When the U.S. Congress eliminated the provision of the Affordable Care Act (ACA) requiring people to maintain health insurance or pay a penalty in 2019, many Americans decided to pass on purchasing coverage.

SPA Assistant Professor Aparna Soni analyzed the impact of this decision in her recent article, “The Impact of the Repeal of the Federal Individual Insurance Mandate on Uninsurance,” published in February in the International Journal of Health Economics & Management.

The ACA federal mandate, repealed as part of the Trump administration’s tax law, imposed a tax penalty on uninsured individuals equal to the greater of $695 or 2.5% of annual income; the penalty was capped at the price of the cheapest bronze plan on the Healthcare.Gov marketplace. In response, three states passed state-level laws requiring that its citizens be insured or face a penalty.

Using data from the 2015–19 Annual Social and Economic Supplement to the Current Population Survey to compare pre- and post-repeal insurance levels in states that did and did not impose a state mandate in 2019, Soni found a 24% increase in the likelihood of becoming newly uninsured in states with no federal or state mandate.

“People respond to financial incentives. Especially those with lower incomes tend to drop coverage,” said Soni, though the study excluded those with the lowest incomes (that would qualify for Medicaid) and the highest incomes (represented by wealthier Americans likely to have employer-sponsored insurance.

The change in policy could have adverse implications for health, Soni said.

“When people choose to drop insurance coverage, it may feel like the right decision in the short run, but uninsurance is associated with worse health outcomes and increases financial risks,” she said, referring to the tendency of uninsured persons with chronic illnesses to seek emergency room care, ultimately at taxpayer expense. “There are individual costs, as well as societal costs, of being uninsured. By repealing policies like the individual mandate, we might be doing harm in the long run.”

An encouraging element of the study was seeing the influence of states acting, added Soni. At the time of Soni’s initial analysis, only three states had instituted penalties for uninsurance. Today there are five (California, Rhode Island, Vermont, Massachusetts, and New Jersey), plus the District of Columbia.

“When there’s not support at the federal level for policies that encourage and facilitate insurance coverage, state-level lawmakers can take things into their own hands,” she said.

As with most health policy, the debate on the mandate was highly politicized, with conservative lawmakers framing it as an infringement on individual freedom, Soni said. If more states propose penalties for uninsurance, she anticipates similar debate at the state level.