Why require people to buy health insurance?

Any final healthcare bill is likely to require that virtually all Americans obtain insurance. This “individual mandate” has stirred some controversy and confusion. Here are some questions and answers.

Why require everyone to buy insurance?

All insurance is based on the idea that most of the time, most people are not filing claims. As it applies to healthcare, supporters say, most people are pretty healthy most of the time, but eventually almost everyone incurs major medical expenses. If only sick people bought insurance, the system would collapse because plans would be forced to pay out more than they took in. And since nearly everyone who develops a serious medical problem gets treated (with or without insurance), the cost of treating the uninsured is passed on to other people. In effect, those with insurance are helping pay the costs of those without it.

What benefit do I get from being required to buy insurance?

Making the underlying insurance mechanism stronger by getting more people into the system assures that you will get coverage when you face big medical bills. With everyone paying into the system, companies will get premiums from millions of new clients. That income will make it possible for the companies to stop denying coverage to people who have a preexisting condition or are likely to get sick in the near future -- smokers or middle-age people at risk of heart disease, for example.

Without the mandate, the proposed rules against denying coverage could lead to only sick people becoming new customers as some others simply waited until they became ill to buy insurance.

How can insurers afford to cover so many people who have expensive illnesses? Will my premium go up?

The challenge for insurers is not in covering routine medical expenses; it’s the high cost of treating cancer and other major diseases. And Medicare currently covers a large share of people with those problems. For those who develop serious medical problems before they are eligible for Medicare, having more people paying into the insurance pool can offset higher costs, especially if a lot of the newly insured are young people.

Since young people don’t cost the system much, would they be allowed to buy less expensive plans?

The bills being considered in Congress would use a system called “age rating” to allow insurers to charge older people as much as three times the amount that they charge young people for premiums. If that idea were carried too far, however, it would defeat the purpose of an insurance plan -- spreading the cost and risk. One provision that could end up in the final bill would allow young people to buy less extensive plans. These plans would cost less but wouldn’t cover the range of healthcare services that older Americans need and tend to use more frequently.