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December 22
08:53 2021


The demise of the individual mandate has not disrupted health insurance markets (at least not yet)

QUOTE: Whatever its value as a market stabilization measure, there is no doubt the individual mandate was essential to getting private health insurers to support a bill making coverage available to all applicants … .

By Joseph S. Harrington, CPCU

 Personal lines agents who sell health insurance have lost a bit of leverage with their clients over the past three years. The 2017 federal tax law reduced to $0 the fine for violating the “individual shared responsibility provision” of the Patient Protection and Affordable Care Act (ACA), effectively eliminating the ACA’s controversial “individual mandate” that required every able adult to have health insurance.

Property/casualty producers may not have been enthusiastic about “Obamacare,” but as insurance professionals, they understood what the individual mandate was designed to avoid: adverse selection and a deteriorating spread of risk. The logic was that if young, healthy people avoided coverage, and older, sicker people sought coverage, the costs of treating the latter would make health insurance even less attractive to the former. This was the “death spiral” many predicted would result if there was no requirement for everyone to be covered.

Whatever its value as a market stabilization measure, there is no doubt the individual mandate was essential to getting private health insurers to support a bill making coverage available to all applicants without regard to pre-existing medical conditions. Without the mandate, there would likely be no ACA.

Health insurers continued to hold that position during deliberations over the 2017 tax bill. America’s Health Insurance Plans, a trade association for health insurers, joined other healthcare organizations in arguing that “repealing the individual mandate without a workable alternative will reduce enrollment, further destabilizing an already fragile individual and small group health insurance market.”[1]

Zero dollars, zero disruption?

Some agents and brokers saw their value diminished by the ACA, because their expertise in coverage options was eclipsed somewhat by the marketing of standardized plans through the federal government’s website. But, to the surprise of some, the elimination of the ACA penalty, which took effect in 2019, appears to have had little impact on enrollment for healthcare insurance. In fact, the U.S. Census Bureau found that enrollment was slightly higher in 2019, when there was essentially no penalty, than in 2018.[2]

Figures from the National Association of Insurance Commissioners (NAIC) indicate no disruption in premium growth in 2019 and 2020, and 2020’s loss and combined ratios were the best recorded in the entire decade, both pre- and post-mandate.[3] However, questions remain about the impact of the COVID-19 pandemic on the 2020 numbers and over the long term.

Despite more than 30 million reported cases of COVID-19, the NAIC says there was only a 7% increase in the number of health insurance claims, an increase consistent with previous years. The NAIC adds that “offsetting factors appear to have reduced the overall financial impact [of COVID-19] to insurers, such as reduced costs related to cancelled or delayed medical treatments, procedures, and utilizing other non-emergency health benefits.”[4] Those deferred costs may be starting to show up, as mid-year numbers for 2021 indicate a some deterioration of operating results from 2020.

So, we don’t know yet if the health insurance system created by the ACA can be sustained indefinitely without a coverage mandate. (Five states have mandates of their own.[5])

It is clear, however, that health insurers and their producers have an unexpected window of opportunity to demonstrate whether we can have a private, voluntary market for individual health insurance that is open to all and does not punish people for pre-existing conditions.

Who knows, maybe expertise in private health insurance coverage options will come back into vogue.

[1] November 14, 2017 letter to congressional leaders from America’s Health Insurance Plans, American Academy of Family Physicians, American Hospital Association, American Medical Association, Blue Cross Blue Shield Association, and Federation of American Hospitals; accessed at

[2] Sarah Kilff, “Republicans Killed the Obamacare Mandate. New Data Shows It Didn’t Really Matter,” The New York Times, Sept. 21, 2020; accessed at

[3] National Association of Insurance Commissioners, U.S. Health Insurance Industry, 2020 Annual Results, p. 1; accessed at

[4] Ibid., p. 3

[5] Massachusetts has had a coverage mandate with a tax penalty since 2006; New Jersey and the District of Columbia enacted measures to that end in 2018; California and Rhode Island passed similar measures in 2019. Vermont has a measure to track uninsured people, but with no penalty to date. See Julia Pak, “5 States Are Restoring the Individual Mandate to Buy Health Insurance,” March 19, 2021, HealthCareInsider; accessed at

Joseph S. Harrington, CPCU, is an independent business writer specializing in property and casualty insurance coverages and operations. For 21 years, Joe was the communications director for the American Association of Insurance Services (AAIS), a P-C advisory organization. Prior to that, Joe worked in journalism and as a reporter and editor in financial services.


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