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Eligibility and the Individual Mandate

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Eligibility and the Individual Mandate

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Report Finds That 94 Percent of the Population Would Not Be Required to Newly Purchase Health Insurance or Face a Penalty

The U.S. Supreme Court is hearing arguments this week regarding the Patient Protection and Affordable Care Act’s (PPACA) individual mandate—the requirement that individuals either have health insurance or pay a fine. A recent analysis by the Urban Institute and funded by the Robert Wood Johnson Foundation shows that 94 percent of the U.S. population would not be required to newly purchase health insurance or face a penalty.

And recently I heard a poll result that seems to illustrate the lack of public understanding of the individual mandate. A CBS / New York Times poll showed that only 1 in 3 American's polled hope the Affordable Care Act stands as constitutional. But, 61% say that they agree with the individual mandate once they hear it dioesn't apply to people who have employer-based health insurance. There is a huge message problem here that the Obama Administration seems to have.

Research Results

The Urban Institute results shows that six percent of the total U.S. population (7% of those under 65) could be subject to penalties if they did not purchase health insurance. While a small percentage of the population would be directly affected by the mandate, the requirement to purchase insurance would have a profound effect on keeping premiums affordable and coverage accessible for people who buy insurance themselves, according to the Urban Institute.

Researchers used the Urban Institute’s Health Insurance Policy Simulation Model to estimate the number of Americans potentially subject to the mandate; identify their insurance status absent the ACA; and simulate eligibility for Medicaid, exchange-based premiums, and cost-sharing subsidies.

The analysis shows:

  • 33 percent of the U.S. population under age 65 would be explicitly exempt from the individual responsibility requirement, most because their incomes fall below the tax filing threshold. Most of these people already have health insurance through an employer, the private market, or public coverage programs.
  • 58 percent of the U.S. population under age 65 are potentially subject to the individual responsibility requirement but are already insured through an employer, the individual market, or public coverage programs and therefore would not face penalties.
  • Three percent of the U.S. population under age 65 are potentially subject to the individual responsibility requirement and are uninsured, but would be eligible for Medicaid, so they could receive coverage at no or low cost and not face penalties.
  • Four percent of the U.S. population under age 65 are potentially subject to the individual responsibility requirement and are uninsured, but would be eligible for exchange subsides to obtain insurance. If they did so, they would not face penalties.
  • Three percent of the U.S. population under age 65 (2% of the total population) are potentially subject to the individual responsibility requirement, are currently uninsured and not offered financial assistance under the ACA. These people could face a penalty if they did not obtain insurance.

Cato Insitute Research

In contrast another analysis by the Cato Institute shows that individual mandate compliance in Massachusetts has been difficult at best. According to Cato, the architects of the Massachusetts plan, recognizing the affordability problem, have already effectively admitted defeat on this front: they have exempted 20 percent of the uninsured from the tax penalties for noncompliance. That's arguably another one-fifth reduction in the already small fraction of health care spending affected by the mandate.

Cato also notes that not all free riders are uninsured. In fact, people with insurance consume almost a third of uncompensated care. Second, not all care received by the uninsured is paid for by others. Analysts at the Urban Institute found that the uninsured pay more than 25 percent of their health expenditures out of pocket.

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