About That Loss of Health Insurance
By David Henderson
Someone tells you that you have to buy something, and levies a penalty if you don’t. So you buy it. Then someone else countermands the first person’s order. You no longer have to buy it. So, assuming it’s not because the price of what you had to buy rose, you don’t buy it. Are you worse off?
Various media outlets have reported on the loss of health insurance that the Congressional Budget Office thinks will come about if Congress gets rid of the mandate that requires individuals to buy health insurance. Estimating the effects of changes in laws is always tricky, of course. What’s not tricky is to explain to readers something that many of the reports don’t do a good job of.
Are you ready?
Many of the people who will “lose” health insurance if the mandate is repealed are people who want to lose health insurance. That is, according to the CBO, what is causing them to get health insurance now is the mandate. So, by their standards, even if we, observing them paternalistically, might think different, they would be better off.
How many of the millions who lose health insurance are people who want to lose it? We can’t tell exactly but we can probably come close.
Let’s take the number that many people are focusing on–the number of people who will be without health insurance in 2027 who would otherwise have it: 13 million. Of these, we know, if the CBO is correct, that fully 5 million people want to be without health insurance. How do we know? Because they would otherwise be on Medicaid. They would choose to be without Medicaid even though they could be on it. And it’s not because the price to them of Medicaid would change. The price, excluding their time cost to apply and qualify, is zero with or without the mandate.
Another 5 million would drop their non-group coverage, according to the CBO. Some of these would be healthier people willing to do without health insurance who don’t find the current rates attractive. Let’s guesstimate that this would be half of the five million, or 2.5 million. I think that’s probably an underestimate. Why would the other half drop their insurance? Because, estimates the CBO, with fewer healthy people in the pool, insurance rates for non-group coverage would rise by about 10%.
So arguably over half of the 13 million without health insurance in 2027 would choose not to have it, not because the premiums would go up, but because the coercion would be gone.
Check the CBO’s Table 1 for a breakdown that shows why the CBO estimates a multi-billion dollar saving in government subsidies in each year, adding to over $300 billion for the 10-year time period.