The Individual Mandate

Obamacare's Unpopular, Pivotal Point

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It’s here at last. Since the individual mandate was proposed as a central feature of President Barack Obama’s health reform plans in 2009, it has been one of the country’s most bitterly divisive issues. In 2012 the mandate — a requirement that all Americans get health insurance — was the subject of a 2012 decision by the U.S. Supreme Court that was one of its most momentous this century. But until now, nobody’s had to do anything about it. For most Americans, all it will mean is checking a “Yes” on their tax form. Those who check “No” will face a fine. That’s supposed to prompt them to sign up for coverage now rather than face a bigger fine next year. What remains to be seen is whether a requirement denounced by Obamacare foes as tyrannical will in practice prove too wimpy to do its job of getting everybody into the insurance pool.

The Situation

The Affordable Care Act, widely known as Obamacare, gave enforcement of the individual mandate to the Internal Revenue Service. It appears on this year’s Form 1040 on Line 61. The penalty for not having had coverage in 2014 is a fine added to your taxes (due in April 2015) of $95 per person or as much as 1 percent of household taxable income, whichever is higher. By 2016, those figures will rise to $695 and 2.5 percent, and will be indexed to inflation thereafter. The Congressional Budget Office estimates that no more than about 4 million Americans will face fines in 2016, a number that dropped from earlier figures as the Obama administration broadened exemptions and insurance signups exceeded initial projections. Besides those paying the mandate, many more people will need to do new calculations for their taxes related to any subsidies they received for their insurance in 2014. Depending on how their income differed from an earlier estimate, they might owe the government money or get a refund.

Source: Kaiser Family Foundation
Source: Kaiser Family Foundation

The Background

Liberals like to point out that the individual mandate was originally a conservative notion, proposed in 1989 by the Heritage Foundation, and that it was a key part of the health-care reform adopted in Massachusetts in 2006 under Republican Gov Mitt Romney. The idea was that without such a prod, any promise to guarantee coverage to those with pre-existing conditions would collapse in a “death spiral” as older, sicker enrollees push up premiums, leading ever more “young invincibles”  to decide they can skip insurance, leading rates to rise even further. As a presidential candidate, Barack Obama opposed the individual mandate, then changed his mind as he prepared legislation in 2009. After the health-reform law was signed in 2010, the mandate became the focus of legal challenges, with conservatives calling a government rule that required purchase of a private product an unprecedented intrusion. In 2012, four Supreme Court justices said that the mandate was justified under Congress’s power to regulate commerce and four called it unconstitutional. The deciding vote was cast by Chief Justice John Roberts, who upheld it not under the commerce clause but as part of Congress’s power to tax.

The Argument

Republicans have not dropped their objections to either Obamacare or the individual mandate, which they describe as unwarranted government coercion. But after taking control of both houses of Congress in the 2014 midterm elections their leaders decided to take a piecemeal approach to reshaping the health care law and focused on other provisions. At the same time, they have also criticized Obama for expanding exemptions to the mandate, with some calling it a stealth repeal of the unpopular provision and others questioning whether the Internal Revenue Service will actually enforce it. The White House says the mandate will be enforced. But even its allies say it has been looking for ways to do so lightly, at least until the law has taken hold. Insurers continue to insist that the mandate is crucial to balancing out the added costs Obamacare places on them.

The Reference Shelf

  • Congressional Research Service report on the individual mandate.
  • U.S. Internal Revenue Service question and answer page on the mandate.
  • A chart from an insurance industry trade group, America’s Health Insurance Plans, on different estimates of the impact of dropping the mandate.
  • Annotated excerpts from the opinions in the U.S. Supreme Court ruling on the Affordable Care Act.
  • A compilation of pre-Obamacare calls for an individual mandate.

First Published April 15, 2014.

To contact the writer of this QuickTake:

Caroline Chen in New York at cchen509@bloomberg.net

To contact the editor responsible for this QuickTake:

John O'Neil at joneil18@bloomberg.net