ACA’s Individual Mandate Boosted High-Income Enrollment Totals

June 05, 2018 - The Affordable Care Act’s (ACA) individual mandate spurred greater high-income enrollment in health plans and is a key component of increasing enrollment and stability in the nation’s individual insurance markets, according to a new report from USC Brookings.

Report author Matthew Fielder, a research fellow at USC Brookings, found that individuals with incomes 400 percent above the federal poverty level (FLP) are more affected by the individual mandate than by other ACA policies to enroll.

These high-income individuals are not eligible for premium subsidies under the ACA and more likely to enroll in health plans because of the mandate.

Fielder found that uninsured rates sharply decreased between 20 and 40 percent among high-income populations after the ACA’s major policies came into effect, equaling 8 million newly insured members. Additionally, the individual mandate was the only consistent incentive for individuals to enroll after the year 2013.

Healthier high-income individuals face some of the highest premiums for insurance and maintained uninsured rates, ranging from 4 to 9 percent in 2013.

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However, healthier individuals with incomes 400 percent above the FLP experienced steady levels, and even declines, in the uninsured rate.

Fielder argued that the minimal changes and reductions in uninsured rates were a byproduct of the individual mandate.

Younger adult populations with high incomes also face some of the most expensive premiums, but enrollment continued to grow as uninsured rates fell. Fielder estimated that the uninsured rate for high-income individuals who were 25 years old dropped from 12 percent in 2013 to 6 percent in 2016.

In certain states, health insurance prices and availability for consumers did not change much, even though high-income enrollment continued to grow.

For example, New York and Vermont previously implemented policies before the ACA that stopped insurers from denying insurance coverage based on health status and from adjusting premium totals for sicker individuals.

READ MORE: Early Health Insurance Premium Proposals Indicate Hikes for 2019

“Despite this fact, these states saw a decline in the uninsured rate among people with family incomes above 400 percent of the FPL similar in size to the one observed nationwide, implying that factors other than changes in the price and availability of insurance coverage must account for this trend,” Fielder said in a supplemental blog post.

ACA policy changes and implications without the individual mandate

The USC Brookings report follows federal actions that will repeal the individual mandate in 2019, which could fragment ACA-compliant health insurance markets across the country.

Federal changes to the ACA, including the repeal of the ACA’s individual mandate in 2019, President Trump’s elimination of the cost-sharing reductions, and new assistance to expand association health plan (AHP) markets are likely to create significant disruption in the individual market.

A lack of an individual mandate, as well as the expansion of AHPs, are likely to destabilize cost and enrollment rates in the individual market, according to several industry experts.

An analysis from the Urban Institute found that both increased availability of lower-cost AHPs and a loss of the mandate would destabilize individual health plan risk pools. Healthier and higher-income individuals would likely not enroll in ACA-compliant plans or instead enroll in AHPs with lower cost-sharing totals, leading to a costlier individual market.

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Removal of the individual mandate will likely force payers to increase their individual premium rates for the upcoming plan years, and could create enough financial hardship to discourage enrollment across multiple beneficiary groups.

Individual insurance premiums are likely to increase between 7 to 15 percent in 2019, according to health plan actuaries and experts from Harvard, UCLA, and UC San Diego. In addition, a repeal of the individual mandate could contribute to a compound annual growth rate of 7 percent for individual health plans through 2021.

Furthermore, early payer rate filings for plan year 2019 are confirming some of the industry’s concerns.

Payers offering individual health products in Maryland, Virginia, Oregon, and Rhode Island are increasing premiums from anywhere between 7 and 90 percent for the new plan year. Many payers cited expected medical loss ratio (MLR) growth in the individual market and the loss of ACA policies as the reasons for 2019 premium increases.

Payers that don’t have any new policy protections in place are likely to increase their premiums and experience significant challenges within the individual market. The individual mandate is one of those policies that helps to reinforce consistent enrollment totals, Fielder concluded.

He added that other policies to subsidize premium costs for high-income enrollees instead of the individual mandate could help ensure steady enrollment, but could create unsustainable federal spending amounts.

“And while it is clearly possible to replicate the financial incentives created by the individual mandate by increasing subsidies to people who obtain health insurance, this approach would have a large fiscal cost,” Fielder said.

“For this reason, if future state and federal policymakers wish to surpass the high-water mark for insurance coverage attained under the ACA, restoring an individual mandate or something like it should be part of the policy conversation.”