Analysis: ObamaCare market stable and profitable despite loss of individual mandate

The ObamaCare market is “stable” and profitable for insurers despite the repeal of the law’s mandate to have coverage, a new analysis finds.

When Republicans repealed the health law’s mandate to have coverage in the 2017 tax law, many Democrats and some policy experts warned the move would cause chaos in the markets as healthy people dropped coverage, leaving only sick, expensive patients remaining. 

But the analysis from the Kaiser Family Foundation released Monday finds that the fears largely did not come to pass in 2019, the first year without the individual mandate, demonstrating a measure of resilience to the health law. 

“Results from the first nine months of 2019 suggest that the individual market remains profitable and stable despite the effective repeal of the individual mandate,” the analysis finds. 

A key measure of insurers’ financial strength, the percentage of premiums insurers collect that they pay back out in spending on health claims, remained relatively strong in 2019 despite the repeal of the mandate, the analysis finds. 

While this percentage, known as a “loss ratio,” hit a high of 97 percent in the early years of ObamaCare as insurers struggled to adjust to the law, the percentage fell to 71 percent in 2018 and rose only slightly, to 75 percent, in 2019, indicating stronger financial performance among insurers. 

The analysis finds that the pool of enrollees is “not significantly sicker than it was while the individual mandate was still in effect.”

Some policy experts, especially right-leaning ones, have long said that the effect of the mandate was overrated and that what was really keeping people enrolled was the carrot of ObamaCare’s financial assistance, not the stick of the mandate.

The stability of ObamaCare without the mandate also has implications for a Republican-backed lawsuit seeking to overturn the health law. That lawsuit argues that the rest of the law is dependent on the mandate and should be invalidated if the mandate falls.

There are still some negative signs for the law.

While enrollment in the ObamaCare marketplaces remained relatively stable for 2020, there has been a larger drop in enrollment among middle-class people with incomes too high to qualify for financial assistance. Enrollment among people not eligible for financial assistance declined by 10 percent in early 2019, the analysis finds.

Insurers also reported the loss of the mandate drove premiums up by about 5 percentage points, though that increase largely did not show up in 2019 because insurers had already overpriced their plan in 2018, the analysis finds.