Puneet Varma (Editor)

Health insurance mandate

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A health insurance mandate is either an employer or individual mandate to obtain private health insurance instead of (or in addition to) a national health insurance plan.

Contents

Australia

Australia's national health insurance program is known as Medicare, and is financed by general taxation including a Medicare levy on earnings; use of Medicare is not compulsory and those who purchase private health insurance get a government-funded rebate on premiums. Individuals with high annual incomes (A$70,000 in the 2008 federal budget) who do not have specified levels of private hospital coverage are subject to an additional 1% Medicare Levy Surcharge. People of average incomes and below may be eligible for subsidies to buy private insurance, but face no penalty for not buying it. Private insurers must comply with guaranteed issue and community rating requirements, but may limit coverage of pre-existing ailments for up to one year to discourage adverse selection.

Japan

Japan has a universal health care system that mandates all residents have health insurance, either at work or through a local community-based insurer, but does not impose penalties on individuals for not having insurance. The Japanese health ministry "tightly controls the price of health care down to the smallest detail. Every two years, the doctors and the health ministry negotiate a fixed price for every procedure and every drug. That helps keep premiums to around $280 a month for the average Japanese family." Insurance premiums are set by the government, with guaranteed issue and community rating. Insurers are not allowed to deny claims or coverage, or to make profits (net revenue is carried over to the next year, and if the carryover is large, the premium goes down). Around 10% evade the compulsory insurance premium; municipal governments do not issue them insurance cards, which providers require. Voluntary private insurance is available through several sources including employers and unions to cover expenditures not covered by statutory insurance, but this accounts for only about 2% of health care spending. In practice, doctors will not deny care to patients in the low-priced universal system because they make up the great majority of patients nationwide, and doctors would not be able to earn enough by serving only the small number of patients with private insurance. Total spending is around half the American level, and taxpayers subsidize the poor.

The Netherlands

The Netherlands has a health insurance mandate and allows for-profit companies to compete for minimum coverage insurance plans, though there are also mutual insurers so use of a commercial for-profit insurer is not compulsory. The government regulates the insurers and operates a risk equalization mechanism to subsidize insurers that insure relatively more expensive customers. Several features hold down the level of premiums which facilitate public compliance with the mandate. The cost of health care in the Netherlands is higher than the European average but is less than in the United States. Half of the cost of insurance for adults is paid for by an income-related tax with which goes towards a subsidy of private insurance via the risk reinsurance pool operated by the regulator. The government pays the entire cost for children. Forty percent of the population is eligible for a premium subsidy. About 1.5 percent of the legal population is estimated to be uninsured. The architects of the Dutch mandate did not envision any problem with non-compliance, the initial legislation created few effective sanctions if a person does not take out insurance or pay premiums, and the government is currently developing enforcement mechanisms.

Switzerland

Switzerland's system is similar to that of the Netherlands with regulated private insurance companies competing to provide the minimum necessary coverage to meet its mandate. Premiums are not linked to incomes, but the government provides subsidies to lower-class individuals to help them pay for their plans. About 40% of households received some kind of subsidy in 2004. Individuals are free to spend as much as they want for their plans and buy additional health services if desired. The system has virtual universal coverage, with about 99% of people having insurance. The laws behind the system were created in 1996. A recent issue in the country is their rising health care costs, which are higher than European averages. However, those rising costs are still a little less than the increases in the United States.

History

An individual mandate to purchase healthcare was initially proposed by the politically conservative Heritage Foundation in 1989 as an alternative to single-payer health care. From its inception, the idea of an individual mandate was championed by Republican politicians as a free-market approach to health care reform. The individual mandate was felt to resonate with conservative principles of individual responsibility, and conservative groups recognized that the healthcare market was unique. Stuart Butler, an early supporter of the individual mandate at the Heritage Foundation, wrote:

If a young man wrecks his Porsche and has not had the foresight to obtain insurance, we may commiserate, but society feels no obligation to repair his car. But health care is different. If a man is struck down by a heart attack in the street, Americans will care for him whether or not he has insurance.

In 1993, President Bill Clinton proposed a health care reform bill which included a mandate for employers to provide health insurance to all employees through a regulated marketplace of health maintenance organizations. However, the Clinton plan failed amid concerns that it was overly complex or unrealistic, and in the face of an unprecedented barrage of negative advertising funded by politically conservative groups and the health insurance industry. At the time, Republican Senators proposed a bill that would have required individuals, and not employers, to buy insurance, as an alternative to Clinton's plan.

An individual health-insurance mandate was initially enacted on a state level in Massachusetts. In 2006, Republican Mitt Romney, then governor of Massachusetts, signed an individual mandate into law with strong bipartisan support. In 2007, a Senate bill featuring a federal mandate, authored by Bob Bennett (R-UT) and Ron Wyden (D-OR), attracted substantial bipartisan support.

