As lawmakers begin to hammer out the details of a health care reform bill, expect to hear a lot about “individual mandates” that require Americans to have health insurance, much like we’re compelled to buy auto liability insurance. We could purchase health insurance through an employer, a private insurer, or a yet-to-be-created public plan.
During last year’s Democratic primary, the issue of mandates was the biggest divide between Hillary Clinton and Barack Obama’s health care proposals, with candidate Obama campaigning against them then. Now President Obama has signaled he’s open to them—with some exemptions for some individuals and small businesses that can’t afford it.
The individual mandates are also the carrot that keeps insurance companies at the bargaining table—it’s their condition for guaranteeing coverage to all Americans regardless of preexisting conditions. And it would provide them millions of more customers. But is an individual mandate necessary for health reform?
An editorial by Linda Blumburg and John Holahan of the Urban Institute, just released in the New England Journal of Medicine argues convincingly that they are. The authors write that the current system encourages insurance companies to spend their money avoiding covering people with higher than average health risks, rather than developing more efficient ways of actually managing health care costs.
The authors point out that the most expensive five percent of the population accounts for about half of all health care spending, while the bottom 50 percent account for just 3 percent. “Because total health care expenditures are so concentrated,” they write, “the gains to insurers of avoiding the sick outweigh any possible gains from managing their care.” But a mandate for coverage would eliminate such adverse selection by covering almost everyone. And including healthy people in the pool of insured helps to pay for the sick people.
Significant funding would be necessary so healthy low-income Americans can afford to buy mandated insurance. Much of that funding can come from money that’s currently being spent on providing hospital, emergency and other uncompensated care to the uninsured. If the reform plan didn’t include a mandate many more people would remain uninsured, and those expenditures would not be available to be redirected.
For those who violate the mandate by failing to purchase coverage, the authors advocate that they should still qualify for care as if they were enrolled. But such patients would have to pay back premiums for the entire calendar year, plus a penalty.
As a consumer organization, we support health care reform that guarantees people will not face financial ruin just because they suffered a major illness or accident. One of the elements needed to make that promise real is a requirement that you have to participate in the health system by getting health insurance. However, such a system must be affordable, and low income and moderate income Americans will need to get help paying for their insurance.
—Kevin McCarthy, associate editor
To find out what we're doing to help fix the system, see our Guide to Health-Care Reform.
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