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New Scrutiny For Insurance Mandate After Repeal Vote

Jan 19, 2011

With the largely symbolic House vote to repeal the health law behind them, Republican leaders now will focus on eliminating or changing specific provisions. A few changes might even win some Democratic support. Republicans especially dislike the individual mandate – the requirement that Americans obtain insurance or face a penalty – because they see it as an unconstitutional imposition of government power. Supporters say it’s critical to the law’s success. Without the mandate, the argument goes, healthy people won’t buy policies until they’re ill, leaving mostly sick – and expensive -- people in the insurance pool. That would push insurance premiums up and undermine a critical requirement in the law that insurers provide coverage to individuals with preexisting medical conditions.

Public support for the mandate is shaky. Some Democratic senators –- such as Claire McCaskill of Missouri and Ben Nelson of Nebraska -- have signaled a willingness to consider an alternative to the mandate.

Democratic pollster Celinda Lake says Democrats should just let the individual mandate go. “It’s not our issue,” she told KHN, adding that it should be left to the insurance companies “to make the argument for why they need it.”

Kaiser Health News reporters spoke with health policy experts about possible alternatives to the individual mandate, which also faces mounting legal challenges with 26 states joining in lawsuits opposing it. Is it time for Democrats to revisit this provision, and perhaps develop alternatives to it? If so, what mechanism could be used instead?

Edited excerpts of these conversations follow.

 

Judy Feder, professor at the Georgetown Public Policy Institute and senior fellow at the Center for American Progress, a public policy think tank in Washington:

The requirement (that almost everyone have health insurance) is key to getting participation from the healthy as well as those more likely to be sick, people with preexisting conditions. That actually makes insurance effective in spreading risk so that we have people who are not sick helping people who are sick. That's what insurance is about. So the mandate is really quite critical to making insurance work and that's why it's part of the law. That says to me that fighting for it is the right thing to do.

I'm not ready to go to alternatives. … Others have talked about open enrollment periods that occur periodically, and then penalties or denied coverage for periods of time if people don't enroll. Those mechanisms can encourage participation but I am skeptical based on analysis that they are as effective in assuring participation.

Medicare has a penalty for late enrollment, and you could imagine doing something like that for eligibility for insurance here. But think about if -- as I've seen some propose -- you're not eligible to get any care or any subsidized care, what does that really mean? Would we deny care? Or does it mean a continued subsidy with people responsible for other people? It's a very problematic approach.

 

Robert Laszewski, a long-time health insurance industry executive and consultant and president of Health Policy and Strategy Associates:

I think the Democrats would be smart to get rid of the individual mandate. It is by far the most unpopular part of the bill, and they would do well to replace it with something else.

One provision of the individual mandate would exempt people if insurance on the exchange costs more than 8 percent of their income. This would exempt most people in the middle class, other than people who get coverage from their employers. This mandate is not terribly effective toward its stated goal of maintaining the integrity of the health insurance market.

The mandate doesn't work politically, it may not work constitutionally, and it doesn't maintain the integrity of the market.

There are a number of things you can do with scheduled open enrollments and increasing premiums for people who don't purchase right away. We should let anybody buy health insurance, any time they want -- but if they don't buy it at the first enrollment, there should be a significant waiting period for preexisting conditions. So if you don't buy insurance right away, you can't expect to have your preexisting condition covered.

 

Paul B. Ginsburg, president of the Center for Studying Health System Change, a health policy research organization based in Washington:

As far as the political discussion goes, I would say that in this moment in time, Republicans don't seem to be very interested in searching for compromise, so I don't think that this would be the time for Democrats to come out and propose an alternative to the individual mandate. After the repeal votes, then perhaps an environment might come up for compromise. Replacing the mandate with another policy that will accomplish the same thing would be a concession the Democrats could make to preserve the important parts of reform. My concern … is that there's going to be an inclination, whether it's a mandate or an alternative to a mandate, of not making it strong enough and thus not succeeding in creating a viable insurance market for individuals where there's guaranteed issue.

From a strictly policy perspective, the mission here is to get healthy people into the risk pools within the exchanges as well as sick people -- that’s the reason why some type of incentives or coercion is needed. Having a mandate is not the only way to do it. There are other ways. Politicians are likely to err on the side of not being forceful enough to meet the requirements of a market where there's guaranteed issue. Most analysts believe that our current individual mandate is too weak to carry out its mission.

One (possible incentive) would be (to have) an initial period to enroll in insurance without (assessing their medical conditions). If you don't enroll then, then you would, say, face two years' exclusion of coverage for preexisting conditions. In other words, (it would be a mechanism) to get away from people's ability to just sign up anytime to get health insurance, because that's not viable.

