March 9, 2018 1 COMMENTS

CT ponders an individual mandate — and two vastly different penalties

A legislative committee aired two bills Thursday that would establish a state individual health care mandate and push back on Congress's recent repeal of the Obamacare penalty, but the bills would impose radically different fines for those who fail to buy insurance coverage.

The federal tax bill passed in December eliminated the individual mandate penalty in 2019. The result, the Congressional Budget Office projected, will be that the number of uninsured Americans will grow by 4 million people that year and by 13 million by 2027. The CBO also estimated there will be an immediate increase of about 10 percent in premiums because the risk pool that remains will be older and sicker.

This year, the penalty for not having coverage under the Affordable Care Act (ACA) is $695 per adult or 2.5 percent of income — whichever is higher.

Gov. Dannel P. Malloy pledged during his State of the State address in February to propose legislation to preserve the most vital elements of the Affordable Care Act — including the individual mandate.

Under a bill he submitted, residents would be fined $500 or 2 percent of their income annually if they don't comply with the state mandate for the entire year — or 1/12th of that for each month not in compliance.

Legislators on the Insurance and Real Estate Committee, however, have introduced a second bill, inspired by a research paper by Fiona Scott Morton, an economics professor at the Yale School of Management. According to the committee's bill, if residents fail to have coverage, they face a penalty of 9.66 percent of their income each year, capped at $10,000.

But the bill would provide a choice — pay the penalty or put 9.66 percent of income each month into a health savings account managed by the state. Residents could withdraw money from their account as long as it was for health care expenses.

According to the Yale paper, health care is considered affordable when all payments — including premiums and out-of-pocket costs — equate to 9.66 percent of income. This is the definition that the ACA uses.

The Internal Revenue Service reported that 60,000 state residents paid the federal penalty in 2016, the Yale paper said.

"This is the starting point of a long conversation," said Rep. Sean Scanlon, D-Guilford, House chair of the committee. "We need to look at this issue from a perspective of not just initial shock, but really look at this from a big-picture perspective and that's not easy to do.

"Ten thousand dollars is a lot of money, and I fully appreciate that," Scanlon said. "But $10,000 to somebody who is going to choose to not get health insurance, and God forbid something happens to them, all of us are going to spend hundreds of thousands of dollars to care for them."

Scanlon also said some economists, including Morton, have argued that the ACA hasn't been as successful as it could have been because the penalty was never high enough.

In her paper, Morton said economic researchers have found that the federal mandate penalty was too small, "and therefore states can be better off designing and enforcing their own."

Scanlon is also part of a bipartisan group that was convened by Lt. Gov. Nancy Wyman last year when ACA repeal attempts started. For the last several months, Scanlon said, the group's discussions have included what to do if the individual mandate — "sort of the linchpin that makes the whole system work" — were eliminated.

Rep. Rob Sampson of Wolcott, the ranking House Republican on the insurance committee, questioned the wisdom of a state mandate during a public hearing on the bills Thursday.

"In my mind, there are only two reasons why people don't have health insurance," Sampson said. "Either A, they're poor and they can't afford it, and fining them does not seem like a really good idea to me.

"And two, they're free American citizens who are making a choice on whether or not they want to purchase a product, and fining or taxing them for that doesn't also seem like it's in keeping with our mission either," he said.

Others submitted written comments — which included issues with other components of the bills.

Malloy, in written testimony submitted to the committee, said that,"By instituting a shared responsibility fee for an individual who does not carry health insurance, the state will drive more individuals into the insurance market, and thus help ensure that Connecticut's individual market risk pool is sufficient to hold the line on premium costs."

"The fees from those who opt not to carry health insurance may be used to offset the cost [of] health care for low-income individuals," Malloy said. Under his bill, the fees would be kept in a new "Health Care Premium Assistance Fund."

Zack Cooper, a health economist and a Yale faculty member, said in his written testimony that if the state fails to introduce a mandate, there will be a jump in the amount of uncompensated care provided by hospitals in addition to increased premiums and more uninsured residents.

"The cost of this burden will fall primarily on the non-profit hospitals in the state, and, ultimately, on taxpayers," Cooper said. "The idea of an insurance mandate has become politically charged in the U.S. I urge you to ignore the politics and focus on the economic merits of the policy."

"We forget what the individual insurance market looked like before the ACA was passed," he said. "There were soaring premiums, large gaps in coverage, and the constant risk that, absent insurance, an accident could bankrupt a family."

He said the mandate "must be large enough to nudge individuals to purchase insurance and dissuade them from free-riding." He said that with some modest modifications, the insurance committee's bill "preserves individual choice and reduces free-riding."

The National Federation of Independent Business submitted testimony opposing the insurance committee's bill.

"NFIB is committed to seeking legislative reforms that can help small business owners and their employees, however establishing a state level individual mandate and accompanying tax penalty for Connecticut is significant step in the wrong direction," the federation said. "Since 1986, our small business members have told us that increasing healthcare costs is their No. 1 problem."


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03/11/18 AT 06:11 PM
I wanted to share with you a data point for the new health insurance mandate.

I am a small business owner that, under the ACA found myself trying to cover an excessive insurance cost increase combined with a decrease in coverage. Shortly after that, my wife had a condition that made her increasingly hard of hearing. Our insurance denied the coverage for the testing and treatment, so I began 'shopping.'

I discovered the Christian Health Ministries. It costs less than 1/2 the price of the bronze plan and allows us access to health care. Jill ended up getting a bit of surgery, and the $15,000 price expected by the insurance rate card ended up costing us ZERO out of pocket. They also covered her Physical Therapy and aftercare.

This cost sharing program complies with the ACA using IRS form 8965. I know the state mandate is a bad idea for our jobs economy even if only in perception. Please draw a line in the sand and have the mandate allow for our program to continue. This little safety net is allowing our business to grow, and is a stronger form of care access than insurance. This option NEEDS to be available in any legislation, even the democratic congress, senate, and executive at the federal level agreed.

Thanks, I am available to talk if you'd like. Please feel free to share my note.
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