The various “repeal and replace” factions have targeted different aspects of the Affordable Care Act: Some want to slash Medicaid; some want to cut federal funding to Planned Parenthood; some say they must repeal taxes on tanning salons. One goal they all have in common is to get rid of the law’s “individual mandate,” the requirement that most people must have some sort of health insurance or pay a penalty. Now the insurance industry, along with physicians, and risk-assessing actuaries, are warning the Senate that gutting this mandate could cause big problems down the road.

All versions of the GOP repeal legislation — including the mysterious, as yet unseen “skinny” repeal bill — nullify the individual mandate by reducing the penalty for non-compliance to $0. So technically, the mandate would still exist but there would be no repercussions to anyone who fails to obtain qualifying health insurance.

There would, however, be repercussions for the insurance industry and healthcare in general, at least according to letters sent this week to Senate leadership.

Industry trade group America’s Health Insurance Plans, which represents a large number of insurers, sent a letter [PDF] this morning to Senate leadership, acknowledging that “important improvements are needed to ensure the individual market
delivers lower costs and more choices,” but that getting rid of the individual mandate “will not solve the problems in the individual market, and in fact will result in higher premiums, fewer choices for consumers, and fewer people covered next year.”

“We would oppose an approach that eliminates the individual coverage requirement, does not offer continuous coverage solutions, and does not include measures to immediately stabilize the individual market,” writes AHIP, which also raises concerns about the future of federal subsidies to insurers.

The subsidies are provided by the government to insurers in an effort to keep rates from spiraling out of control. President Trump has repeatedly threatened to cut off these payments, totaling billions of dollars, and some insurers say they are pulling out of the individual marketplace because of this uncertainty. Without these cost-sharing payments, AHIP says premiums will increase by about 20%.

Insurers who plan to sell individual plans through the public health exchanges must set their rates for 2018 in the coming weeks, and some companies say they will have no choice but to raise their premiums or drop out of the exchanges if there isn’t any concrete news on these subsidies.

“If we aren’t able to gain certainty on some of these items quickly, we do expect that we will need to revise our rate filings to further narrow our level of participation,” said Joseph Swedish, CEO of Anthem, one of the nation’s largest providers, earlier this week.

The AHIP letter comes on the heels of a similar message [PDF] from the Health Practice Council of the American Academy of Actuaries, which told senators that eliminating the individual mandate “would likely have significant implications for health insurance coverage and costs both to consumers and the federal government.”

The purpose of the individual mandate is to make sure that as many people as possible are paying into the risk pool. If the mandate goes away, it’s largely believed that healthier people, particularly young adults, will elect to not be covered. Those who retain their coverage would be more likely to need coverage, meaning higher payouts with fewer premiums coming in from people who don’t have costly medical bills.

“Eliminating the mandate would likely result in lower coverage rates in the individual market and a deterioration of the risk pool,” writes the Academy. “Premiums would increase as a result.”

To keep younger, healthier people from dumping their insurance after repeal, the GOP has proposed allowing insurance companies to charge higher premiums to people who have gone without coverage. The idea is that people wouldn’t only be able to hop back onto an insurance plan when they suddenly find out they have a kidney stone, or are having a child.

The actuaries argue that this continuous coverage requirement would likely be inadequate for keeping low-cost policy holders in the risk pool.

There is also the suggestion of mandating a waiting period for people without continuous coverage. During that time period, a new policy holder couldn’t make insurance claims. The Academy concludes that while this might work to keep claim costs down, since you wouldn’t have people buying policies on Monday and showing up at the hospital for a liver transplant on Wednesday — it probably won’t help to bolster insurance enrollment numbers.

Finally, the American Medical Association, which has already come out against repeal of the Affordable Care Act, specifically spoke out against reports that the “skinny” repeal will include elimination of the individual mandate.

“Eliminating the mandate to obtain coverage only exacerbates the affordability problem that critics say they want to address,” says AMA President David O. Barbe, MD. “Instead, it leads to adverse selection that would increase premiums and destabilize the individual market.”

Last night, the nonpartisan Congressional Budget Office also chimed in once again with revised projections based on reports of what is included in the “skinny” repeal. As before, the CBO concluded [PDF] that eliminating the individual mandate would result in an additional 16 million Americans going without insurance, with nearly all of that happening in the first year of repeal.

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