ONTD Political

Could the health-care law work without the individual mandate?

9:25 pm - 03/27/2012
If the Supreme Court were to invalidate the 2010 health-care law’s requirement that virtually all Americans obtain insurance, would the rest of the law become unworkable?

Even among supporters of the statute, opinions vary widely about the practical impact of a decision to strike down the mandate but leave everything else intact — one of several options available to the court.

“It’s probably the the biggest area of uncertainty around all estimates about the law,” said Larry Levitt, a health insurance expert with the Kaiser Family Foundation.

The Obama administration argues that requiring individuals to get coverage is essential to the success of two of the most important — and popular — regulations that the law will impose starting in 2014: a rule that insurers can’t discriminate against people with preexisting conditions, and limitations on how much they can vary rates among customers.

Many of the law’s supporters insist that without the mandate, these rules would impose an unsustainable burden on insurers, ultimately causing the market to implode.

In fact, the government contends that if the mandate falls, these provisions should be struck as well. With no requirement that they buy insurance ahead of time, this argument goes, people could wait until they were sick to purchase a plan, skewing the insurance pool toward the ill, who are more costly to insure.

“That’s not a hypothetical,” said John McDonough, a professor at the Harvard University School of Public Health.

He points to New Jersey, New York, Kentucky and Washington, which attempted to introduce similar insurance regulations in the 1990s. None included a requirement that residents obtain coverage. The resulting disruption to the states’ insurance markets was cataclysmic: Rates skyrocketed, and many insurers simply stopped offering plans.

But Levitt argues there is an important reason that the impact at the national level might not be so dramatic: In contrast to the state laws, the health-care statute will offer millions of Americans generous subsidies to help buy private plans.

This means that many more people — including healthy people — who are not currently buying insurance because of its cost will be prompted to enter the market voluntarily.

“It becomes a much better deal for you. So you are more likely to enroll even without a mandate,” Levitt said.

Paul Starr, a health policy expert at Princeton University, agrees and points to the high enrollment rates for Medicare’s Part B and Part D plans, which cover doctors and prescription drugs; in contrast to Medicare’s hospitalization plan, they are optional.

“Seniors don’t have to sign up, but they do because it’s a good deal,” Starr said.

He also notes that complex “risk adjustment” mechanisms would protect private insurers that end up with a disproportionately sick pool of customers.

The potential interplay of all these factors may explain the tremendous variation among statistical estimates concerning the mandate.

The Congressional Budget Office has calculated that without the mandate, insurance premiums on the individual market — the sector most vulnerable to fluctuations — would be 15 to 20 percent higher than with it. One respected researcher puts the difference as low as 10 percent, another at 27 percent.

Similarly, while the CBO estimates that the number of Americans remaining uninsured would jump by about 16 million without the mandate — about 40 percent more than if the health-care law were implemented intact — other analyses suggest that the number could be nearly half that.

Starr and others also contend that estimates of the mandate’s effect may be overblown.

For all the controversy it has ignited, the mandate is actually fairly weak. Penalties will ultimately be set at $695 or 2.5 percent of income — whichever is higher — and there is a hardship exemption for people who can’t afford insurance even with a subsidy. While the government can collect the penalty by counting it against a person’s federal tax rebate, it will be barred from using other collection tools such as placing liens or threatening incarceration.

There is a robust debate within health policy circles about alternative approaches that could achieve the same aims as the mandate through less controversial means. For instance, Congress could automatically sign up uninsured people for the least expensive private plan available to them, allowing them to opt out but counting on human nature to ensure that most wouldn’t bother doing so. Or, give people the choice to either buy insurance or give up the consumer protections in the law for five years. States could also step in and enact their own mandates.

theguindo 28th-Mar-2012 02:35 am (UTC)
and there is a hardship exemption for people who can’t afford insurance even with a subsidy.

So they...what? Aren't insured? Please tell me this is not a crack for the working poor to fall through.
one_hoopy_frood 28th-Mar-2012 02:40 am (UTC)
That's exactly why the mandate as it stands is only good for insurance companies. It forces people to pay into insurance who most likely don't have it for a reason or face a fine; if they're ~lucky enough to be SO POOR that they can get out of it they are still without insurance.
theguindo 28th-Mar-2012 02:47 am (UTC)
Yeah... I've heard that it expands medicare to cover single childness adults (hi) but I still feel like there's going to end up being a grey area between people who make too much to qualify for medicare but don't make enough to fall under the mandate.

