7.1 million would pay more in Obamacare, testing strength of ‘individual mandate’: report

Roughly 7 million Americans would have to pay more for the cheapest Obamacare plan available to them than to satisfy the sharply rising tax penalty for going uninsured in 2016, according to a new analysis that looked at the economic trade-offs of the administration’s main tool to prod people into the new marketplace.

The Kaiser Family Foundation said Wednesday the average “individual mandate” tax for shirking coverage next year will be $969 per household, a 47-percent jump from the 2015 estimated average of $661.

The Affordable Care Act’s framers phased in the penalty, hoping at first to softly nudge healthy people into Web-based exchanges and keep premiums in check, before tightening the screws on holdouts who refused to get covered.

The baseline 2016 tax is $695 per adult, plus $347.50 per child, or 2.5 percent of household income over the filing threshold — up from $325 per adult or 2 percent of income in 2015.

Kaiser says 7.1 million uninsured persons would still pay more for the the least expensive plan in their marketplace than they would under the mandate tax, meaning they may not think it’s worth signing up.

By contrast, about 3.5 million people could acquire an inexpensive bronze plan and pay nothing in premiums, or at least less than the mandate tax, meaning they have a financial incentive to enroll.

“We think this should make the choice easier and easier for people,” Andy Slavitt, acting administrator for the Centers for Medicare and Medicaid Services, said Wednesday in general comments about the mandate as an incentive.

The Health and Human Services Department has estimated that about 10.5 million uninsured people remain eligible for exchange plans in 2016.

People who earn 100-400 percent of the federal poverty level can qualify for income-based tax credits that make their premiums more affordable.

The subsidized population faces an average household penalty of $738 in 2016, while those with generally higher incomes and no subsidy face an average hit of $1,450, according to Kaiser.

Upheld by the Supreme Court in 2012, the mandate tax is calculated at the end of the year, so it is not immediately clear how effective it will be in drawing people into a marketplace that faces an array of challenges.

The nation’s largest insurer, UnitedHealth, has said it is losing money on the exchanges and may drop out by 2017, while more than half of Obamacare’s nonprofit co-op plans have failed.

Nevertheless, the administration insisted Wednesday that Obamacare’s third open enrollment, which began Nov. 1 and last until Jan. 31, is going well so far.

Through Dec. 5, about 2.8 million customers had selected a 2016 plan on the federal HealthCare.gov website that covers 38 states without their own web-based markets; roughly 1 million of them were new customers, as opposed to those looking to re-up in coverage for the new year.

Though customers have until Jan. 31 to get covered, the administration is encouraging people to sign up by Tuesday to hold insurance in time for the start of the new year.

“Much like last year, we are now seeing a surge of interest as we get closer to the deadline,” Mr. Slavitt said.

The administration said unlike last year, it will not stretch the enrollment period’s deadlines to let people sign up and avoid a mandate tax that is starting to inflict real pain.

Certain people are exempt from the mandate, either because they do not earn enough money or because they fit certain categories — for example, they are in prison, in the country illegally or take care of their own health costs through a faith-based health care ministry.