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The Affordable Care Act’s insurance market has not been materially affected by the elimination of the individual mandate penalty — undercutting a key argument in the lawsuit urging the courts to strike down the health care law.

The big picture: Healthy enrollees have not left the market in droves, premiums have not spiked and there has been no market death spiral.

Details: Premiums spiked in earlier years, as insurers figured out the market and anticipated the elimination of the penalty, but are declining by an average of 2-3% in 2020.

  • Healthy people do not appear to have fled the market. ACA enrollees spent fewer days in the hospital in 2019 than in the previous four years.
  • The financial health of insurers participating in the ACA marketplaces is stable, and dramatically improved since the early years of the ACA. 
  • Other elements of the ACA, such as the Medicaid expansion, appear to have been largely unaffected by the elimination of the penalty.

Flashback: ACA historians will remember that many critics of the mandate believed the penalty was too weak to drive the healthy into the marketplaces from the start.

  • And real-world experience has shown that premium subsidies have been more important than the mandate penalty.

There are still well-documented problems in the individual market. 

  • Policies are unaffordable for many people who do not receive subsidies. Deductibles are very high (averaging $4,544 per person for a “benchmark” plan).
  • And insurer participation in some rural areas remains fragile.    

But these problems existed with the mandate penalty in effect.  

  • Experience on the ground has demonstrated that the marketplaces and the larger ACA continue to function, even when “severed” from the mandate penalty.

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