Affordable Care Act

Romney's success in installing an individual mandate in Massachusetts was at first lauded by Republicans. During Romney's 2008 Presidential campaign, Sen. Jim DeMint (R-SC) praised Romney's ability to "take some good conservative ideas, like private health insurance, and apply them to the need to have everyone insured." Romney himself said of the individual mandate: "I'm proud of what we've done. If Massachusetts succeeds in implementing it, then that will be the model for the nation." In the 2008 Presidential campaign Senator Barack Obama campaigned against an individual mandate. Obama attacked Hillary Clinton and John Edwards for their support of the individual mandate during primary debates and in television ads.

However, following the adoption of an individual mandate as a central component of President Obama's Patient Protection and Affordable Care Act in 2009, Republicans began to oppose the mandate. In 2009, every Republican Senator (including Bennett, who had co-written the 2007 bill featuring a mandate) voted to describe the mandate as "unconstitutional". (Explaining his opposition, Bennett later said: "I didn't focus on the particulars of the amendment as closely as I should have, and probably would have voted the other way if I had understood that the individual mandate was at its core. I just wanted to express my opposition to the Obama proposal at every opportunity.") The New York Times wrote: "It can be difficult to remember now, given the ferocity with which many Republicans assail it as an attack on freedom, but the provision in President Obama's health care law requiring all Americans to buy health insurance has its roots in conservative thinking."

Other Republican politicians who had previously supported individual mandates, including Romney and Orrin Hatch, similarly emerged as vocal critics of the mandate in Obama's legislation. Writing in The New Yorker, Ezra Klein stated that "the end result was... a policy that once enjoyed broad support within the Republican Party suddenly faced unified opposition."

The Affordable Care Act signed in 2010 by Obama included an individual mandate to take effect in 2014. The mandate was challenged in federal courts by Republican state Attorneys General. On June 28, 2012, the U.S. Supreme Court upheld the provision as Constitutional. Chief Justice John Roberts delivered the majority opinion in National Federation of Independent Business v. Sebelius, which upheld the Patient Protection and Affordable Care Act by a 5-4 vote. The Court ruled that although the "individual mandate" component of the act was not constitutional under the Commerce Clause, it was reasonably construed as a tax and was therefore valid under the Congressional authority to "lay and collect taxes."

On August 30, 2013, final regulations for the individual mandate were published in the Federal Register (78 FR 53646), with minor corrections published December 26, 2013 (78 FR 78256).

Criticism of individual mandate

Insurance lobbyists (AHIP) in the United States advocate that the mandate is necessary to support guaranteed issue and community rating, which limit underwriting by insurers; insurers propose that the mandate is intended to prevent adverse selection by ensuring healthy individuals purchase insurance and thus broaden the risk pool. Studies of empirical evidence suggest that the threat of adverse selection is exaggerated, and that risk aversion and propitious selection may balance it. For example, several US states have guaranteed issue and limits on rating, but only Massachusetts has an individual mandate; similarly, although Japan has a nominal mandate, around 10% of individuals do not comply, and there is no penalty (they simply remain uninsured - see below). Without mandates, for-profit insurers have necessarily relied on risk aversion to charge premiums over expected risks, but have been constrained by what customers are willing to pay; mandates eliminate that constraint, allowing insurers to charge more. Governments that impose a mandate must subsidize those who cannot afford it, thus shifting the cost onto taxpayers.

In 2010, the Congressional Budget Office estimated that more than 20 million people would remain uninsured despite the enacted mandates and subsidies. A 2004 editorial in USA Today asserted that Department of Health and Human Services (HHS) data show the uninsured are unfairly billed for services at rates far higher—on average 305% at urban hospitals in California—than are the insured; USA Today concluded that "millions of [uninsured patients] are forced to subsidize insured patients." Citing data from the Urban Institute and the experience of Massachusetts (see below), the Cato Institute argues that without the uninsured, "The insured would pay more, not less." The Pacific Research Institute argues that the uninsured subsidize the insured, do not drive up the cost of health care, and use fewer services than the insured.

The Los Angeles Times reported in 2009 that mandates without cost controls "add up to higher costs for taxpayers and consumers." The Washington Post reported that even with mandates insurers would likely continue discrimination to "chase away the chronically ill," quoting Karen Pollitz, research professor at the Georgetown University Health Policy Institute: "The race is to the bottom." The Wall Street Journal said it would render constitutional limits on federal power "a dead letter" and asked, "If the insurance mandate stands, then why can't Congress insist that Americans buy GM cars, or that obese Americans eat their vegetables or pay a fat tax penalty?"

National Nurses United, the nation's largest registered nurses organization and a supporter of Medicare-for-all, ranked the individual mandate first in a list of ten problems explaining their opposition to the bills passed by Congress in 2009. The California Nurses Association, which supports single-payer healthcare, added that due to "insurance company pirates and their predatory pricing practices...subsidies and tweaking will amount to little more than an umbrella in a hurricane." Physicians for a National Health Program, which also supports single-payer healthcare, wrote that "mandate-based health reforms don't work."

