1 0.4% –8 –22.9% Virginia 104 2.2% 166 42.2% 8 0.8% –278 –21.3% Washington 49 1.4% 95 47.1% 58 3.5% –201 –27.9% West Virginia 5 0.6% 16 68.5% 15 3.0% –35 –29.7% Wisconsin 40 1.4% 71 30.1% 3 0.3% –115 –22.3% Wyoming 5 1.5% 15 66.3% 1 0.8% –20 –21.7% Total 2,266 1.6% 4,197 34.3% 1,034 1.6% –7,497 –19.9% Data: Urban Institute analysis of its Health Insurance Policy Simulation Model (HIPSM) 2018. Reform simulated in 2022. Note: Table excludes Massachusetts and New Jersey. Massachusetts has its own individual mandate under current law, and New Jersey’s individual mandate is expected to go into effect in 2019. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?14 METHODS COMPARISON OF URBAN INSTITUTE AND This analysis estimates the coverage and health CONGRESSIONAL BUDGET OFFICE ESTIMATES care spending effects that would occur if each state Our estimates are consistent with CBO’s 2019 implemented an individual mandate to replace the estimates of the effect of eliminating the federal federal penalties that will be eliminated in 2019 under individual mandate.* The CBO estimated that in 2019 the 2017 Tax Cuts and Jobs Act. We assume that each state eliminating the individual mandate would decrease would implement a mandate with the same structure Medicaid coverage by approximately 1 million people as the ACA’s federal mandate. Massachusetts and New and nongroup insurance coverage (marketplace Jersey are the only states that currently have their own and nonmarketplace) by 3 million people, and would individual mandates. Massachusetts’s requirements and increase the number of uninsured by 4 million. Our penalties associated with its mandate are different than estimates represent an inverse effect of the same size. the federal requirements in the ACA. The New Jersey The estimates presented in our analysis are essentially mandate structure and penalties are very similar to the mirror image of the types of estimates made by the ACA. Consequently, we exclude Massachusetts and CBO. Our estimates differ somewhat from CBO’s in New Jersey from the state-specific tables. Our analysis terms of the effect of eliminating the individual mandate relies upon the Urban Institute’s Health Insurance Policy in 2022. They diverge most with regard to the effect Simulation Model (HIPSM). on Medicaid enrollment; CBO rounds coverage effects to the nearest 1 million people, which makes precise HIPSM is a detailed microsimulation model of the health comparisons difficult. CBO estimates that elimination care system designed to estimate the cost and coverage of the individual mandate would decrease Medicaid effects of proposed health care policy options. HIPSM is coverage by 4 million people in 2022, whereas we based on two years of the American Community Survey estimate a smaller inverse effect of 1 million additional (ACS), which provides a representative sample of families people enrolling in Medicaid with state mandates in that is large enough to produce estimates for individual place. Our smaller estimate may reflect the fact that states. The population is aged to future years using CBO’s baseline assumes that some states that had not projections from the Urban Institute’s Mapping America’s yet expanded Medicaid under the ACA by 2017 would Futures program. HIPSM is designed to incorporate do so in future years; we make no such assumptions. timely, real-world data when they are available. As CBO estimates a 2022 nongroup coverage effect described below, we regularly update the model to reflect from eliminating the individual mandate of 5 million people, compared to our estimate of 4.2 million people published Medicaid and marketplace enrollment and gaining coverage nationally under state mandates. costs in each state. The enrollment experience in each CBO estimates that 2 million fewer people would have state under current law affects how the model simulates employer coverage without a mandate, compared to policy alternatives. our estimate of 2.3 million people gaining employer HIPSM is unique among microsimulation models coverage with state mandates. Taken together, CBO estimates that the number of uninsured would be 12 of health coverage and costs because individual and million people higher in 2022 absent mandate penalties, family decisions combine the two most common types compared to our estimate that 7.5 million fewer people of microsimulation decision-making: elasticity and would be uninsured with state mandates introduced expected utility. Decision-making follows an expected- across the country. utility framework that captures factors such as individual health risk, but we add a term for each observation that * Congressional Budget Office, Federal Subsidies for Health Insurance represents factors involved in their observed choices that Coverage for People Under Age 65: 2018 to 2028 (CBO, May 2018), https:// www.cbo.gov/system/files/115th-congress-2017-2018/reports/53826- the expected-utility approach alone could not capture. healthinsurancecoverage.pdf. These terms are set so the model leads to each person in commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?15 the data making the choice they reported in the survey, of a marketplace bronze plan as the penalty cap, instead and the distribution of the terms is set so the model of the national average. We also assume that the state replicates premium elasticity targets from the literature. mandates would be as effective as the federal mandate. In this way, the model has the overall population change The IRS has released state specific data on individual insurance enrollment decisions at a rate consistent with mandate penalty payments through 2015.10 HIPSM the research literature. Still, individuals within the model estimates of the number of households paying penalties respond to changes in prices