Research & Commentary: Connecticut Should Not Revive the Individual Mandate

Published March 29, 2018

In late 2017, Congress repealed the Affordable Care Act’s (ACA) penalty on the uninsured, better known as the individual mandate, as part of the Tax Cuts and Jobs Act. Now, legislators in Connecticut are looking to reimpose this regressive and unpopular tax.

Marin Looney (D-New Haven), the Nutmeg State’s Senate president pro tem, recently proposed to levy a tax of 9.66 percent of annual income or $10,000, whichever is higher, on anyone without health insurance. Gov. Daniel Malloy (D) supports the idea, arguing Connecticut needs these burdensome penalties to prevent individuals from leaving the state’s Obamacare health insurance exchange.

“The GOP tax law, which gave massive handouts to the wealthiest Americans, also repealed the individual mandate,” said Leigh Appleby, a spokesman for Malloy. “This is projected to lead to 13 million people losing their health insurance and premiums to increase by more than 10 percent.”

Despite this fear mongering, researchers have found repealing Obamacare’s individual mandate had almost no effect on people’s decision to buy insurance. In a 2016 article for The New England Journal of Medicine, MIT economist and key Obamacare architect Jonathon Gruber examined the impacts of Obamacare’s various provisions on health coverage, including the individual mandate. He wrote, “When we assessed the mandate’s detailed provisions, which include [penalties] for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law.

The primary reason why the individual mandate didn’t work is because millions of Americans realized it makes more financial sense to pay Obamacare’s penalty than to purchase its unaffordable coverage. The law leveed a penalty of 2.5 percent of personal income or $695, whichever is higher, on every person who refused coverage. However, the average silver plan sold on Connecticut’s Obamacare health insurance exchange, known as Access Health CT, costs over $6,500 per person.

Looney’s proposal would punish thousands of families in Connecticut who can’t afford Obamacare’s expensive insurance premiums. Data from the Internal Revenue Service (IRS) show nearly 80 percent of Connecticut households that pay the ACA’s insurance penalty make less than $50,000 per year. The IRS data also show more than 35 percent of households make less than $25,000 per year. These low-income families would face even higher taxes if Looney’s proposal were to become law.

Rather than punish Connecticut’s poorest residents, who can’t afford coverage, legislators should work to expand inexpensive insurance options for consumers. One action lawmakers can take is to cement into law actions the Trump administration has taken to lower the cost of insurance. The Department of Health and Human Services recently introduced new regulations to allow insurers to sell short-term, limited duration insurance for up to 12 months.

Short-term plans cost far less than Obamacare plans. Unlike the insurance offered on ACA exchanges, short-term plans don’t have to comply with a range of expensive regulations and mandates that drive up premiums and deductibles, including mandated benefits, community rating regulations, and age-rating restrictions. This is why the average individual can purchase short-term insurance for just $124 per month, which costs less than one-quarter the price of the benchmark silver plans in Connecticut.

These affordable health plans would entice the estimated 120,000 uninsured people in Connecticut to buy coverage much more effectively than Looney’s proposal, which simply imposes crushing tax penalties.

The following documents contain more information about health insurance policy.


Don’t Wait for Congress to Fix Health Care                            …/dont-wait-for-congress-to-fix-health-care                                                 
In this Policy Brief, Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled, even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs, or submit even more ambitious requests for waivers to the Department of Health and Human Services—a procedure the Trump administration has encouraged.

Trends in Employer-Sponsored Insurance Offer and Coverage Rates
This report from the Kaiser Family Foundation looks at the amount and percent of non-elderly workers covered by employer-based health insurance plans and how these amounts have changed over the past 15 years.

Employer Health Benefits                      
This 2016 Summary of Findings looks at employer contributions and worker contributions to employer-sponsored health insurance. It breaks these contributions down by the type of coverage, type of insurance plan, and type of firm.

State Insurance Mandates and the Aca Essential Benefits Provisions
NCSL gives an overview of the different health benefit mandates in all the 50 states. These mandates dictate what services, providers, and persons insurance plans must cover. There are more than 1,900 mandate laws currently on the books among all states.

How Premiums Are Changing in 2018
Kaiser Family Foundation researchers examine the premium rate increases consumers face in Obamacare marketplaces, which have occurred in large part because of the drop in insurer participation.

Section 1332 State Innovation Waivers: Current Status and Potential Changes
This Issue Brief from the Kaiser Family Foundation provides an overview of Section 1332 Medicaid waivers, how they are approved and financed, how states have used them, and how they have impacted health care reform.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute’s website, contact Charlie Katebi, The Heartland Institute’s state government relations manager, at [email protected] or 978-855-2992.