Another possibility would be -- for all those people who have incomes less than 400 percent of poverty -- to reduce those subsidies for those who do not enroll right away. There's precedent for this in the Medicare program. For those people who are eligible for Part B but do not enroll when they do not have a reason not to, if they decide to enroll later on they pay a higher premium for the rest of their lives.

 

Tom Miller, resident fellow at the American Enterprise Institute, a conservative public policy research center:

(Considering alternatives is) a necessary strategy for desperate incumbents with bad poll numbers trying to seek reelection. For the administration, they will hold onto the individual mandate because they actually believe in it.

Sometimes the argument is made that we can't do all these things in insurance regulation and coverage without forcing people to buy insurance. You should back up a step and say if we have to force people to do something, maybe we shouldn't be doing it. But, they never want to acknowledge that part.

An alternative is to provide a positive incentive to people to want to buy insurance and stay covered, and reward them for it. So they think of it as not a penalty for being late, but as a benefit for doing the right thing in a responsible manner and you get these enhanced protections. That's using incentives in a voluntary and private market place.

 

Kavita Patel, a health policy expert and former Obama White House adviser:

I don't think (altering the provision is) an effective strategy, and I do think the administration should wait for the courts. … I can tell you that leading up to the passage (of the health law), a lot of people in the administration took a long look at the (Constitution's) Commerce Clause (which has been cited by opponents of the individual mandate) and what would be legal.

I think for the health policy implications, it's important to remember what the individual mandate means. It's the only way to make sure that everyone is on a level playing field, so we don't have to roll back the preexisting condition ban. The things that are great about the (health law) are not just in silos, they have to be connected, and the individual mandate is the one thing that holds them together.

At the very least, (if the Democrats choose to revisit the individual mandate) we'd have to talk about implications for having just a children's mandate or some kind of mandate for (people who retire before they are eligible for Medicare), which would have to be paired with some way to extend (them) Medicare benefits.

 

Dr. Jonathan Oberlander, professor of Health Policy and Management at the University of North Carolina at Chapel Hill:

(Democrats) are, in the short term, wedded to the individual mandate, for better or worse. I'm not sure that any of the alternatives have been discussed so far are very compelling and so if you don't have very compelling alternatives, then you're stuck with the policy that you brought to the dance—and that's the individual mandate. The big point is this: I don't think the Democrats want the … debate to be about the individual mandate. If (it) is … and that's the central focus, they've got a problem because that is the least popular provision of the new law.

We have to step back and ask what the purpose of the individual mandate is, and it's really to induce healthier Americans to sign up for health insurance, and if we don't have that, we're going have some very unstable risk pools that could potentially jeopardize the stability of the exchanges. … It's hard to induce people to sign up for health care coverage without a penalty. Asking nicely is not enough. So if you're talking about alternatives, most of the alternatives that are going to have any effectiveness are going be other forms of penalty.

 

Mark Pauly, health care economist at the Wharton School of Business at the University of Pennsylvania who helped develop the concept of an individual mandate while serving as an adviser to President George H.W. Bush:

There are two purposes of the individual mandate -- one that I agree with and one that I don't. The one I agree with is its intention to close the gap with people who are relatively high income. The reason that I think is troubling is to prop up the community rating with no preexisting exclusion because if people can wait until they get sick, then obviously that will collapse. That's not a good way to protect high risk people.

I would prefer to have a mandate to mop up for the well-off uninsured, but I think in the short run we could make a lot of progress with the generous subsidies that are aimed at bringing in the great bulk of the uninsured. Then, we could see where we are and then we could talk about an individual mandate to round up the stragglers. I'd prefer to have one to be safe, but if people are going to get themselves all up in an uproar, then why don't we use the effective tool – subsidies – first and see if we really need it.

The individual mandate has become this enormous distraction which could run the risk of sinking the whole ship. If you had to throw it overboard to save subsidies and exchanges, I would sure throw it overboard myself.

(Penalties could work as an alternative if they were) bad enough or strict enough. But then you run the risk of what if people don't respond to the penalty, then they're out and uninsured. My preferred solution would be to have a really attractive high risk pool and be done with it. After all, most people are not high risk. Plus, this is guaranteed renewability so they never get themselves in that pickle.

 

Robert D. Reischauer, president of the Urban Institute:

The Democrats should stick with the policy that they and virtually every health care expert have said is the most effective way to cover the uninsured while holding down the growth of costs. All the other policies are distant second bests. I don't think there is an alternative strategy especially if the government is fiscally constrained. If you had money to throw at the problem, then you could bribe people to participate but we don't have the resources nor should they devote resources to something that can be effectively done through a regulation enforced with penalties.

 

Kaiser Health News reporter Jenny Gold contributed to this article.

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