Publisher's note: The author of this post is Katherine Restrepo, who is the Director of Healthcare policy for the John Locke Foundation.
It isn't all that effective
As of this afternoon, the GOP tax reform package has been approved by the House and is now headed to the Senate for a final vote this evening.
If President Trump signs the bill, Americans will no longer face a tax penalty
if they don't purchase health insurance. This change would become effective in 2019.
Obamacare's individual mandate was originally viewed as the glue that would hold together the health insurance market. It was supposed to compel the young and healthy to sign up for health insurance plans, and their premiums would offset the costs of insurers' sickest policyholders.
But the mandate didn't have teeth. In 2014, the penalty was the greater
of $95 or 1 percent of a single person's income. In 2016, it maxed out at 2.5 percent of income. As a result, infrequent users of the health care system and people who don't qualify for a subsidized health plan accepted the penalty instead of paying for Obamacare's pricey health insurance.
Repealing the individual mandate is a way to put health reform back on the table in 2018. People may enjoy the fact that they won't be hit with a tax if they choose not to purchase an Obamacare plan, but they won't necessarily have more affordable health insurance options because Obamacare's expensive insurance regulations still remain intact. Let's hope that federal agencies will heed to President Trump's executive order
by giving insurers more flexibility to create catastrophic plans - a missing component that is needed to help stabilize the individual health insurance market.