S&P’s projection agreed that premiums would rise as well, despite forecasting less of a drop-off in the number of people with insurance.
If the Senate bill becomes law, and S&P’s number turns out to be more accurate than CBO’s, it would mean that the tax cuts that Republicans seek to implement will cost the government more than has been predicted.
It also would mean that the loss of insurance coverage would not be as dramatic as Obamacare advocates fear, although it would still be steep enough to concern them.
“Although there will be some drop-offs, the mandate repeal will, in our view, not stop the majority of this population from re-enrolling,” S&P said.
“This is also why we expect limited savings for the federal government from the mandate repeal.”
Obamacare’s mandate requires that most people have some form of health insurance coverage or pay a tax penalty, unless they qualify for one of a slew of exemptions from the requirement.
S&P said “the key difference” between its estimates and the CBO’s is how much the individual mandate is seen as driving enrollment in either individual health plans or Medicaid.
“Our estimates are lower because we believe that it is not the mandate penalty, but the intrinsic financial incentives available to most eligible enrollees that drive enrollment in these two markets,” S&P said.
S&P was referring to the fact that in the majority of states, poor adults can enroll in Medicaid — a joint federal-state-run health coverage program — at no direct cost to themselves.
The company was also referring to the fact that low- and middle-income people can qualify for federal subsidies that lower the health insurance premiums if they buy a plan through an Obamacare exchange.
Almost 60 percent of all customers in the individual health plan market — which includes both exchange and off-exchange customers — qualify for premium-reducing tax credits. Those subsidies can sharply reduce direct costs to customers, sometimes to as low as $0 per month.
S&P said that while some nonsubsidized customers “may be enrolling because of the mandate, the majority are signing up today because they need insurance.”
S&P noted, as do many others, that “the individual mandate is currently weak.”
Earlier this year, the IRS reported that about 6.5 million taxpayers who failed to comply with the mandate paid $3 billion in total penalties, with the median payment being around $330 for the 2015 tax year.
Almost double that number of people, 12.7 million, claimed an exemption from the mandate.
And even with the mandate in place, a total of 28.1 million people, or 8.8 of the U.S. population, still had no health insurance during the course of the year in 2016, according to the Census Bureau.