in a way that is consistent by household adjusted gross income (AGI) level in each with their characteristics and their decisions observed state correspond well with IRS data. However, HIPSM in the data. This approach makes it easier to simulate does not simulate monthly coverage decisions, so the novel policies consistently while calibrating the model model computes the amounts households would pay if to a wide range of real-world data, such as Medicaid and members were uninsured for a full year. The IRS reports marketplace enrollment. actual penalty collections and, as such, it reflects that some In this analysis, we provide all results in 2019 and a subset people are uninsured for only part of a year (and thus of results for 2022. Our current law — or baseline — pay proportional penalties), the fact that some people scenario implicitly takes into account policy changes receive hardship exemptions unrelated to individual made since early 2017 that affected health insurance data collected by household surveys like the ACS, as coverage for the 2018 open-enrollment period; our model well as idiosyncrasies in the way that the law is being is calibrated to 2018 state marketplace enrollment figures 7 implemented. Consequently, we make adjustments to the and the most recent state-specific estimates of Medicaid level of our revenue estimates that reflect the differences enrollment. We also use state average marketplace 8 between IRS and HIPSM full-year penalties per household premiums for the 2018 plan year. While estimates of for 2015 at each AGI level and state. These adjustments nonmarketplace nongroup insurance enrollment are are applied to penalties computed using the tax brackets not currently available, HIPSM uses premium growth enacted by the Tax Cuts and Jobs Act of 2017. in marketplace bronze plans between 2017 and 2018 to Demand for uncompensated care for the uninsured is estimate enrollment in unsubsidized nonmarketplace estimated in our model based on data from the Medical plans. The current-law scenario assumes the elimination Expenditure Panel Survey–Household Component of the federal mandate penalties but does not assume the adjusted to the results of a detailed analysis of expansion of the short-term, limited-duration plans in uncompensated care in 2013.11 The authors of that analysis proposed regulations as they have yet to be made final. found that the uninsured pay for about 30 percent of their The 2018 ACA penalty for being uninsured for a full year health care out-of-pocket, with the remainder becoming is equal to the maximum of 1) $695 per adult; half that uncompensated care. About 45 percent of uncompensated amount for children and 2) 2.5 percent of household care is funded by the federal government through income. The penalty is capped at the national average programs such as Medicaid Disproportionate Share premium of a marketplace bronze plan, and it is prorated Hospital (DSH) funding, Medicare DSH, and the Veterans for people uninsured for fewer than 12 months. There are Administration. About 24 percent is funded through state a number of penalty exemptions. We assume that each 9 and local governments. The remainder is funded by health state’s own penalty would use the state average premium care providers themselves. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?16 NOTES 1. Congressional Budget Office, Federal Subsidies for 6. Palanker, Schwab, and Giovannelli, “State Efforts,” 2018; Health Insurance Coverage for People Under Age 65: and New Jersey State Legislature, “A3380 Aca (1R) — New 2018 to 2028 (CBO, May 2018), https://www.cbo.gov/ Jersey Health Insurance Market Preservation Act” (State system/files/115th-congress-2017-2018/reports/53826- of New Jersey, May 30, 2018), http://www.njleg.state.nj.us/ healthinsurancecoverage.pdf. bills/BillView.asp?BillNumber=A3380. 2. Sabrina Corlette et al., Insurers Remaining in Affordable 7. Centers for Medicare and Medicaid Services, 2018 Care Act Markets Prepare for Continued Uncertainty in Marketplace Open Enrollment Period Public Use Files 2018, 2019 (Urban Institute, March 2018), https://www. (CMS, updated Apr. 4, 2018), https://www.cms.gov/ urban.org/sites/default/files/publication/97326/moni_ Research-Statistics-Data-and-Systems/Statistics-Trends- insurercanvas2018_2001756.pdf. and-Reports/Marketplace-Products/2018_Open_ Enrollment.html. 3. New Jersey and Vermont have both recently passed legislation; Vermont’s legislation requires 8. We used Centers for Medicare and Medicaid Services specification of the penalties during the course of 2019 Monthly Enrollment Snapshots to determine the change with implementation in 2020. Connecticut, Hawaii, in Medicaid enrollment in each state since 2013. See Maryland, Washington, and the District of Columbia Centers for Medicare and Medicaid Services, MMCO have all considered or are continuing to consider their Statistical & Analytic Reports (CMS, updated Mar. 16, 2018), own legislation. See Dania Palanker, Rachel Schwab, https://www.cms.gov/Medicare-Medicaid-Coordination/ and Justin Giovannelli, “State Efforts to Pass Individual Medicare-and-Medicaid-Coordination/Medicare- Mandate Requirements Aim to Stabilize Markets and Medicaid-Coordination-Office/Analytics.html. Protect Consumers,” To the Point (blog), Commonwealth Fund, June 14, 2018, https://www.commonwealthfund. 