With $5.7B up for grabs, states look to fill individual mandate void

vermont
Vermont is one state that passed its own individual mandate following the repeal of the federal one in 2018. Vermont's mandate goes into place in 2020. (Wikipedia/Jonathanking)

The federal individual mandate may be dead. But given the mechanism's potential to keep premiums down while bringing in revenue, several states are reviving the idea at the statehouse level.

Massachusetts pioneered the individual mandate in 2006, setting the example for the Affordable Care Act in 2010. But after Congress repealed the ACA's mandate in its 2018 tax reform package, New Jersey and the District of Columbia stepped in with their own mandates, closely mirroring the federal rules.

Several additional statehouses are also considering similar proposals, partially to avert the negative consequences of the individual mandate going away.

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RELATED: Report: ACA premiums 16% higher than they would have been with individual mandate

"The primary motivation for states to enact a mandate is to replace the federal mandate and its support for health insurance markets and coverage," Jason Levitis, a nonresident fellow with the Center for Health Policy at the Brookings Institution, wrote in a recent analysis. "A state mandate modeled on the federal mandate would generally maintain enrollment at what it would have been with the federal mandate in place, and thereby maintain federal health subsidy spending as well."

But these laws also benefit to the state's budget. If an individual mandate like the ACA's was passed in every state, the governments would bring in a combined revenue of $5.68 billion in 2020, according to the Brookings report (PDF).

Not every state may be willing to consider such a proposal. But many are: Vermont passed a law that will go into effect in 2020, and similar proposals are under consideration in Washington, California, Minnesota, Maryland, Connecticut, Hawaii and Rhode Island.

The potential revenue from this law for each state varies depending on the socioeconomic conditions and existing healthcare laws. States with high levels of insurance coverage, for example, don't have as much potential revenue to gain from those who go uninsured.

RELATED: State experiments with restoring the individual mandate include a health plan ‘down payment’

To remove the population factor, FierceHealthcare divided the potential revenue projected by Brookings for each state by the U.S. Census' projected population for that state in 2020. These are the 10 states with the most to gain per resident.

Of course, revenue intake is hardly the only way states benefit financially from an individual mandate. As Brookings pointed out, increasing insurance coverage reduces premiums and uncompensated care, which also make their way to state budgets. Furthermore, any savings (or revenues) the state does realize can always be turned around to making it easier to obtain coverage.

"Collecting revenue is not the main goal of a mandate, but the revenue it produces for a state may be put to good purpose," Levitis wrote. "While the revenue may be used for anything, states considering mandates may direct it towards programs to make coverage more affordable, thereby helping state residents comply with the mandate. The Massachusetts, New Jersey, and D.C. mandates all take this approach."

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