July 15, 2019

July 15, 2019

Subscribe to Latest Legal News and Analysis

July 12, 2019

Subscribe to Latest Legal News and Analysis

Have the Reports of the Affordable Care Act’s Death Been Greatly Exaggerated?

The tax reform bill signed into law by President Trump on December 22, 2017, notably includes the repeal of the Affordable Care Act’s (ACA’s) individual mandate penalty. The individual mandate, which requires most Americans to maintain a basic level of health insurance coverage or pay a penalty to the federal government, had already endured multiple constitutional challenges and scrutiny by political pundits by the time it came into effect in 2014. The offering of affordable insurance coverage through the ACA’s healthcare exchanges was supported by the individual mandate, which was intended to ensure that enough healthy people would participate in insurance pools to balance out the sick, who cost more to insure.

The largest concern raised by payors and providers relating to the repeal of the individual mandate penalty is that individuals with lower health expenditures could be less inclined to buy insurance through an exchange, which would result in imbalanced risk pools and rising premiums. Indeed, the Congressional Budget Office (CBO) has estimated that up to 13 million more people will be uninsured within the next 10 years and that insurance premiums will rise by an additional 10% per year as a result of the repeal. Beyond causing turmoil in the health insurance markets, should the CBO’s estimates come to pass, the reduced number of individuals with insurance may generate increased numbers of visits to the emergency room, reduced volume for non-emergency medical services, and an increase in hospital spending on uncompensated care, among other far-reaching ramifications.

Considering the importance of the individual mandate penalty to the ACA and its healthcare exchanges, its repeal has left some questioning the future of the ACA altogether. President Trump, for one, confidently declared after the tax reform bill was passed that “when the individual mandate is being repealed, that means Obamacare is being repealed.” However, elimination of the individual mandate does not by itself repeal the other provisions of the ACA, such as the ban on insurance companies refusing coverage due to pre-existing conditions, or enabling parents to keep their children covered under their plans until the age of 26. In fact, some have speculated that repeal of the ACA’s most unpopular provision could insulate the law from further efforts to undermine it, as the political calculus must be recalibrated.

The actual impact of the repeal will be contingent upon several key factors: (i) health insurance enrollment volume, (ii) health insurance premiums, (iii) health insurer participation in the ACA exchanges, and (iv) future legislative action in this space (e.g., stabilization measures such as the proposed Alexander-Murray and Collins-Nelson bills). While there is little doubt that repeal of the individual mandate penalty is a setback for the ACA, it would be premature to declare dead a law that has already proven more resilient than many anticipated.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.


About this Author

Matthew Goldman, Corporate Attorney, Sheppard Mullin Law Firm

Matthew Goldman is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm's healthcare practice team.

Areas of Practice

Matthew’s practice blends the regulatory and transactional components of healthcare law, and includes representation of hospitals, managed care organizations, medical groups, and other healthcare entities and providers. On the regulatory side, Matthew’s practice is focused on licensing, regulatory compliance, and managed care arrangements. Matthew has extensive experience preparing Knox-...

Jordan Grushkin, Attorney, Sheppard Mullin Law Firm, Health Care

Jordan Grushkin is an associate in the Corporate Practice group in the firm's Century City office.

  • J.D., Georgetown University Law Center, 2015

  • B.A., Georgetown University, 2015, magna cum laude

David Solberg, Attorney, Sheppard

David M. Solberg is an associate in the Corporate Practice Group in the firm's Century City office.

David M. Solberg focuses his practice on serving healthcare and higher education institutions. He advises health systems and other covered entities on compliance with the Health Insurance Portability and Accountability Act (HIPAA), Emergency Medical Treatment & Labor Act (EMTLA) and provider licensure laws.