Actuaries warn of insurer losses, exchange exits if individual mandate is killed

If Republicans use their tax bill to repeal the individual mandate, more insurers could end up fleeing the Affordable Care Act exchanges amid climbing financial losses, according to the American Academy of Actuaries.

In a letter (PDF) sent this week to Senate leaders, the group also predicted that a repeal of the mandate would cause premiums to rise in the individual market. That’s because without an alternative means to drive enrollment among healthy individuals, coverage rates among that population would decrease—which in turn would result in a deterioration of the risk pool.

A worsening risk pool could also lead to financial losses—and even solvency issues—for insurers, the letter warned. This is especially true if the individual mandate is repealed after they’ve set their rates, as premiums would be too low and would no longer match the costs of those covered.  

As has already been the case on the ACA exchanges, insurers could only bear those losses for so long before resorting to marketplace exits. “This could lead to severe market disruption and loss of coverage among individual market enrollees,” the group said.

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The American Academy of Actuaries is not the only entity to issue such predictions about the effects of repealing the individual mandate. The Congressional Budget Office projected that doing so would save the federal government $338 billion over the next 10 years but cause an additional 13 million to be uninsured and raise premiums by an average of 10%.

Ratings agency Standard & Poor’s projected more modest savings and coverage reductions, reasoning that it’s financial incentives and medical need—not the tax penalty—that compels most people to stay covered.

Another recent analysis from The Commonwealth Fund found that only some Americans who are expected to experience premium increases as a result of the mandate repeal would have those increases offset by tax cuts in the GOP’s bill. Those who would benefit the most from the tax cuts tend to be people with higher incomes.

Those analyses come amid a clear signal from one key Republican senator that she supports repealing the mandate.

“I believe that the federal government should not force anyone to buy something they do not wish to buy in order to avoid being taxed,” Alaska Sen. Lisa Murkowski wrote in an op-ed published by the Daily News-Miner on Tuesday.

Murkowski’s position is significant, as she was one of the deciding votes against the GOP’s legislative attempts to repeal and replace the ACA earlier this year. As with those bills, Senate Republican leaders can afford to lose only 50 votes to pass their measure. The House has already passed its own tax reform bill, though it does not address the individual mandate.