State based mandates

Nick Bagley, a law professor at the University of Michigan, also has a model state individual mandate law.

State based mandates, if adapted, could give states significantly more flexibility in future plans for 1332 waivers in 2019 and beyond. Under current law, mandate revenue goes to the federal general fund to offset some of the costs of providing subsidies and expanding Medicaid. None of that money goes to the state.

Now let’s imagine a world where there is no federal mandate but a state mandate that mimics the current federal mandate. What happens?

Some people will get insurance who otherwise would not have as the relative costs of being uninsured increase compared to buying minimal coverage.

Some people will still not get covered and will not be exempt. The state will collect the individual mandate from these people.

And now a state has a pool of money. It is not a huge pool of money, the IRS collected about $3 billion nationwide for tax year 2016. But it is not nothing.

This would be unanticipated revenue. One of the ways that might make state based individual mandates more palatable at the state level would be if the revenue was dedicated to bringing down premiums for non-subsidized buyers. These funds could be used for reinsurance that will bring down index premiums for subsidized and non-subsidized buyers which mainly benefits non-subsidized buyers. It could be used for direct premium subsidies for people who earn more than 400% ($48,080) of the Federal Poverty Line (FPL). It could be used to start-up and back a state public option that only sells off-Exchange policies.

Furthermore, if a state was to enact an individual mandate, it will lead to a higher enrollment levle and a lower Silver benchmark. This will lead to a different set of calculations for any 1332 waivers that they may wish to submit. The per member per month (PMPM) pass through amount may decrease but the PMPM will be multiplied against a larger number of covered lives. The overall sum of money available for a 1332 may increase compared to the counterfactual of no state based individual mandate. Larger potential 1332 pass-throughs means more state flexibility if a state wishes to engage in customizing their healthcare system.

Update 1 The downside of pre-writing posts is that Maryland puts out an interesting proposal to use a state level mandate and auto-enrollment after you write and before you publish.

2 replies
  1. 1
    Jim Bales says:

    My understanding is that here in Massachusetts we have had an individual mandate for years. Seems to have worked for us …

  2. 2
    Victor Matheson says:

    Mass resident and economist who occasionally works on ACA issues here. Yes, we have had a state mandate since the Romney as governor years. Our legislation served as a main blueprint for the ACA. the mandate (along with other policies) was highly effective at lowering uninsured rates. The year before the ACA passed, Mass had an uninsured rate of about 5% which was 3 or 4 percentage points below the next best state in the country and about 10 or 15 points below the worst states like Texas.

    Administratively, it was easy. I got a form like a w2 from my employer and had to file a single page sheet along with my tax form. I accidentally forgot to include it one year and was automatically flagged and fined about $3,000 but I immediately got that refunded when I showed proof of insurance.

    It is also my understanding that our mandate is still on the books having never been officially removed after passage of the ACA as noted by Jim. I guess we will both find out for sure next year at this time when we do our 2018 taxes.

    The main thing I like about the idea of state level mandates is that, like Medicaid expansion, it gives states who want to do right by their people a chance to do the right thing at the expense of those states who want to screw their own people. State mandates should increase coverage, generate revenue for the states, reduce insurance prices within the state, and increase federal spending going to the state (as higher enrollment causes more total subsidies to head to states with mandates.) I am fine with taxpayers in red states sending money to Mass for once to cover our intelligent and compassionate policies.

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