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The Future of the Individual Mandate

When the Obama administration proposed the Patient Protection and Affordable Care Act (commonly known as Obamacare), one of its key components was what is popularly known as the Individual Mandate.  Essentially, the Individual Mandate requires all adult Americans to have health insurance coverage—unless their income is below a federally set minimum—or pay a fee. This component of Obamacare is deeply unpopular, with only 39 percent of respondents in a recent poll by Reuters-Ipsos supporting the Individual Mandate.

Economists argue that the Individual Mandate is necessary to prevent a portion of the U.S. population from exploiting the system.  Without the mandate, they could forgo obtaining health coverage until they get sick and then sign up for insurance to pay medical bills.  This would unbalance the system, leaving insurance companies to foot the bill without payment into the system by occasional policyholders.  This also compels healthy people to obtain insurance which offsets the costs of insuring sick people who enroll in Obamacare.

Political Furor Over the Individual Mandate

A large portion of the political establishment really dislikes the Individual Mandate.  In particular, the Republican Party has strenuously criticized it as government overreach. GOP members have repeatedly argued that the government shouldn’t be forcing people to enroll in health insurance programs who don’t want to. Some have even argued that such a serious intrusion into the finances of Americans may be unconstitutional. The Republicans, who control both the U.S. House of Representatives and the Senate have voted at least 60 times to repeal Obamacare.

Unfortunately, the U.S. Supreme Court has already ruled in National Federation of Independent Business v. Sebelius that the Individual Mandate is constitutional. Five out of the nine justices, including Chief Justice John Roberts ruled that this mandate was similar to other financial mechanisms like taxation that the federal government is constitutionally empowered to perform.

Roberts was joined by the four “liberal” members of the court.  It is possible that with several of these potentially retiring in the near future, President-elect Donald Trump will appoint more conservative justices and change the complexion of the court.  Should another case about the Individual Mandate reach this new Supreme Court, there could be a wildly different ruling.

President Trump’s Position

The election of Donald Trump may be pivotal to healthcare in the United States. On the campaign trail, Trump repeatedly said that he would repeal the Affordable Care Act and replace it. He has specifically pointed to the Individual Mandate as something he would scrap.  Since his election victory, Trump has maintained that he will hold to his promise to repeal Obamacare, but he has also said he would like to keep the provisions that allow enrollees with preexisting conditions to obtain coverage and young adults can remain on their parents’ plans until age 26.

If Trump intends to keep insurers from discriminating against sick enrollees, he will have to keep the Individual Mandate or something very similar. If he wants to eliminate the mandate, insurers will likely raise premiums steeply across the board which would prevent almost everyone currently insured through the health insurance marketplaces from remaining covered. Currently, almost 70 percent of Obamacare enrollees pay less than $75 a month for their coverage because of the tax credits subsidized by the federal government.

He may use other methods to subsidize health insurance coverage including various tax credits which he has mentioned during the course of the campaign. It would remain difficult however to convince the insurance companies to continue to participate in the health insurance exchanges as they are currently set up. In fact, a growing number insurers like Humana and UnitedHealth have exited a number of markets due to significant financial losses.

In addition to potential tax credits, President Trump would like to see more Americans with health savings accounts or HSAs. These tax-deferred accounts would enable people to set aside a certain amount of pre-tax money through their employer or independently. Currently, the Internal Revenue Service allows taxpayers to deposit up to $3,400 per year for a single person, up to $6,750 for a family along with a $1,000 bonus for those 55 years of age or older. Trump has also proposed that HSAs should be completely tax exempt rather than taxable upon withdrawal.

Impending Changes

Regardless of what the incoming president wants, there are likely to be few immediate changes.  Most health care analysts suggest that it would take at least one year and possibly two or more to repeal Obamacare and replace it.  In the short term, many of the newly insured can remain relatively at ease.  Experts suggest that it will take some time for President Trump to hammer out a new law, one that would pass through both the U.S. House of Representatives and the Senate.

Passage of any new law could be a time-consuming and bruising process.  Although Republicans control both Congressional houses, they don’t hold a super-majority. With 48 seats in the Senate, the Democrats could stall passage with a filibuster.  It is likely that President Trump will have to expend some political capital to attract some Democratic support.

Public Support

In addition to securing support from elected officials, President Trump will also need to swing public support behind his new health care policies. Right now, there is considerable apprehension among Obamacare enrollees that any policy changes could leave them uninsured.  This apprehension is likely to become outright panic if the new Trump plan fails to offer them health coverage, which could metamorphize into a powerful political backlash in two or four years’ time.

According to a Gallup poll earlier in 2016, the country is almost evenly split in support of Obamacare.  With 48 percent in favor and 49 percent opposed, it will take a concerted effort on the part of the new administration that a sweeping reform will improve their lives and be worth the risks and costs.  Ultimately, President Trump will need to exercise his showman and negotiating skills to convince the American public that change is necessary.

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