Potential Effects Of Eliminating The Individual Mandate Penalty In California

Abstract

The federal government eliminated the tax penalty for non-compliance with the Affordable Care Act’s individual mandate starting with the 2019 enrollment year. Using interviews with individual market enrollees in California in 2017, we found that 19 percent reported that they would not have purchased insurance had there been no penalty. We estimate premiums would have increased by four to seven percent if these enrollees were not in the risk pool. Moreover, the effects of eliminating the penalty were more concentrated in vulnerable subgroups, including those with lower income or educational attainment, Hispanic enrollees, and those who were uninsured in the prior year. Younger enrollees and those without chronic conditions were also more likely to say they would not have purchased insurance if there was no penalty. Eliminating the mandate penalty alone is unlikely to destabilize the individual market in California, but could erode coverage gains, especially among groups who have historically been less likely to be insured.