President Donald Trump remains intent on undoing the Obamacare individual mandate one way or another.
Encouraged by Trump, a group of congressional conservatives want to add repeal of the mandate to the GOP’s overhaul of the tax code. But other Republicans fear the toxic politics of Obamacare could jeopardize the tax fight, and so far have kept repeal language out of both Senate and House versions of the tax package.
That means it could be left to Trump to act unilaterally to neutralize what polls consistently show to be the most unpopular part of the Affordable Care Act.
Most legal observers believe the administration has the necessary authority to interpret the law and substantially weaken enforcement of the tax penalty levied on most Americans who fail to obtain coverage. The downside is that unraveling the mandate might ultimately make it harder for Republicans to follow through on their long-standing promise to repeal and replace Obamacare.
The White House has drafted an executive order to scrap the individual mandate, but is waiting to see if Congress opts to go first, multiple media outlets reported this week. House Ways and Means member Jim Renacci (R-Ohio) worked behind the scenes to add a repeal provision to tax legislation moving to the House floor, according to a source close to the talks.
The White House denies that any executive action is imminent.
“We are always looking for ways to provide relief from Obamacare,” said a spokesman in an email. “The longstanding issues with the mandate would be best resolved legislatively.”
On Wednesday, the CBO released a revised assessment of how repealing the individual mandate would affect coverage and federal spending. The nonpartisan scorekeeping agency estimated that repeal would lead to 13 million more uninsured Americans and save $338 billion over a decade. The previous CBO estimate had projected 16 million more uninsured and a savings of $416 billion.
Sen. Bill Cassidy (R-La.) said Republicans may be more interested in repealing the mandate now, before the score drops even more significantly due to a growing realization that it’s an effective cudgel to compel individuals to get coverage.
“If you think something’s utility days are numbered — how long is the CBO going to stick with the idea that it is important when all the evidence is that it isn’t? — that gives you a different complexion on how you may address it now,” he said.
Trump signed an executive order on his first day in office directing all federal agencies to seek ways to ignore economic and regulatory requirements under Obamacare. The move was widely seen as an invitation to defang the individual mandate.
But that turned out to be a misguided interpretation. The IRS announced last month that it will reject 2018 tax returns that don’t specify if the filer complied with Obamacare’s coverage requirement. That’s more stringent than the criteria in force during the Obama administration.
If Republicans don’t add mandate repeal to their tax package, the administration could direct the IRS to stop enforcing the requirement. And there’s some precedent for ignoring provisions of the ACA: The Obama administration unilaterally delayed implementation of the employer mandate in order to give businesses more time to adjust to the coverage requirements.
“There is a lot of latitude in how you enforce the tax code,” said Nicole Elliott, who was a top IRS official working on ACA implementation during the Obama administration and is now a partner at Holland & Knight. “We definitely were not taking a really hard enforcement position on the individual mandate, and I don’t think the IRS has taken a really strong enforcement position on the individual mandate to date.”
The Obama administration’s flexible interpretation drew howls of protest from Republicans and some legal scholars. House Republicans even successfully sued the administration over subsidy payments to insurers that they argued were illegally funded.
But there’s no reason to think the Trump administration wouldn’t consider the same thing if it suits their goals.
“I would try to use the same approach the Obama administration did,” said Tevi Troy, who served as a deputy HHS secretary under former President George W. Bush and is now CEO of the American Health Policy Institute. “Presumably, you could either delay it one year at a time or two years at a time or indefinitely.”
Tim Jost, an ACA legal expert and supporter of the law, says the administration couldn’t simply ignore the mandate. Instead, he thinks the most likely path for weakening it through executive action would be to expand the number of reasons that individuals can cite for failing to obtain coverage, and still not be subject to the tax penalty. For example, there is currently a “general hardship” exemption that could be interpreted quite broadly.
Conservatives pushing to add mandate repeal to the GOP tax package argue that the tax penalty disproportionately hits people of from low-income households, who already are struggling to make ends meet. But Jost points out that most poor people should be exempt from the penalty.
“They need to find different tax preparers because there are so many ways in which low-income people can qualify for not having to pay the penalty,” Jost said.
Chris Condeluci, who was a top Republican staffer on the Senate Finance Committee during the drafting of the ACA, is skeptical that the administration will take any significant action to weaken enforcement of the mandate. One major reason: It would potentially cause the CBO to reduce the amount of projected savings that would be realized by repealing the mandate legislatively, as fewer Americans would enroll in subsidized coverage. That in turn would further complicated efforts to repeal and replace the ACA.
“I’m skeptical that they would do this,” Condeluci said. “I would argue that it’s more or less a way of trying to encourage Congress to act.”
Jennifer Haberkorn contributed to this report.