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Individual mandate penalty delay will cut deficit, increase number of uninsured

Rep. Lynn Jenkins of Kansas promotes her bill to delay the ACA individual Mandate penalties for one year.
Rep. Lynn Jenkins of Kansas promotes her bill to delay the ACA individual Mandate penalties for one year.
Congresswoman Lynn Jenkins

Delaying enforcement of the Affordable Care Act (ACA) individual mandate for one year could save the federal government $2.1 billion in 2014, the Congressional Budget Office (CBO) estimates. According to the CBO report, published March 4, House bill 4118, “Suspending the Individual Mandate Penalty Law Equals Fairness Act (SIMPLE),” would save the government $9.4 billion over the next ten years.

The savings would come from decreased Medicaid and Children’s Health Insurance Program (CHIP) spending and decreased outlays for health insurance subsidies offered through the health insurance exchanges. The CBO estimates that one million fewer individuals will have health insurance than originally projected for 2014 if the legislation is enacted.

The SIMPLE Fairness Act was introduced in the house on Feb. 28 by Kansas Congresswoman Lynn Jenkins. The ACA requires that most Americans have health insurance coverage effective Jan. 1, 2014. Those who do not comply, with a few exceptions, will be accessed a fine of $95 or 1 percent of Adjusted Gross Income, whichever amount is greater. The penalties will be collected by IRS during the 2015 tax season. The penalty increases in subsequent years.

Jenkins bill would not eliminate the individual mandate, but would delay until 2015 the imposition of any penalties for failure to have health insurance.

The Shared Responsibility Payments for businesses, which were to take effect in 2014, have already been delayed. Businesses with 100 or more full-time employees will not be fined until 2015; mid-size businesses with at least 50, but fewer than 100, full-time employees have until 2016 to comply with the law.

The CBO expects that delaying the penalty will increase costs to insurers, and increase the amount the government pays for the risk corridor program. This program limits insurers’ losses and gains, offering a hedge against higher-than-expected outlays for claims.

The CBO expects that a larger percentage of those that do not purchase a health plan if the penalty is delayed will be younger, healthier individuals, creating an older risk pool with higher medical costs.

The U.S. House of Representatives will consider the bill today, March 5.