9. Exemptions from the individual mandate penalties org/blog/2018/state-efforts-pass-individual-mandate- include: income below the tax filing threshold, religious requirements-aim-stabilize-markets-and-protect. As conscience, members of health care sharing ministries, this report was going to press, an individual mandate people not lawfully present in the United States, was passed by the Council of the District of Columbia as incarcerated individuals, people uninsured for less than part of a larger budget bill. It has not yet been signed by three months in the year, people for whom the cost of the mayor, although she is expected to do so. In addition, coverage exceeds 8 percent of household income (with the there are riders to the D.C. budget in the U.S. House of 8 percent indexed over time), members of Indian tribes, a Representatives intended to inhibit implementation, person who would be eligible for Medicaid but who lives although it is not clear they would be successful. in a state that had not expanded Medicaid eligibility under the ACA, people receiving a hardship exemption from the 4. Katie Jennings, “New Jersey Will Become Second State to Secretary of Health and Human Services. Enact Individual Health Insurance Mandate,” Politico, May 30, 2018, https://www.politico.com/states/new-jersey/ 10. Internal Revenue Service, SOI Tax Stats — Historic story/2018/05/30/new-jersey-becomes-second-state-to- Table 2 (IRS, updated Oct. 11, 2017), https://www.irs.gov/ adopt-individual-health-insurance-mandate-442183. statistics/soi-tax-stats-historic-table-2. 5. In 2019, 138 percent of the federal poverty level in the 11. Teresa A. Coughlin et al., Uncompensated Care for 48 contiguous states will be $16,753 for an individual the Uninsured in 2013: A Detailed Examination (Urban and $34,638 for a four-person household; 400 percent of Institute, May 2014), http://www.urban.org/research/ poverty will be $48,560 for an individual and $100,400 for publication/uncompensated-care-uninsured-2013. four-person household. commonwealthfund.org July 2018 How Would State-Based Individual Mandates Affect Health Insurance Coverage and Premium Costs?17 ABOUT THE AUTHORS John Holahan, Ph.D., is an Institute Fellow in the Health Linda J. Blumberg, Ph.D., is an economist and Institute Policy Center at the Urban Institute, where he previously Fellow in the Urban Institute’s Health Policy Center. She served as director for more than 30 years. His recent work is an expert on private health insurance, health care focuses on health reform, the uninsured, and health financing, and health system reform. Her recent work expenditure growth. He has examined the coverage, costs, includes extensive research related to the Affordable and economic impact of the Affordable Care Act, including Care Act (ACA); in particular, providing technical the costs of Medicaid expansion and the macroeconomic assistance to states, tracking policy decision-making effects of the law. He also has analyzed the health status of and implementation at the state and federal levels, and Medicaid and exchange enrollees, and the implications for interpreting and analyzing the implications of particular costs and exchange premiums. Dr. Holahan has written policies. Examples of her work include analyses of the on competition in insurer and provider markets and implications of congressional proposals to repeal and implications for premiums and government subsidy costs as replace the ACA, delineation of strategies to fix problems well as on the cost-containment provisions of the ACA. He associated with the ACA, estimation of the cost and received a Ph.D. in economics from Georgetown University. coverage potential of high-risk pools, analysis of the implications of the King v. Burwell case, and several Editorial support was provided by Deborah Lorber. studies of competition in ACA marketplaces. In addition, Dr. Blumberg led the quantitative analysis supporting the development of a “Road Map to Universal Coverage” ACKNOWLEDGMENTS in Massachusetts, a project with her Urban colleagues In addition to Commonwealth Fund support for this that informed that state’s comprehensive health reforms research, the Robert Wood Johnson Foundation provided in 2006. She received a Ph.D. in economics from the substantial funding for the development of the Health University of Michigan. Insurance Policy Simulation Model, which was used in this analysis. The authors are grateful for comments and Matthew Buettgens, Ph.D., is a mathematician and suggestions from Kevin Lucia, Justin Giovanelli, and Sara Senior Fellow in the Urban Institute’s Health Policy Collins, and for research assistance from Robin Wang and Center. He leads the development of the Urban Institute’s Erik Wengle. Health Insurance Policy Simulation Model. The model has been used to provide technical assistance for health reform implementation in Massachusetts, Missouri, For more information about this report, please contact: New York, Virginia, and Washington as well as to the Linda J. Blumberg, Ph.D. federal government. His recent work includes papers Institute Fellow, Health Policy Center analyzing proposals to repeal and replace the Affordable Urban Institute Care Act, both nationally and state-by-state. Topics have lblumbergurban.org included the costs and savings of health reform for both About the Commonwealth Fund federal and state governments, state-by-state analysis of The mission of the Commonwealth Fund is to promote changes in health insurance coverage and the remaining a high-performing health care system. The Fund carries uninsured, the effect of reform on employers, the role out this mandate by supporting independent research on of the individual mandate, the affordability of coverage health care issues and making grants to improve health care under health insurance exchanges, and the implications of practice and policy. Support for this research was provided age rating for the affordability of coverage. Dr. Buettgens by the Commonwealth Fund. The views presented here received a Ph.D. in mathematics from the State University are those of the authors and not necessarily those of the of New York at Buffalo. Commonwealth Fund or its directors, officers, or staff. commonwealthfund.org July 2018