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Health advocates blast tax law’s rollback of penalty for not having insurance

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FILE - Executive Director Matt Slonaker of the Utah Health Policy Project speaks to the media after the Utah Decides Healthcare ballot proposal is officially filed at the Lieutenant Governor's Office at the Capitol in Salt Lake City on Monday, Oct. 2, 201

FILE - Executive Director Matt Slonaker of the Utah Health Policy Project speaks to the media after the Utah Decides Healthcare ballot proposal is officially filed at the Lieutenant Governor’s Office at the Capitol in Salt Lake City on Monday, Oct. 2, 2017.

Ravell Call, Deseret News

SALT LAKE CITY — Utah health advocacy groups are speaking out against the rolling back of a financial penalty levied against people who don't buy health coverage, saying that without it, fewer healthy people will sign up for plans and insurance markets will suffer.

The penalty — which is applied to those who do not comply with the Affordable Care Act's individual mandate, the part of that law that requires all Americans to have health insurance — was reduced to $0 beginning in 2019 as part of the expansive tax reform bill passed last week.

In 2017, those who did not purchase coverage became subject to a $695 fee for each uninsured adult and $347.50 per uninsured child, up to $2,085 per family — or 2.5 percent of the household's income, whichever was highest.

Many supporters of the Affordable Care Act — as well as prominent policy think tanks that include the Kaiser Family Foundation and Brookings Institution — have said the penalty is a necessity to ensure that enough healthy people are enrolling in the federal health exchange, thereby mitigating insurers' financial risk and keeping premiums under control.

"The consequences of this careless, partisan attack on the U.S. health care system are yet to be fully determined, but we do know that it will lead to fewer Americans with coverage, higher premiums and a weaker individual market," Stacy Stanford, health policy analyst for the Utah Health Policy Project, recently wrote in a news release.

"The mandate, combined with premium and deductible-reducing subsidies, is what makes sure everyone, regardless of health status, has access to affordable health insurance coverage."

Matt Slonaker, executive director of the Utah Health Policy Project, said that "any potential meager tax cut poor Utahns received will be gobbled up by higher health care costs" as a result of the new tax law.

"This may be a tax bill on its face, but it is also an attack on our health care system, taking health insurance from the poor in order to further enrich wealthy individuals and corporations,” Slonaker said in a prepared statement.

Utah Health Policy Project, an advocacy organization that also helps people enroll in insurance on the federal health exchange, was joined by the Disability Law Center, Voices for Utah Children, Comunidades Unidas, and a Utah member of California-based policy group Manufactured Housing Action, in saying they were dismayed at the new law.

"(These) organizations express our disappointment in Senators Hatch and Lee, and Representatives Bishop, Stewart, Curtis, and Love, and we condemn their support of this reckless legislation," Stanford wrote.

Matt Whitlock, a spokesman for Sen. Orrin Hatch, R-Utah, said in an email to the Deseret News that the groups are contributing to "false information" about the new tax law.

"These groups are seen as important policy experts and authorities in our state," Whitlock said. "They know they can reach out to us with questions about policy, but it is incredibly unfortunate that they’re joining in a chorus of spreading false information about a tax reform proposal that will help the vast majority of people in our state."

Hatch has joined fellow Republicans in Congress in saying that getting rid of the individual mandate penalty amounts to relieving Americans of an onerous, unpopular requirement that disproportionately affected low-income families.

"(He) believes that no one should be forced to purchase insurance or be punished if they voluntarily choose not to," Whitlock said.

Hatch also said during a Senate presentation in November that the individual mandate is "a terribly regressive tax that imposes harsh burdens on low- and middle-income taxpayers."

"Also, let’s keep in mind that the mandate has been a pretty ineffective tool," the senator said at the time. "It hasn’t prevented premiums from skyrocketing, nor has it kept insurers from leaving markets."

Hatch has also previously estimated, per Internal Revenue Service data, that about 80 percent of Americans who were assessed the penalty in 2015 earned less than $50,000 per year. He also estimated last month that, in Utah, 32 percent of those who paid the penalty earn less than $25,000 per year.

Stanford pointed to estimates from the nonpartisan Congressional Budget Office that premiums would rise as a result of rolling back the mandate penalty; the agency says the move would make premiums "increase by about 10 percent in most years" between 2018 and 2027.

"The mandate enables pre-existing condition protections," Stanford wrote. "The more that healthy people lose or give up their coverage, the more expensive and unstable the market becomes — especially for people with health care needs."

But Whitlock contends the cost of insurance on the federal exchange can stay under control even without a legal penalty for not purchasing insurance.

"While (the Congressional Budget Office) does estimate a 10 percent premium increase over the decade due to a slightly sicker risk pool, eligibility for premium tax credits would not change, meaning the vast majority of enrollees would not be exposed to the full increase," Whitlock said.

Whitlock also believes the exchange can stay stable without the mandate, referring to a Congressional Budget Office finding that says so.

The Congressional Budget Office also estimated in November that the number of Americans with health insurance would fall by 4 million in 2019 and by 13 million in 2027 compared to when keeping the mandate.

Of those, about 5 million fewer would have insurance through the exchange, 5 million fewer would be Medicaid recipients and the rest of the decrease would be due to fewer Americans having coverage through their employer, the office predicted.

The Center for American Progress, a left-leaning policy organization, estimates 125,000 Utahns will be among the increase in uninsured by 2025.

The Congressional Budget Office also projected that repealing the mandate will save the federal government $228 billion by 2027.

Tanji Northrup, assistant commissioner of the Utah Insurance Department, said that uncertainty over the Trump administration's enforcement of the mandate penalty "could even affect (marketplace) enrollment for 2018" if people back out of the plans they have already selected.

"They may have not actually paid their premium yet ... (and) now that they know it's no longer a mandate with a penalty connected to it, they may decide not to (pay for) their coverage," which would ultimately kick them off their plan, Northrup explained.

Rep. Rebecca Chavez-Houck, D-Salt Lake City, said she is concerned about the mandate ending, but intrigued to find out how the market fares in Utah.

"I think the jury is out on that until next year," Chavez-Houck told the Deseret News. "I am concerned about it because the more people that we have covered, that obviously shares the risk ... and that helps keep costs down for everyone."

However, she said she is holding out hope that some people who would have dropped their coverage if it weren't for the mandate will decide to stay insured "now that they've had (the benefits of a plan) for one or two years."

"Maybe that will make a difference," she said.