News broke on Tuesday that the Senate will include repeal of Obamacare’s individual mandate in its final tax bill.
This is something President Donald Trump has called for, and it’s exactly the right move.
It’s critical that Congress take every opportunity to undo Obamacare’s damage. Repealing the individual mandate is a great place to begin the necessary work of undoing Obamacare regulatory burdens and tax increases that have driven up costs and reduced plan value and availability .
The individual mandate is Obamacare’s requirement that every American enroll in health insurance or be fined. The idea was to push lots of healthier people—who didn’t need or want Obamacare’s expansive, overpriced coverage—to buy those plans in order to subsidize the cost of care for others.
But the experience with Obamacare over the last four years shows that the individual mandate does not work.
According to the most recent IRS reports, 6.2 million tax filers chose to pay the tax penalty rather than buy Obamacare insurance, 12.7 million tax filers obtained an exemption from the mandate, and 4.3 million tax filers omitted their health insurance status on their tax return.
In total, 23.2 million tax filers paid the fine, obtained an exception, or simply ignored the individual mandate.
And with good reason—the products they were being forced to buy were from a private market broken by Obamacare’s many regulatory mandates. Plan prices skyrocketed and plan quality and availability dropped.
In the face of this situation, many Americans had to choose: Do I buy an overpriced product that doesn’t meet my needs, or do I pay a tax penalty and look for other alternatives?
With costs for plans continuing to rise, and possibly outpacing the ability of individuals to pay, it’s likely that a growing number of individuals will determine that it’s better to pay the penalty than pay for overpriced coverage.
And pay they will. Until now, the IRS has been lax in its enforcement of the mandate. However, this upcoming tax year the IRS will begin to actively enforce the individual mandate by requiring proof of health insurance coverage.
In previous years, Americans have been able to omit reporting health care coverage and still receive a tax refund. No longer will this be the case.
Moving forward, the IRS will refuse the submission of a tax return unless it includes proof of coverage, a coverage exemption, or payment (read: tax) for lack of coverage.
Repealing the individual mandate would provide relief to millions of Americans who have to either buy a health insurance product they don’t want, or pay tax penalties.
It’s possible that coverage numbers would go down at least somewhat after repealing the individual mandate. But that wouldn’t be because people are being kicked off of coverage. It would be because some Americans will either drop plans that are a bad deal for them, or not buy those plans in the first place.
Rather than forcing people to buy coverage that government bureaucrats think they should have, lawmakers should focus on creating market conditions that allow Americans to buy plans that they actually want.
That requires Congress to roll back the broken Obamacare regulations that are driving up the cost of insurance for millions of Americans—including the benefit mandates, actuarial value standards, and rating restrictions that drive up the cost of premiums.
Moreover, if Congress wants to encourage people to buy coverage rather than force them to do so, it could provide regulatory relief to the states to give them options to reward healthy individuals for buying and keeping continuous coverage.
Congressional leaders need to get back to work to undo Obamacare’s damage, and the Senate is leading the way by placing the individual mandate on the chopping block.
This piece originally appeared in The Daily Signal