As you may know, the tax bill just passed by the GOP also removes the tax fine for the indivdual mandate. Not a lot of attention has been paid to this as much as the 1.5 trillion added to the deficit, but we’ll get into that later. Trump, in fact, actually said after the bill was passed, and I quote,

“The individual mandate is being repealed. When the individual mandate is being repealed, that means Obamacare is repealed. Because they get their money from the individual mandate. So the individual mandate is being repealed. So in this bill, not only do we have massive tax cuts and tax reform, we have essentially repealed Obamacare and will come up with something that will be much better, whether it’s block grants or whether it’s taking what we have and doing something terrific. But Obamacare has been repealed in this bill. We didn’t want to bring it up. I told people specifically ‘be quiet with the fake news media because I don’t want them talking too much about it. Because I didn’t know how people would - but now that it’s approved, I can say the individual mandate on health care, where you had to pay not to have insurance, okay, think of that one.“

Although it is not precisely true, it is, surprisingly, a somewhat accurate statement. Let’s get into the details.

Healthcare/Insurance for dummies

In order to understand Obamacare, we have to understand insurance. Of course, this isn’t exactly elementary school level material - people spend their entire lives trying to really understand this. In a very basic sentence, essentially, you pay an health insurer on a repeated basis, and in case you ever get get super sick they’ll pay for some/most/all of the medical costs.

However, if you’re more prone to getting sick - for example, if you have a pre-existing condition (you are already sick) or a family history of some sickness, then a healthcare insurer will charge you more per month because it’s more likely that they’ll have to pay for you, as they have to cover their costs.

But what does this have to do with Obamacare?

Back in 2010, Obama passed the Affordable Care Act (ACA), also known as Obamacare, which was intended to improve access to health insurance for Americans. Though it was pretty unpopular when it passed Republicans, including Trump, campaigned on repealing Obamacare - it’s actually become steadily more popular with time, presumably because Republican’s threats to undo it made people realize it actually does a lot of good for a large about of people.

Part of Obamacare includes the individual mandate, which says that everyone has to get insurance somehow. And if you don’t pay for insurance, the government will fine you. This, by and large, was the most unpopular part of the bill, but it was necessary. When insurers have more people insured (and therefore more money), they can keep premiums down. If everyone, including those who are typically healthy, is paying a tiny bit of money, then insurers can lower rates for everyone, thus being more competitive. Win-win situation.

So the mandate exists to ensure that everyone gets insurance, everyone is covered, and so premiums are low for everyone.

But let’s say only the people who are sick or have a family history of being sick get insurance. When this happens, insurers have to raise premiums as they have less money in total - they have to cover their costs such that they can pay for medical costs.

Without the mandate, seemingly healthy people don’t buy insurance - it’s expensive, “I never get sick”, and you’d rather spend the money on something else. So, insurers essentially enter a death spiral because the only people buying insurance are the sick ones.

The mandate has not been repealed, but the tax fine that penalized those who didn’t buy insurance has been eliminated. In effect, the mandate has lost all of its power.

Essentially, the mandate having been repealed means that those with insurance are gonna see their premiums rise. So, even if you get a tax break, it’s probably going to be offset by rising insurance premiums.