BY DAVID HOGBERG INVESTOR’S BUSINESS DAILY
Political momentum is growing to make everyone buy health insurance — or else.
Private health insurers on Wednesday said they could accept laws requiring them to accept all customers — regardless of pre-existing medical conditions — if lawmakers mandate that all Americans purchase coverage.
Support from America’s Health Insurance Plans, the industry trade group, is notable because the group’s “Harry and Louise” ads helped doom HillaryCare in 1994.
Proponents of an individual mandate say people have a responsibility to buy health insurance.
“Without a mandate, people often purchase insurance only when they get sick and need it,” said Ron Pollack, executive director of the liberal FamiliesUSA. “An individual mandate is needed to ensure that people don’t game the system.”
Supporters also say a mandate can reduce costs for those already paying for health care by effectively ending uncompensated care.
Such arguments have persuaded Montana Sen. Max Baucus. The moderate Montana Democrat last week proposed requiring individuals to buy health insurance and a mandate that large employers provide it to workers.
Several other lawmakers, including some Republicans, have signaled support for an individual mandate. President-elect Barack Obama has endorsed mandating health coverage for children but not adults.
States Experiment Massachusetts, Hawaii and Vermont already require individuals to buy insurance. Those states have been able to reduce the number of uninsured, but enforcement can be dicey.
In Massachusetts, individuals must purchase health insurance or pay a tax penalty. Businesses must offer their staff insurance or pay $295 per worker to a fund for the uninsured. Vermont has a similar “pay or play” employer mandate, with a $365 penalty per worker. Hawaii requires employers to provide coverage to all employees working more than 20 hours a week.
Under the Baucus plan, individuals would have to enroll in a private or public health care plan or face a sanction, most likely a tax penalty. Large employers would have to offer employees coverage or pay into a fund to help the uninsured. Small firms would be exempt.
The law in Massachusetts, passed as part of a 2006 reform advocated by then-Gov. Mitt Romney, requires individuals to pay a tax penalty of $219 if they lack insurance.
“I’m impressed with the power of the individual mandate to get people enrolled,” said Fawn Phelps, interim director of Health Care for All, a consumer advocacy group.
Since Massachusetts enacted its reform, the number of uninsured has fallen by 50%-75%, depending on the estimate. The number with insurance has grown by 439,000.
It’s not clear what effect Vermont’s mandate, passed in 2006, has had since it’s not as sweeping as Massachusetts’, and little time has passed since it was enacted.
Hawaii’s mandate became law in 1974. There is considerable debate over its impact on the uninsured.
A 2004 analysis from Academy Health suggested the mandate lowered the rate of the uninsured. But Jamie Story, president of Grassroot Institute of Hawaii, a research and policy organization, counters that while the mandate “initially lowered the number of uninsured Hawaii citizens, the uninsured rate has since crept back up to 10%.”
Baucus might have to consider how punitive the penalty would be to maximize compliance with the mandate and possible political pushback.
In Massachusetts, the tax penalty on individuals will rise to $912 next year. MIT professor Jonathan Gruber, a member of the board implementing the plan, earlier this year suggested even that might not be enough.
“That mandate has to be enforced,” he said. “We need to think beyond what looks mean and do what’s right.”
Merrill Mathews, president of the Council for Affordable Health Insurance, said Massachusetts had “initial pushback” against the mandate. “Once you set the standard benefits package, some portion of the population with health insurance won’t qualify.”
About 200,000 people in Massachusetts fell into that category. An additional 60,000 were exempted from the mandate because they earned too much income to qualify for state-subsidized insurance and not enough to purchase a private policy.
A recent poll in the journal Health Affairs found that support for the law in Massachusetts jumped in 2008 to 69% from 61% in 2006. But among the uninsured, support dropped to 45% from 72%. Those uninsured viewing it negatively doubled to 33%.
Baucus may also have to face the issue of what it will cost the government to subsidize those too poor to afford private insurance.
“Because those taking up subsidized coverage were so high, it has cost more than the state expected,” said Greg Scandlen of Consumers for Health Care Choices.
About 38%, or 162,000, of those who have gained coverage in Massachusetts have gotten it via state-subsidized plans. These plans could cost the state $1.35 billion by 2011, double what was initially estimated.
But Phelps says initial estimates were based on faulty numbers from the Romney administration.
Cost-Shift Debate Proponents of a mandate also claim that when the uninsured get coverage, that eliminates uncompensated care, which is shifted to those with private insurance.
But there’s a big dispute over how large that cost-shifting is.
An analysis by FamiliesUSA suggests that uncompensated care can boost health insurance premiums by $1,502 annually. But a Chamber of Commerce analysis found it hikes premiums by only $166.
“There is not that much cost-shifting from the uninsured,” Scandlen said. “The real cost-shifting comes from inadequate payments from Medicaid and Medicare.”
A study in Health Affairs suggested that the uninsured use $35 billion in uncompensated care, less than 3% of overall health care spending.
It’s also not clear how a mandate would address the issue of illegal immigrants, who are far more numerous in states like California than in Massachusetts, Vermont or Hawaii.
Another key reason for imposing an individual mandate: By requiring the young and healthy to get health insurance, they will effectively subsidize the coverage of the old and sick.
Perverse Incentives Hawaii’s mandate appears to encourage employers to skirt the costs by switching to part-time employees, researchers say.
The number of employees working less than 20 hours a week in Hawaii increased following the mandate, while those working 20 to 35 hours declined, according to economists at the University of Hawaii. Academy Health found similar results.
Pollack notes that the costs might be worse if the U.S. does not act. “What are the costs of doing nothing? Health insurance is increasingly unaffordable for