What Does Eliminating The Individual Mandate Do To Affordable Care Act?


On December 20, 2017, Republican lawmakers passed the new tax bill, also known as the “Tax Cuts and Jobs Act of 2017.”  This legislation is the largest overhaul of the tax code in over 30 years.  One of the key components in the bill is the elimination of the Individual Mandate of the Affordable Care Act (“ACA”).  The Individual Mandate requires all individuals to have insurance or pay a penalty.  While Congress tried several times during 2017 to repeal and replace the Affordable Care Act, they did successfully incorporate the repeal of the Individual Mandate into the tax bill, which eliminates the penalty to individuals for not carrying insurance.

The GOP argued by eliminating the Individual Mandate, it will save $338 million over the next 10 years because the government would spend less on health care subsidies. This savings will help pay for middle class tax cuts. However, the concern with removing the Individual Mandate from the ACA is that the younger, healthier U.S. population could opt not to purchase insurance.  This would effectively reduce the insurance risk pool, and the sick and elderly people, who need insurance the most, will end up paying a higher premium.  According to the Congressional Budget Office (“CBO”), the repeal of the Individual Mandate will cause the uninsured rate to increase 16% by 2021.

Many medical and insurance organizations, including The American Medical Association, American Health Insurance Plans and Blue Cross Blue Shield Association, warned that removing the Individual Mandate will destabilize the insurance markets causing insurance companies to pull out of the marketplace and hospitals to serve more uninsured people.

While the GOP was successful in passing the tax bill, the Individual Mandate is actually still in effect for 2018, allowing the possibility of an individual being penalized for not having insurance.  Once the Individual Mandate is repealed, the Employer Mandate, which requires businesses with 50 or more full-time equivalent employees (“FTEs”) to offer insurance or be penalized, will remain intact.

It is important to note that the reporting obligations under the ACA for employers and insurers remain in effect even after the Individual Mandate is eliminated in 2019.