Obamacare is best understood as a collection of carrots and sticks designed to expand access to insurance coverage. But what happens to Obamacare if we get rid of the sticks? It looks like we’re about to find out.

During the Obamacare debate, many conservatives, myself included, warned that once the law was in place, the sticks would prove politically impossible to enforce, the carrots would have to get more and more generous to compensate and the end result would be a fiscal calamity. We won’t know if this dire projection will be fully borne out for some time. What we do know is that at least one of the most important Obamacare sticks, the individual mandate, is already getting watered down, and it’s not crazy to imagine that it will at some point be abandoned. Before we get to the individual mandate, though, consider the carrots and sticks that apply to state governments and employers.

In the original legislation, states that agreed to expand Medicaid were promised new federal funds to help meet the cost of doing so (the carrot) while states that refused to expand Medicaid had to forsake federal Medicaid funds altogether (the stick). This combination of carrot and stick would have made refusing to expand Medicaid a very costly decision for state governments, virtually all of which are struggling to meet the high and rising cost of providing medical insurance to those who are already on Medicaid. Last summer, however, the Supreme Court ruled that the threat of removing all federal Medicaid funds from states that refused to play ball was unconstitutionally coercive, and so a large number of states have chosen not to expand Medicaid. Eventually, the holdout states might decide that the carrot of new federal money is too tempting to resist, particularly when neighboring states cash in. But for now, the all-carrot, no-stick approach has definitely held down the number of Medicaid enrollees.

Large employers, meanwhile, were supposed to be subject to an employer mandate, the requirement that all employers with 50 or more full-time-equivalent employees either had to provide health insurance benefits or pay a stiff penalty. This was a pretty big stick without much of a carrot attached. Yet the employer mandate was very important, as it was meant to hold down the costs of coverage expansion, as the federal government was expected to subsidize low- to moderate-income workers with employer-sponsored coverage less generously than similarly situated workers on the exchanges. In July, the Obama administration announced that it would delay enforcement of the employer mandate until 2015. And so, another stick was removed from the Obamacare arsenal.

The debates over Medicaid expansion and the employer mandate have been heated. But the individual mandate debate has been the most contentious of them all.

One of the great ironies of the individual mandate is that, though it is one of the central pillars of Obamacare, Barack Obama actually ran against the individual mandate during the 2008 Democratic primaries. While Hillary Clinton championed the idea as the surest way to achieve universal coverage, the future president described it as unnecessary, though he certainly left himself enough wiggle room to later change his mind. Sure enough, he ultimately concluded that an all-carrot, no-stick approach to coverage expansion wouldn’t fly. Even with generous subsidies for the purchase of medical insurance, the president and his advisers, and large health insurers with a big stake in coverage expansion, determined that large numbers of people would forego coverage in the absence of a mandate, and so they imposed one.

And the individual mandate penalty is no small thing. From the first year of Obamacare to the third, it was set to grow from $95 or 1 percent of adjusted gross income (whichever is higher) annually, to $695 or 2.5 percent of adjusted gross income (the same). In many cases, individuals subject to the mandate penalty would pay more for not buying insurance than they would for paying for insurance after subsidies. So it is easy to see why the mandate penalty might prove to be a very effective stick.

After the employer mandate delay was announced, Republican lawmakers immediately pounced on the fact that while the Obama administration was giving businesses a break from expensive penalties, individuals were still subject to the individual mandate penalty. And then, as healthcare.gov and most state-level partner exchanges were plagued by technical difficulties, the president’s GOP critics argued that it was unfair to enforce the mandate when the new insurance marketplaces were such a mess. Defenders of the new health law pushed back against these calls, recognizing that without the individual mandate penalty, insurers might turn against Obamacare for fear that they’d face massive losses if healthy people chose not to buy coverage while sick people bought it in droves.

But on Thursday, as hundreds of thousands of Americans found that their insurance policies have been cancelled, the Obama administration buckled. The Department of Health and Human Services announced that those who’ve had their insurance policies cancelled had the right to purchase catastrophic plans on the new insurance exchanges, low-cost plans that had previously been open only to those under the age of 30, and they would be allowed to claim “hardship exemptions” from the individual mandate if they felt that insurance options on the exchanges were too expensive for them.

Republican critics of Obamacare were quick to note that while the federal government is granting a hardship exemption to people who’ve owned insurance in the recent past, it is not extending the same courtesy to middle-income people who have not. Moreover, people who’ve had their insurance policies cancelled will have access to low-cost insurance options that aren’t available to previously uninsured over-30-year-olds. The end result is rather odd, and the president will have a very hard time defending this decision.

Even more telling is the fact that officials charged with convincing Americans to enroll in the exchanges have been downplaying the individual mandate in its efforts to attract people, as Anemona Hartocollis of the New York Times recently reported. The obvious reason is that Obamacare’s promoters are keen to lead with the carrot of subsidies and the benefits of insurance rather than the threat of an expensive penalty. But what happens as the deadline for buying coverage approaches and large numbers of would-be voters are faced with the prospect of paying significant fines? A recent NBC/WSJ survey found that only 24 percent of uninsured Americans consider Obamacare a good idea, while half think it’s a bad idea — an astonishing finding given that the purpose of Obamacare is to better the lives of uninsured Americans. Some will claim that the uninsured have been badly misled, and perhaps that is true. But will enforcement of the individual mandate make uninsured Americans more inclined to embrace Obamacare — or less?

There is much more to be said about the impact of weakening the individual mandate. Seth Chandler, a law professor at the University of Houston, has raised questions about the legality of Thursday’s decision, and elsewhere he has warned that the law might result in a net decrease in the number of Americans with private health insurance. Avik Roy, the opinion editor of Forbes and a health policy adviser to Mitt Romney’s 2012 presidential campaign, observes that Thursday’s decision implicitly acknowledges that plans on the insurance exchanges are “unaffordable.” But for now, it’s enough to point out that while Obamacare’s carrots remain intact, the president has demonstrated very little willingness to stand behind its sticks. The unraveling of Obamacare continues.

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