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POLICY: Can You Really Mandate People To Buy Health Insurance? by Robert Laszewski

RobertlaszewskiThis evening THCB welcomes our newest contributor.  Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog. Can you really mandate people to buy health insurance? That’s not so much a policy question as a practical question and it is what Hillary Clinton seems to be saying
is the big difference between her health care reform plan  and the health reform plan of Barack Obama. That’s why a news story this week out of Massachusetts caught my eye.

It seems that the Mass Department of Revenue is in the process of drafting new regulations to up the penalty for people who do not buy health insurance. If they are approved, the maximum penalty for those who do not buy health insurance would jump from $219 per year to a maximum of $912 in 2008. The penalty is estimated to be half the per person cost of the lowest priced health plan available.

Penalties would vary by age and the time a person was without health insurance.
A 26 year-old would have a penalty of $672 per year and those over 26
would pay $912. So, a family of two adults over 26 would pay about
$1,800 in penalties if they didn’t buy health insurance (a reader has correctly pointed out children are not covered by the mandate).

The state health plan administrator- The Connector–has
said that about 290,000 of the states 400,000, that were believed to be
uninsured when the program was launched, have purchased coverage. But
most of these people are those that get either all or most of their premiums paid by the state.
Among those who get no subsidy, relatively few have chosen to buy
insurance likely because they cannot afford the thousands of dollars in
premiums for the minimum policy with a $2,000 deductible.

At a practical level, we are talking about middle class families
being required to buy a health insurance policy costing $6,000 to
$9,000 a year (with a $2,000 deductible) or having to pay a $1,800+
penalty.

The Connector has already exempted thousands of residents from the mandate because there was no way they could buy the coverage.

It is notable that the senior Medicare Part D drug benefit is voluntary
but the vast majority of seniors have purchased it. Why? Because the
government pays 75% of the costs and it is affordable. The Part D experience shows that if insurance coverage is affordable people will buy it.

The Massachusetts experience tells us if it is not affordable,
people will not–or maybe more appropriately cannot–buy health
insurance.

It’s one thing to mandate health insurance coverage, but as we are
learning in Massachusetts, the real challenge is making it affordable.

On the issue of health insurance mandates, Barack Obama, and the Republican candidates, are right.

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Richard FerreiramelhospitalsJohnbrian Recent comment authors
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Richard Ferreira
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Richard Ferreira

Mandating Health Insurance coverage I am amazed as I read the various comments the number of ancillary issues that are brought up. The costs of care on a per capita basis in foreign countries, the successes or failures encountered in foreign countries are interesting but not relevant to this question. Similarly, the data being out forth in support or opposition is also not valid or relevant. Remember the old saw, “Figures don’t lie, but liars figure”. Put aside those issues and look at the US, an entrepreneurial free enterprise capitalistic system and build from that. We already mandate healthcare coverage… Read more »

mel
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mel

The thing I worry about with mandated insurance is that the subsidy threshold might be set too low, particularly if the affordability index (income thresholds) were nationwide: this would benefit people in low cost-of-living states and penalize those in high cost-of-living states. Re the Obama-style plan in Massachusetts and other states driving out the “better insurers”: well, if all 50 states had the same plan, there would be anyplace for those insurers to escape to. I think what we really need, though this is an unpopular idea among the general public, is to do more cost-benefit analyses and restrict care… Read more »

hospitals
Guest

Health insurance should be mandate. I do not see any other way.
And Govt should help who can not afford to pay health insurance or hospital expenses.

John
Guest

When it come to health insurance, the plan that would hurt our economy the least is Hillary Clinton’s plan. Everyone would have health insurance. WA, NJ, NY and a few other states who have already tried Obama’s proposed health insurance plan of not mandating coverage. These states have driven out of the better insurance companies. When anybody can get health insurance without having to go through medical underwriting, people won’t get coverage until they absolutely need it. Usually because of a serious illness. This causes health premiums to sky-rocket. That’s because insurance companies are only paying claims for unhealthy people.… Read more »

John
Guest

When it comes to health insurance, the plan that would hurt our economy the least is Hillary Clinton’s plan. Everyone would have health insurance. WA, NJ, NY and a few other states who have already tried Obama’s proposed health insurance plan of not mandating coverage. These states have driven out of the better insurance companies. When anybody can get health insurance without having to go through medical underwriting, people won’t get coverage until they absolutely need it. Usually because of a serious illness. This causes health premiums to sky-rocket. That’s because insurance companies are only paying claims for unhealthy people.… Read more »

brian
Guest

yes we can mandate people to buy Health Insurance by telling the benefits of these plans and convincing them to insure.
Health Insurance Plans

Peter
Guest
Peter

“Do you want to get rid of both of these things?” jd, yes. I know this is a wild and crazy idea that I will not see in my lifetime, but if we really want to get costs under control and produce a fair(er) system then I think that’s what needs to be done. Taxes ARE premiums, subsidies ARE premiums, premiums are premiums, as long as these payments go to insurance carriers they’re all premiums. I don’t believe an insurance model is what will save us. Why do you believe that a solution to access and affordable medical costs is… Read more »

jd
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jd

Peter,
If you want there to be only taxes, no premiums, to fund a UHC scheme, then what you want is something more radical than Medicare-for-all. Medicare has premiums, of course. It also has penalties for failure to subscribe as soon as you are eligible. Do you want to get rid of both of these things?

Barry Carol
Guest
Barry Carol

Peter, I think the only part of your comment that I agree with is that a taxpayer funded system should include a highly visible and transparent dedicated tax. My favorite candidate for such a system would be a payroll tax, but the rate would have to probably be somewhere between 13% and 15% of salary and bonus income depending on whether we capped the wages to which the tax applies at the current limit for Social Security taxes ($102K in 2008) or if there is no cap like the Medicare tax. Of course, those whose income comes from interest, dividends,… Read more »

Rainer
Guest

Hi,
Sorry for my bad English.
Also in Germany is a health insurance mandatory, it also anyone interested in whether the people can afford.
The problems with pensions and health insurance is probably a problem for the whole western world.

Peter
Guest
Peter

Here’s a mandate that works and is already in place – it’s the IRS. Why are we trying to solve healthcare affordability and access with a focus on keeping private insurers flush in their present business model? We are saying the young don’t have to buy insurance because their need is small, but we want their offsetting good health along with free ride (to the insurance industry) mandated premiums to keep money coming into the system. Then we also want to charge older people up to twice what we would charge younger people because they use the system more. Why… Read more »

Barry Carol
Guest
Barry Carol

jd, Excellent comments as usual. As many have commented in the past, insurers cannot be expected to offer health insurance on a guaranteed issue and community rated basis without a mandate that everyone have insurance. At the same time, health insurance is not affordable without subsidies up to incomes well into the middle class. Moreover, as you indicate, health insurance at uniform community rates is a poor deal for young, healthy people. Massachusetts allows insurers to charge older people up to twice as much as the young for health insurance. They call this modified community rating, and I think it… Read more »

jd
Guest
jd

No disrespect, but I’m surprised how much this debate about mandates seems to be no longer about policy, but politics, even in policy circles. Here’s why I think that. First, Hillary Clinton is not proposing mandates without subsidies. No one is. Has she said anything to contradict the claim that people won’t buy insurance if they can’t afford it? It’s strange to think that she wouldn’t be aware of this. In order to have a fair and successful mandate policy we will have to provide subsidies for the working poor and much of the middle class (so long as we… Read more »