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An Alternative to the Individual Mandate

Posted on September 21st, 2017

The so-called Individual Mandate has been considered a widely unpopular provision of the Affordable Care Act (ACA) which most Republicans want to repeal and even several Democrats want to change. As members of Congress talk about the various ways the ACA could be modified or improved, options to change the Individual Mandate are being explored.  
 
The Individual Mandate applies a penalty which is (the greater of) $695 or 2.5% of household income for people who are uninsured. There are some exceptions to the rule for people who have a religious objection to insurance, experience a financial hardship, or for other reasons. 
 
The Individual Mandate is viewed by many as a necessary evil. There needs to be a rule or system in place which encourages more people to obtain health insurance, and this is necessary to account for another ACA provision that prohibits pre-existing conditions from being a factor when establishing premiums or determining eligibility for coverage. 
 
In other words, the Individual Mandate is supposed to encourage healthier people to obtain coverage to offset the risk of unhealthier people. However, many people argue the Individual Mandate isn’t working the way it was intended since insurance companies are exiting various markets due to bad risk and somewhere around 27 million people continue to be uninsured. 
 
Some members of Congress are now exploring the idea of auto-enrollment as an alternative to the Individual Mandate. Under this concept, anyone who is uninsured would be automatically enrolled in a low premium health insurance plan, and they would have to proactively waive coverage if they didn’t want it. 
 
This idea is being compared to a process that some employers use for their 401(k) plans. Some employers automatically enroll employees into their 401(k) plans so that they don’t have to fill out lots of paperwork or review complicated financial statements. Employees must notify their employer if they want to opt out. Employers who use an auto-enrollment process see far greater participation rates in the 401(k) plan.
 
Some members of Congress think an auto-enrollment process would be the ideal replacement to the Individual Mandate, but it would likely be a more complicated process when it comes to health insurance. There would have to be an effective system in place to identify who was uninsured, to enroll them in a plan with a private insurance company, determine eligibility for subsidies, and give them the ability to opt of coverage. The logistics alone may make auto-enrollment infeasible, but it’s something on the table as Congress continues to explore ways to change the ACA.     
 

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