The Individual Mandate Must Stay

The Individual Mandate Must Stay

Members of the House and Senate voted across party lines to pass the $1.5 trillion Republican tax bill on December 20th [1]. After failing repeatedly to repeal the Affordable Care Act last year, Republicans included the elimination of the ACA’s individual mandate provision within the Tax Cuts and Jobs Act, in an effort to dismantle the Obama-era legislation in a piecemeal fashion. However, doing away with the individual mandate will have negative and far-reaching ramifications.

The individual mandate requires most Americans to have a basic level of health care. Those who do not purchase insurance face a penalty that is determined in one of two ways: per person or by income percentage, whichever is higher [2]. The penalty is $695 per adult while the income percentage is 2.5 [2]. This being said, the law allows for exemptions to be made for several reasons. For example, if buying a health coverage plan would cost greater than 8.16% of the household income, the mandate does not apply [2]. Contrary to popular belief, the individual mandate began as a conservative idea. In the 1980s, conservative economists and health care experts at the Heritage Foundation regarded the idea of the mandate as a necessary aspect of a market-based health system [3]. In tune with conservative ideology, the mandate was intended to encourage individual responsibility by not relying on uncompensated care, or the total amount of services provided to patients who are either unable or unwilling to pay. At the same time, the mandate would mean all are expected to have coverage so they do not burden their neighbors. Stuart Butler, the Foundation’s director of domestic policy studies in the 1980s, summarized the idea by arguing that it is a societal “moral obligation” to make sure citizens do not suffer from the unavailability of health care and each household has an obligation to avoid “placing demands” on society by “protecting itself”[3]. However, after the idea was embraced by Democratic lawmakers the Heritage Foundation disavowed its own idea [3].

Ideally, the United States government would implement a universal health care system like those in other developed countries. In these systems, health care is regarded as a basic human right and personal wealth does not dictate access to care. Lack of income should not be a death sentence in the United States, as it often can be [4].  Given the current political circumstances rendering such reforms as nearly impossible, the preservation of the ACA, and its mandate provision, is of utmost importance. If people purchase health insurance only when they are sick, it drives up the cost of premiums. To address this, the Affordable Care Act offers subsidies to help people pay for insurance while, at the same time, mandating its purchase. In this way, the market is made up of both healthy and sick individuals, thus driving down costs for all. As of 2013, uninsured individuals cost the health care system just under $85 billion [5]. On top of that, the uninsured paid an additional $26 billion in out-of-pocket costs [5]. A relatively sicker pool of insured individuals drives up costs, which in turn prompts people to relinquish coverage, which drives costs up even further. The individual mandate alleviates this issue by requiring healthier, and thus lower costing,individuals to buy into the insurance pools to reduce the shared risk. A balanced risk pool keeps costs down which encourages people to stay covered. By promoting continued coverage, the mandate discourages people from buying insurance only when they are sick and cancelling it once they are better.

Closely-related to the individual mandate concept are the ACA provisions ensuring individuals cannot be denied coverage and must be charged a fair price regardless of age [6]. Prior to the ACA, individuals could be denied insurance, pre-existing conditions could be excluded from coverage, and plans could cost more if the individual was sick. According to MIT economics professor Jonathan Gruber, such regulations “can’t exist in a vacuum” [6].  If insurers are not to discriminate against the sick, he says, it must be ensured that the healthy join the pool as well. Otherwise, the healthy individuals wait until they are sick to buy insurance, and insurers lose money. This isn’t just an “idle conjecture,” since states in the 1990s tried such regulations in a vacuum. As a result, the non-group, or the insurance not offered by employers, market collapsed [6].

Without the mandate, healthier and wealthier people may choose to intermittently forgo health coverage. Relatively poorer populations may not sign up for insurance because of high premiums and a lack of a sense of urgency to enroll without the mandate. As a result of the mandate repeal, economists at the nonpartisan Congressional Budget Office estimate that insurance premiums are expected to rise by an additional 10 percent each year and 13 million more Americans could become uninsured in the next decade [1].

References

  1. Muherjee Sy, “The GOP Tax Bill Repeal’s Obamacare’s Individual Mandate”, Fortune, Dec 20 2017. http://fortune.com/2017/12/20/tax-bill-individual-mandate-obamacare/

  2. “The Fee for Not Having Insurance”, HealthCare.gov, https://www.healthcare.gov/fees/fee-for-not-being-covered/

  3. Sanger-Katz Margot, “Requiem for the Individual Mandate”, The New York Times, Dec 21 2017. https://www.nytimes.com/2017/12/21/upshot/individual-health-insurance-mandate-end-impact.html

  4. Bakalar Nicholas, “Researchers Link Death to Social Ills”, The New York Times, July 4 2011. http://www.nytimes.com/2011/07/05/health/05social.html

  5. Coughlin Teresa et al., “Uncompensated Care for the Uninsured in 2013”, Kaiser Family Foundation, May 30 2014. https://www.kff.org/uninsured/report/uncompensated-care-for-the-uninsured-in-2013-a-detailed-examination/

  6. 6. Gruber Jonathan, “Scrapping the Individual Mandate Will Only Worsen Health Care’s Biggest Problems”, Fortune, March 8 2017. http://fortune.com/2017/03/08/american-health-care-act-individual-mandate/

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