Without mandate, insurance may get more expensive

GOP’s tax overhaul removes penalty for not having coverage, which could leave insurers with customers who are less healthy

Maybe you never go to the doctor. Maybe you just cannot afford health insurance.

There are tens of thousands of New Mexicans who pay a penalty on their taxes each year rather than pay for coverage.

About 37,540 tax filers across the state, most of them earning between $10,000 and $50,000, paid a penalty last year because they did not have insurance in 2015, according to the Internal Revenue Service.

But a provision nestled in the tax bill passed by Republicans in Congress this week would end that penalty starting in 2019.

Conservatives have heralded the move as allowing thousands of consumers who have gone without insurance to keep more money in their pockets.

State officials, insurance executives and public health advocates, however, have said many New Mexicans could drop their health coverage as a result and send prices higher for just about everyone else.

The Office of the Superintendent of Insurance says the move could push up prices by about 10 percent for consumers who buy coverage on the individual marketplace. And insurance executives caution the move could have a ripple effect, potentially driving up rates for New Mexicans who get health care through their employers and increasing the number of unpaid bills on the ledgers of hospitals and doctors.

“There is nothing that happens with insurance in this state that doesn’t affect everyone,” said Dr. Martin Hickey, CEO of New Mexico Health Connections, a nonprofit health plan.

What has become known as the Individual Mandate was part of the Affordable Care Act, colloquially known as “Obamacare,” and policymakers have seen it as a means of keeping insurance prices in check.

The thinking goes that if healthier people are made to buy insurance, they can balance out the costs of covering less healthy people.

Congressional Republicans, however, argued the penalty amounted to an unfair intrusion that forced Americans to spend money on a particular service they may not want or cannot afford.

“It is the first time ever the government is saying, ‘You’ve got to buy a product,’ ” said Rep. Steve Pearce, a Republican from Southern New Mexico who voted for the tax bill.

Pearce argued that ending the penalty is effectively a tax cut for New Mexicans who do not have health insurance.

The penalty amounts to either 2.5 percent of a person’s applicable income or $695, whichever is greater.

For 2015, New Mexicans ended up paying a total of nearly $18 million, according to the Internal Revenue Service.

A provision to end the Individual Mandate penalty landed in the far-reaching tax bill this week because its authors calculated that it would lead to fewer people getting subsidies from the federal government to buy insurance or enrolling in Medicaid. Those savings could in turn offset the costs of tax cuts.

While the Individual Mandate would remain in law, the penalties would drop to zero starting in about a year.

But without the penalty, public health advocates and insurance executives say prices will likely rise for the insured because insurers will be left with customers who are less healthy.

The Congressional Budget Office projected 4 million more people around the country would be uninsured by 2019 and 13 million more by 2027.

It is difficult to predict exactly how many New Mexicans might ditch health care coverage, however.

The state saw one of the biggest drops in the rate of uninsured people after the Affordable Care Act went into effect, from nearly 19 percent in 2013 to about 9 percent in 2016. Advocates attribute much of that to the state’s decision to expand access to Medicaid, which had enrolled more than 900,000 New Mexicans as of August.

The question now is how many people might drop out of those plans or other coverage if they will not have to pay a penalty.

Hickey said he has seen research indicating as many as half of the New Mexicans who bought insurance on the marketplace did so to avoid the penalty.

“That could not bode well for New Mexico and its rates next year,” Hickey said, referring to the insurance exchange. About 50,500 New Mexicans have signed up for insurance through the exchange for 2018. That is about 4,000 fewer than for 2017, but consumers had less time to sign up for next year.

Some public health advocates expect that many people who purchased insurance because of the Individual Mandate will continue to renew their coverage if they have seen benefits from it.

Moreover, advocates have said that many New Mexicans who are uninsured remain so not out of choice but because they do not know their options.

“The requirement to have health coverage provides that extra nudge for folks who are uninsured to see what options are available,” said Colin Baillio, director of policy and communications at Health Action New Mexico, an advocacy group.

Without that, even people who are eligible for Medicaid might not consider signing up.

Still, backers of the Individual Mandate say New Mexico could stave off the effects of Congress’ vote by adopting a mandate at the state level. Massachusetts already has one. But that is unlikely to become law under Gov. Susana Martinez, whose aides have described the Affordable Care Act as a “complete disaster.”