Money Minute: Why we need the mandate [Video]

Today’s the day the U.S. Supreme Court tackles the so-called insurance mandate in the healthcare reform law. So what’s really at stake?

Simply put, if the court rules that the requirement for most people to buy health insurance or face a tax penalty is unconstitutional, perhaps the most important element of the law becomes unworkable.

Polls show that most Americans support the provision in the law requiring insurers to provide coverage to anyone, regardless of medical condition. People don’t like the idea that insurers get to pick and choose who they’re going to cover.

But many people also apparently believe they have a right to wait until they get sick before buying insurance. Critics of the reform law say making people buy insurance when they’re still healthy is a threat to liberty and freedom.

It’s not. It’s basic economics.

Insurance is the art of managing risk. If only sick people have coverage, premiums will reflect the greater risk to insurers and will go up. If healthy people are also in the risk pool, insurers can keep rates lower.

That’s what the mandate is about: It’s a tool to spread risk evenly among society, based on a reasonable assumption that at some point in their lives, everyone will need medical care.

Without the mandate, insurers would have little choice but to send rates soaring, making health insurance even less affordable and less accessible. And with about 50 million now lacking coverage, that would obviously be a big step in the wrong direction.

Critics of the law mistakenly let their political ideology influence their feelings. What they should do instead is enroll in a remedial economics course.

Then at least they could have an informed discussion about the issues.

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