The individual mandate provision of the 2010 healthcare reform law is winding its way through the courts, and will probably be decided by the Supreme Court. It’s the place of judges to decide the constitutional issues. However, as a physician and a public health researcher, respectively, we believe that striking down the mandate would threaten the future of private health insurance coverage.
Many Republicans — Mitt Romney, Sen. Charles E. Grassley of Iowa, the Heritage Foundation and many others — have favored such a mandate since the first Clinton administration. Yet as Democrats included this provision in their proposed national healthcare reforms, many of these same Republicans suddenly began to argue that the mandate was an affront to personal liberty. In our view, the timing speaks for itself. Whatever the partisan calculations, there is a real issue here that must be addressed.
Governing often involves some tradeoff between individual autonomy and measures that constrain this autonomy to achieve important social purposes. The mandate that everyone be insured is less an infringement on individual liberty than it is a coordination mechanism to ensure that everyone participates in a well-functioning private insurance market. By discouraging any one of us from free-riding, the mandate allows each of us greater protection and more affordable coverage. In fact, the mandate may be essential for this market to function at all.
It does that by accomplishing several important and connected goals.
First, the mandate greatly reduces the number of uninsured. Urban Institute researchers estimate that once healthcare reform is fully implemented, 22.1 million would still be uninsured. Removing the mandate would leave another 17 million people uninsured. Other mechanisms, such as automatic opt-out enrollment or late enrollment penalties, could limit the damage. Yet researchers estimate that these measures would still leave many people uninsured, and would also result in higher premiums.
This raises the mandate’s second purpose. It guards against adverse selection, whereby large numbers of young and healthy people forgo coverage, which drives up premiums for everyone and makes insurance unaffordable for many who need it most. The experience under Massachusetts’ healthcare program suggests that premiums in the individual and small-group market could be markedly higher without the mandate in place to ensure a large risk pool. The Congressional Budget Office estimates that premiums would rise by 15% to 20% if the mandate were removed.
Third, the mandate helps providers by reducing uncompensated care. The Urban Institute researchers estimate that overturning the mandate would increase uncompensated care by almost $28 billion.
Fourth, and more subtly, the mandate helps consumers by making insurance coverage a collective obligation. Once we say that everyone must have insurance, we are also saying that everyone has a right to affordable coverage. Take away the mandate, and it would be much easier to neglect poor people and to leave them uninsured. That’s just what we expect to happen if the new law is limited or overturned.
There are alternatives to the mandate. Each makes a larger government role more feasible and perhaps more necessary. For example, without the mandate, hospitals would continue to bear the burden of uncompensated care. Emergency departments will not turn you away if you’re sick, because federal law prohibits them from doing so. Of course, the law does not prohibit them from taking you to court later over the resulting whopping bill.
Without the mandate, we suspect pressure would build for a greatly enlarged government role. That’s why many other industrialized countries either have a mandate, which allows private insurance markets to function, or they effectively abolish private insurance through some variant of a single-payer system. Such policies do not raise the same constitutional issues as the mandate. Yet they are a more radical expansion of public insurance than the law passed last year.
The individual mandate will also be important to address problems left largely unaddressed in last year’s healthcare reform. The crisis in long-term care, for example, requires serious action. Adverse selection is an especially serious problem in this market. Less than 4% of American adults — on average, a relatively old and sick 4% — own long-term care insurance. If the electorate or the courts reject the mandate, addressing long-term care would require a great expansion of Medicaid and other government programs.
The individual mandate embodies a web of mutual obligations, within which each citizen agrees to be insured. Government agrees to subsidize this coverage for individuals who cannot otherwise afford it. Insurers agree not to discriminate against patients on the basis of their expected costs.
We don’t know what the courts will do. If you favor a regulated system of private coverage, you should hope that the mandate will be upheld. There’s a reason our nation’s insurers fought so hard for the mandate. They know what the future might well hold without it.
Rahul Rajkumar is an attending physician at Brigham and Women’s Hospital and an instructor in medicine at Harvard Medical School. Harold Pollack teaches health policy at the University of Chicago.