Eliminating the ACA’s Individual Mandate: How Would California Fare?

Marian Mulkey, Principal, Mulkey Consulting


The federal tax law of 2017 will eliminate, beginning in 2019, financial penalties imposed on individuals who do not maintain creditable coverage as defined under the Affordable Care Act. This paper is a concise overview of the following:

  • How ACA provisions encouraged enrollment in health coverage. The penalty for not carrying creditable coverage was one of many provisions in the ACA that encouraged enrollment, including guaranteed issue, premium subsidies on Covered California, and the expansion of Medi-Cal.
  • What will penalty elimination mean for California? Analyses, such as those from the Congressional Budget Office, RAND, and others, have projected reduced enrollment and premium increases resulting from the elimination of the individual penalty. A survey led by John Hsu of Harvard Medical School found that 18% of those buying insurance on Covered California in 2018 would not have bought insurance if the penalty had not been in place.
  • Why should California take action? California’s policy leaders, seeking to sustain coverage gains made under the ACA, may wish to impose state-level penalties. Individual market premiums would be more stable and lower than if penalties were abandoned without replacement. The paper outlines implementation considerations for a state-based penalty.