Cotton Helps Kill the Individual Mandate

The mandate that you must buy health insurance or face a hefty penalty is dead. Whether you think this is a good idea or a bad idea, you have to acknowledge that Senator Tom Cotton played a key role in making this happen.

As we noted on TAP last month, Sen. Cotton was a leading proponent of including the individual mandate repeal in tax reform legislation. The final version of the tax bill sets the penalty (or, if you are Chief Justice John Roberts, “tax”) for not having health insurance coverage at 0, effectively ending it. Without this change, the penalty/tax would have been $695 next year, or 2.5% of your household income if you met certain conditions.

There is predictable wailing and gnashing of teeth in some quarters over this change to Obamacare. These voices say that this will sabotage one of the main pillars holding up the edifice of “affordable insurance.” They note that the Congressional Budget Office says this change will result in fewer people having insurance. They also claim that it will result in higher prices.

To be fair, there is some truth to these objections. Those who choose to forgo insurance are likely those who see a value in the insurance that the government mandates must be sold. Therefore, they are least likely to use it. That means their premium dollars are subsidizing the price of those who see a greater need for insurance, and who would purchase this insurance regardless of a federal mandate. End the penalty for the first group, and the price for the second group goes up.

Michael Tanner, a health care analyst at the Cato Institute, points out some important defects about this scenario:

… if your health-care model depends on a product so lousy and overpriced that no one will buy it unless you force them to … well, perhaps you should rethink it.


Moreover, the CBO has long overstated the impact of the power of the individual mandate to induce insurance coverage. That’s one reason why actual ACA enrollment has consistently fallen short of CBO projections. An independent analysis released last week by S&P Global concluded that repealing the individual mandate would result in just 3-5 million fewer people purchasing insurance over the next decade. That would mean a smaller reduction in government spending, but also a smaller impact on premiums.

One of the core problems of Obamacare is that it placed numerous mandates and limits on the types of health insurance that could be sold, driving up the cost and preventing policies from being designed to appeal to consumers’ needs. Then it required that everyone must purchase these one-size-fits-all policies that are overly expensive. The tax bill ends the mandate that people must purchase this insurance, but it does not end the mandates that make the insurance unattractive for so many people. That should be the next area of health care reform that Congress tackles.

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