Healthcare Reform 103

Arguably, the health insurance mandate is a simple concept at the center of the complex and convoluted Healthcare Reform Act. While it acts as a central pillar to healthcare reform, it is also one of the most controversial components of the legislation. In recent public opinion polls,the individual mandate is one of the least popular elements of the Healthcare Reform Act.

Simply stated, the insurance mandate will expand insurance coverage by requiring that everyone obtain insurance. Beginning in 2014, uninsured individuals will pay a tax penalty to the federal government of $95 or 1% of household income, for each uninsured member of the household. By 2016, the penalty rises to $695 or 2.5% of household income per person. Although the insurance mandate is meant to provide everyone with insurance, there are some exceptions. Certain individuals with religious objections, Native American Indians, illegal immigrants and people in prison will not be required to comply with the insurance mandate.

Insurance companies may face a negative financial impact for the short term, due to legislative requirements. These requirements include: companies will no longer be able to sell insurance policies with lifetime caps, companies will no longer be able to exclude children based on pre-existing conditions, companies can no longer drop adults when they become sick (a practice known as recission), and starting in 2014, insurance companies will no longer be allowed to deny coverage to anyone with pre-existing conditions. Some companies, such as Anthem Blue Cross of California have already reacted by raising premiums. Anthem recently raised individual rates 39%.

To help offset the rising cost of insurance, the federal government will introduce subsidies for middle and low income families. The Congressional Budget Office estimates that of the roughly 25 million unemployed, self-employed and people not covered by insurance through work, 19 million of those will qualify for insurance subsidies. The subsidies will be based on a sliding income scale. For those making 3-4 times the federal poverty level ( 44,000 for one person or 88,000 for a family of four), will not pay more than 9.8% of their income for insurance. Those making less will pay a smaller percentage of income. For those living in extreme poverty conditions, the Medicaid program is scheduled to expand to cover their insurance needs. The Department of Health and Human services will oversee the insurance subsidy, and decide who qualifies for assistance.

 Some feel the insurance mandate will stabilize the insurance market. Deborah Chollet, a health care economist at Mathematica Policy Research said, “Because you don't have what we call hit-and-run enrollees, that is people enroll when they're sick and they dis-enroll when they've gotten the care they needed.” Duke University health economist Barak Richman suggests that costs will go down because insured people are more likely to seek preventive care, and it is cheaper to prevent illness than to treat it.

Over the long-term, insurance companies will benefit from the new business that results from the required expansion of coverage. With a larger pool of customers, insurance companies will benefit from an influx of healthy individuals required to purchase insurance which will offset those who are ill.

Opposition to the insurance mandate comes from many corners. Healthcare experts express concern that the focus of the Healthcare Reform Act has shifted from bringing rising healthcare costs under control to expanding insurance coverage for the uninsured. Many economists agree that covering the uninsured without addressing cost controls could create a bigger fiscal disaster. Rather than a discussion of all the issues, the emphasis has shifted to focus almost entirely on universal insurance coverage and the insurance mandate.

Other critics decry the insurance mandate as unconstitutional. This month a federal judge ruled the mandate unconstitutional. U.S. District Judge Roger Vinson called the mandate, “an unprecedented requirement that people buy a product.” While over twenty states have joined the Florida lawsuit against the Healthcare Reform Act, the Senate recently voted against the healthcare repeal, which passed the House of Representatives.