Impacts of the Elimination of the ACA's Individual Health Insurance Mandate Penalty on the Nongroup Market in New York State

by Preethi Rao, Christine Eibner, Sarah A. Nowak

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Research Questions

  1. How will elimination of the Affordable Care Act's individual mandate penalty affect premiums, enrollment, and the likelihood of individuals disenrolling from the nongroup market in New York State?
  2. How does New York's Essential Plan, a comprehensive public coverage program serving low-income individuals, contribute to these effects?

How will elimination of the Affordable Care Act's individual mandate penalty affect the nongroup insurance market in the state of New York? Researchers used RAND's COMPARE microsimulation model to estimate the effects, taking into account New York's unique health care landscape. New York is different from other states in that is has full community rating on the nongroup market and is one of two states to offer a Basic Health Program, called the Essential Plan (EP) in New York, to certain qualifying low-income individuals. These two features make New York's nongroup market particularly susceptible to adverse selection when the individual mandate penalty is removed in 2019. The authors estimate that, among the unsubsidized population, young, healthy individuals will leave the nongroup market in much higher numbers than their older, sicker counterparts, while subsidized individuals, including the young and healthy, will remain enrolled at high rates. This will lead to steep increases in premiums in 2019: a 23–25 percent increase in premiums in the nongroup market and a 37 percent reduction in enrollment in the nongroup market. The researchers also considered a scenario in which both the individual mandate penalty and the EP are eliminated, and found that premiums would increase by only 7–10 percent.

Key Findings

The elimination of the individual mandate penalty is likely to have unique impacts on New York

  • Two features make the nongroup health insurance market in New York unique: (1) New York has full community rating, requiring insurers to charge all adults purchasing nongroup plans the same premiums regardless of age or tobacco use status, and (2) New York is one of two states that uses an option under the Affordable Care Act (ACA) to offer a Basic Health Program, called the Essential Plan (EP) in New York, to provide continuous health insurance coverage for low-income residents.
  • These two features make New York's nongroup health insurance market particularly susceptible to adverse selection — whereby unsubsidized young, healthy individuals leave the market in much higher numbers than their older, sicker counterparts, leading to higher premiums — when the individual mandate penalty is removed in 2019.
  • In 2019, elimination of the individual mandate penalty in New York will lead to a 23–25 percent increase in premiums in the nongroup market and a 37 percent reduction in enrollment in the nongroup market.
  • If the EP were not contributing to New York's susceptibility to adverse selection, premiums would increase by 7–10 percent in 2019.

The research described in this report was sponsored by by the Wakely Consulting Group and conducted by RAND Health.

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