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Repealing health reform law individual mandate could save govt. billions: CBO

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Repealing a provision in the health care reform law that imposes financial penalties on individuals who don't enroll in a health insurance plan would save the federal government tens of billions of dollars each year, according to a new congressional analysis.

Under the Patient Protection and Affordable Care Act, the penalty for not opting for health plan coverage in 2015 is $325 or 2% of household income, whichever is greater. In 2016, the penalty will rise and be $695, or 2.5% of household income, whichever is higher.

Repealing those penalties — intended to give individuals a powerful financial incentive to enroll in a health care plan — would save the government $311 billion over the next decade, according to the Congressional Budget Office report released Tuesday.

The reason for that massive reduction in government outlays: without those tax penalties, millions of lower-income individuals eligible for ACA-created federal premium subsidies to buy health care plans through the public exchanges or for the Medicaid or the Children's Health Insurance Program would not opt for coverage.

Most of the reductions in government spending “would occur because outlays would be $110 billion less for exchange subsidies and $200 billion less for Medicaid and the Children's Health Insurance Program,” the CBO report said.

In all, according to the report, 41 million Americans would be uninsured in 2025, 14 million more compared to current law projections. In 2014, 33 million Americans were uninsured, according to a Census Bureau report released Wednesday.

“Fewer would seek coverage and as a result the government would be paying out less in subsidies,” said Frank McArdle, an independent benefits consultant in Bethesda, Maryland.

And if that scenario developed, there could be a financial impact on employers.

“With more uninsured, potentially there would be more provider cost-shifting to employers,” Mr. McArdle added.