Schneider: Repeal Obamacare's individual mandate

When congressional Republicans began their first earnest attempt to repeal Obamacare in March, Democrats howled that scuttling the health care law would empower evil insurance companies to soak consumers. “The Congressional Republican repeal plan puts insurance companies back in charge,” said Sen. Tammy Baldwin.

Now that Senate Republicans are using a broad tax bill to repeal Obamacare’s mandate requiring individuals to purchase health care, Democrats have suddenly become the insurance industry’s most effusive lobbyists. On Tuesday of this week, a group of major insurers wrote a letter to congressional leaders predicting disaster if the mandate were removed. Democratic Senators argued against repealing the mandate by citing the insurance companies’ opposition as a reason to keep it.

Of course, the anti-insurance company rhetoric by Democrats has always been a smokescreen. Insurance companies lobbied hard for Obamacare — who wouldn’t want a law requiring every American to buy your product?  In effect, Obamacare turned insurance plans into something no rational person would buy, then forced people to buy them anyway.

If the Senate tax plan succeeds in repealing the mandate, individuals won’t be forced to purchase an inferior product. Those poor insurance companies will have to persuade people their plans are worthwhile, and that includes keeping premiums and deductibles low — which is how the free-market system is supposed to work.

As usual, Democrats continue to predict catastrophe if Senate Republicans move forward on the mandate repeal. Armed with tax tables purporting to show a large tax increase on low-income earners if the mandate is tossed, Democratic senators have argued, paradoxically, that refusing to force people to purchase health insurance they don’t want will cost them more money.

According to the Senate’s scoring estimates, eliminating the mandate will save taxpayers $338 billion over the next 10 years — funds Republicans would plow back into tax cuts for all income levels. Under current law, the government provides generous subsidies for those on Medicaid or forced to purchase insurance on the individual market. If those individuals don’t buy health insurance, they no longer get the subsidies, which the Senate’s cryptic numbers reflect as a tax increase on individuals making between $10,000 and $30,000 in the year 2021.

Yet an alternate estimate by the Joint Committee on Taxation shows that without repealing the mandate, the phantom tax "increase" disappears. In fact, those making between $20,000 and $30,000 would see taxes drop 11.2%, the largest cut of any bracket. That would be, of course, on top of any savings realized either by not purchasing health insurance or being able to purchase more affordable insurance.

That doesn't mean the estimates are perfect: According to the Congressional Budget Office, 13 million people would choose not to buy health care if the mandate were lifted. But that number likely overstates the number of people who would suddenly, after years of purchasing health care under Obamacare's mandate, drop their health insurance altogether. The CBO believes 5 million people will suddenly drop out of Medicaid, which is already free.

If a large number of people continue to buy their own health insurance, the $338 billion Senate Republicans want to parlay into tax cuts won't materialize. But mandate repeal is only one provision in a bill with dozens of moving parts. If both the individual and corporate tax cuts in the bill stimulate the economy in the way Republicans expect, new government revenue won't be a problem.

Earlier this week, House Republicans passed their own tax plan that didn't include repeal of the individual mandate. When the two houses agree on a final package, it should adopt the Senate provision, ending consumer coercion in health care,

If we want citizens to have leverage over insurance companies, it's time to make them compete for our business.

Christian Schneider is a Journal Sentinel columnist and blogger. Email christian.schneider@jrn.com. Twitter: @Schneider_CM