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Taking the Individual Mandate Off Life Support

9:29 AM, May 13, 2011 • By TOM MILLER
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This week, the latest challenge to Obamacare, and its individual mandate to purchase health insurance, was heard before the 4th Circuit Court of Appeals in Richmond. Similar appeals cases are due to be heard next month in Cincinnati and Atlanta. Already two federal judges have declared the mandate unconstitutional and beyond the powers of Congress to enact. Regardless of how these courts and the Supreme Court rule (when it eventually makes it to the highest court) on these arguments, it’s time to get rid of the unworkable, unenforceable, and unsustainable mandate.

Capitol at night

The individual mandate has been presented as a necessary means to more popular ends – universal coverage, better access to care for those with pre-existing health conditions, and lower health care costs for those already insured. However, the real evidence of the connection between the mandate and the problems it purportedly could solve is shaky at best. Nevertheless, the Obama administration and its congressional allies hoped that an individual mandate could accomplish two political goals: First, it might obscure the full cost of expanded coverage by conscripting private resources to pay for most of it without explicit tax increases; second, it would ensure enough new captive customers for private insurers to provide them with sustainable revenue and keep their risk pools from falling apart, despite expanded regulatory requirements and benefits mandates.  

However, trying to force people to buy insurance that they cannot afford, or coercing them into paying more than it actually appears to be worth to them, remains politically difficult. Lowering the visible sticker shock for most folks through additional taxpayer subsidies and below-cost price controls doesn’t work economically, either. Government budgets tighten, political demand for health care explodes, market supply of medical providers cannot keep up, and overcharged premium payers resist. And eventually someone has to pay for it all.

Hence, Obamacare’s compromise, for the time being, on a weak mandate scheduled to begin almost four years after the bill became law (in 2014). Its soft penalties are set at a small fraction of likely insurance premium costs, with further exemptions for those facing “unaffordable” coverage options. The law’s guaranteed-issue incentives for potential purchasers —enroll ‘just in time when sick,’ and ‘go bare’ when healthy (and pay less in penalties than premiums)—further ensures limited and erratic mandate enforcement.

Even these faint gestures and evasions could not avoid offending the political sensibilities and core values of a majority of voters. The mandate-friendly pollsters at the Kaiser Family Foundation reported last March that 67 percent of Americans favored repeal of the mandate, and only 27 percent favored it. The individual mandate has consistently remained the most intensely unpopular provision of the new health law since it first took shape. The serious court challenges to its constitutionality only reinforce those basic sentiments.          

But whether it is repealed by legislation or by the courts, the mandate needs to be replaced by something else that works better to address serious cost and coverage problems in health insurance. Various political actors are already looking for alternatives. In late March, the Government Accountability Office responded to a request from Senator Ben Nelson (D, Neb.) for an analysis of “voluntary enrollment” alternatives to an individual mandate. They included less-frequent open enrollment periods coupled with late enrollment penalties (the incentive model for Medicare Part B and Part D coverage), expanded auto-enrollment (with opt-out) in employer health plans, several lesser taxes to pay for uncompensated care, and lots of begging and cajoling (called “public education and outreach”). Not surprisingly, GAO surveyed about 40 “expert” representatives of the health policy status quo and found those alternatives did not satisfy them. 

Other critics on the left reflexively say that such incentives will fail to insure as many people as their tautological modeling for legal mandates predicts. Without a doubt, those who see universal coverage as their foremost political objective always imagine that it will be obeyed faithfully and executed flawlessly.

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