We show that the individual health insurance market would function marginally better if the Affordable Care Act’s (the “ACA”) individual mandate to purchase insurance is enforced through an individual mandate payment, as it was before the reforms enacted in 2017, but that even without such a payment, an individual market that operates pursuant to the ACA’s other key provisions will provide affordable health insurance to millions more enrollees than a market without these provisions.
We show that the ACA’s two principal subsidies — advance premium tax credits (“APTCs”) and cost-sharing reduction payments (“CSRs”) — are critical to the continued operation of the individual market. Further, we show that if the APTCs and CSRs that are currently available in the individual market were eliminated, but all other ACA requirements remained in place, issuers would not be able to set premium rates in the individual market without taking significant financial losses. This would trigger an exit of issuers from the ACA individual market, leaving only those individuals with pre-ACA, transitional and grandfathered plans with comprehensive major medical coverage through the individual market.
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