The ACA requires health insurers in the individual and group markets to provide coverage on a “guarantee issue” basis without any pre-existing condition exclusions—which could create an environment where individuals wait until they are sick to obtain coverage absent strong incentives to assure that everyone participates in the marketplace. States that have enacted similar approaches have seen significant premium increases, less competition and a loss of consumer choice. To counter-balance some of the effects of this and other insurance market reforms, the ACA also includes a requirement that all Americans carry basic health insurance. Yet many experts question whether the coverage requirement will be sufficient to encourage younger and healthier people to take up coverage. In fact, the penalty for failing to carry insurance in 2014 will be as low as $95.
Studies from independent experts--the Congressional Budget Office (CBO), Center for American Progress (CAP), Urban Institute, Lewin Group, and RAND Corporation--have examined the impact of severing the individual mandate but retaining ACA market reforms. While the studies differ on the magnitude of the impact of severing the mandate, they all find that doing so would result in a dramatic rise in the uninsured population and increases in health insurance premiums compared to health reform with a mandate.
Experience in eight states that enacted various forms of guarantee issue and community rating in the 1990s all showed what happens when these market reforms are not linked to a mandate - higher premiums, no reduction in the uninsured and loss of consumer choice.
Milliman examined states that enacted guaranteed issue and community rating reforms in the absence of an individual mandate, and found that they saw their individual insurance markets deteriorate. This report updates Milliman’s August 2007 report on the impact of guaranteed issue and community rating (CR) reforms adopted in eight states in the 1990s.