If the conservatives don't want congress to force everyone to buy insurance, they could just take the money out of our taxes and give everyone insurance through the tax funds--

Oh wait.

clarice_01 28th-Mar-2012 03:39 am (UTC)
From what I have heard (we just went over the new health care policy in one of my political science classes) medicaid would have to cover everyone who makes up to 133% of the poverty line, then there is a sliding scale as income goes up. What that means in real life, when it is put into action I have no idea, but in the abstract it sounds much better than what we have now.
theguindo 28th-Mar-2012 03:42 am (UTC)
Well, compared to what we have now, it's great. I just hope it doesn't leave people who are right on the edge of that 133% out in the cold.
brookiki 28th-Mar-2012 05:06 am (UTC)
Yeah, that's the problem with the way so much stuff works. Yeah, you're pretty bad off if you're making 132% of the poverty line, but saying that you're okay if you make 134% is just ridiculous.
mirhanda 28th-Mar-2012 05:52 pm (UTC)
I'm pretty sure what it will mean in the real world, is that people who are barely scraping by now will have to decide if they are going to buy food that month or pay the insurance companies an outrageous "premium" and if they don't make that hard choice, the government is going to take their income tax refund away.
mirhanda 28th-Mar-2012 05:50 pm (UTC)
Medicare covers every American over the age of 65 whether they have children or not.
theguindo 28th-Mar-2012 05:53 pm (UTC)
I should clarify that I meant single childless adults under the age of 65. Like the 20-somethings who are no longer able to be included on their parents' insurance but can't afford their own coverage.

...I also meant medicaid. Whoops. XD I always forget they're two different things.
tsaraven 28th-Mar-2012 02:09 pm (UTC)
The financial help for purchasing health insurance goes up to making around $89,000 a year for a family of 4 in the lower 48 states. I think that's pretty fair, and all poor and middle class people fall into that not just the very poor.

mirhanda 28th-Mar-2012 05:54 pm (UTC)
How much is the financial help though? Will it cover 10%? 50%? We know it won't cover 100% and for a lot of people who are living paycheck to paycheck and still not having quite enough food to last til their next paycheck, they CANNOT afford even 10% of this. What are they supposed to do?
tsaraven 28th-Mar-2012 06:18 pm (UTC)
It's true that it is not a great solution, but you would just have to get sub-par insurance (like the terrible commercials that come on late at night saying you can get insurance for your family for only $100 a month!!11!...then you find out it's only a 20% off discount for healthcare). Not what anyone would want to get, but enough that a tax credit would pay for it and therefore eliminate the fine for not having any. Eventually the goal should be to have a public option, which the House bill did, but we have a lot of work to get the public onboard.
mirhanda 28th-Mar-2012 06:22 pm (UTC)
A tax credit isn't going to put any food on the table, it just reduces the amount of your income that you pay taxes on. It doesn't add anything to your paycheck. And we still have people who can't afford healthcare. This law is terrible.
tsaraven 28th-Mar-2012 06:28 pm (UTC)
Our tax credits that my family gets for our kids are completely free money given to us by the government. It is separate from our taxes paid and deductions made on that which we get a refund of. This year we got a refund of X number of dollars and on top of that got a huge tax credit amount added to our check. It was cash in hand in 10 days.

theguindo 28th-Mar-2012 05:57 pm (UTC)
That does put me somewhat at ease, though I do worry that the gov't does not have a good idea of how much "financial help" is necessary depending on the income bracket. We'll have to see, I suppose.
tsaraven 28th-Mar-2012 06:24 pm (UTC)
True. I've heard discussions in the past of figures around $5000-6000 a year being thrown around which isn't enough to get amazing paid-at-80% with no deductible insurance, but enough to get a crappy plan. That's not ideal, but it's a start. I'm also okay with the credit being reduced by income level. If you are making $80,000 a year and you still qualify for help, you should be able to pay more into it yourself than a family making $30,000 a year. If poor people are supposed to manage their money and not live above their means (the "how dare you buy a big screen TV while you accept food stamps!" mindset), then surely a family making $80,000 a year should have picked a mortgage and car payment they could deal with while still expecting to pay for health insurance.
phoenixblaze 28th-Mar-2012 03:01 am (UTC)
Living under Romneycare I can tell you that it does, sadly. We have MassHealth, but there are still so many problems.

There are flaws in this law, but I really do believe it's necessary. We are so backwards in this country with our medical care. The bottom line is all that matters and that is a terrible way to look at people's health.
theguindo 28th-Mar-2012 03:05 am (UTC)
I just hope the reform doesn't stop here, but with the current state of politics I have a terrible sinking feeling.
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