The insurance mandate faced opposition across the political spectrum, from left-leaning groups such as the Green Party and other advocates of single-payer healthcare to right-leaning groups such as the Heritage Foundation, FreedomWorks, and the Cato Institute as well as some members of the U.S. Senate and House of Representatives. In the Senate Finance Committee, Republican Jim Bunning of Kentucky had called a mandate 'un-American' and argued that it "may even be unconstitutional".

However, the idea has traditionally gathered support from insurance companies and some politicians within the Republican Party (Charles Grassley, Mitt Romney, and the late John Chafee are examples), and became part of the defeated Clinton health care plan of 1993 and Hillary Clinton's plan in 2008. Some sources trace the idea to the Heritage Foundation around 1990, but the Heritage Foundation has since concluded that the mandate is unconstitutional. In 2008, Larry Levitt, Vice President of the Kaiser Family Foundation (founded by the founder of the Kaiser Permanente HMO), stated in a Kaiser Network "interactive web show" that the mandate has been at the heart of health care reform proposals in the United States. In the same Kaiser network show, Dr. Len Nichols, Director of the Health Policy Program at the New America Foundation, called an individual mandate an "absolutely necessary" pre-condition to universal health care: he stated that, without a mandate, only a maximum of about half of uninsured Americans would likely obtain coverage under any non-compulsory reform. A 2008 AHIP/Kaiser forum cited Dutch and Swiss mandates (see below); AHIP's published report does not mention penalties but says Switzerland "enforces the rules in many ways..." In October 2009, Kaiser Health News reported that "the mandate has become a target for both Democrats and Republicans" and stated, "The insurance industry is clearly worried about the mandate being defanged."

Opponents such as Michael Cannon, Director of Health Policy Studies at the Cato Institute, make a philosophical argument that people should have the right to live without government social interference as a matter of individual liberty. He has stated that federal, state, and local governments are not willing or able to raise the necessary funds to effectively subsidize people who cannot currently afford insurance. He has also stated that the costs of increasing coverage are far higher than other reforms, such as reducing the amount of errors and accidents in treatment, which would accomplish as much or more benefit to society.

There was also disagreement as to whether federal mandates could be constitutional. In 2010, a majority of the 50 states filed litigation contending that the individual mandate was unconstitutional, and newly elected Republican governors campaigned promising to add their states to the list in 2011. The federal district courts initially split on the constitutionality issue, which ultimately was expected to reach the Supreme Court; also, state legislative actions may at least cause delay. The Militia Acts of 1792, based on the Constitution's militia clause (in addition to its affirmative authorization to raise an army and a navy), would have required every "free able-bodied white male citizen" between the ages of 18 and 45, with a few occupational exceptions, to "provide himself" a weapon and ammunition; however, it was never enforced so its constitutionality was never litigated. In 1994, the Congressional Budget Office issued a report describing an individual mandate as "an unprecedented form of federal action." The agency also wrote, "The government has never required people to buy any good or service as a condition of lawful residence in the United States."

In a September 2010 working paper, a forthcoming article in the NYU Journal of Law and Liberty, and a lecture given at NYU, Randy Barnett of Georgetown University Law Center argues that the mandate is unconstitutional under the doctrine of the Commerce and Necessary and Proper Clauses, and that enforcing it is equivalent to "commandeering the people." Penalizing inaction, he argues, is only defensible when a fundamental duty of a person has been established. He also asserted that Congress fails to enforce the mandate under its taxing power because the penalty is not revenue-generating according to the Act itself.

Public opinion polls from 2009 through 2012 continued to find that most Americans rejected penalizing people for not buying health insurance. In 2010, voters in at least three states enacted ballot measures to block the individual mandate, "laying the foundation for future legal challenges... Oklahoma approved an opt-out ballot initiative by a 2-to-1 margin. Proposition 106 in Arizona gained 55 percent of the vote. ... Missouri voters approved a similar measure, Proposition C, with 71 percent support on a primary ballot in August." In November 2011, the issue appeared on the ballot in Ohio, where a Quinnipiac Poll of registered voters found that "when asked if they agree with a mandate that they obtain coverage or face fines, opposition jumped to 67 percent, with just 29 percent backing the mandate;" subsequent reports showed 66% of voters rejected the mandate.

The U.S. Supreme Court decision upholding the individual mandate was rendered in June 2012, in the case of National Federation of Independent Business v. Sebelius.

State-level mandates

A 2005 Massachusetts health care reform law, part of which offers subsidized insurance programs to poor and lower income residents, replaced 28% of unpaid hospital visits with a 28% increase in taxpayer subsidized insurance (MassHealth and Commonwealth Care). Contrary to supporters' claims that insurance coverage and preventive care would save money by reducing emergency visits, in fact both emergency visits and costs increased significantly. Before the law was passed, per capita health care costs in Massachusetts were the highest for any part of the country except D.C. From 2003 to 2008 (three years prior and two years after enactment) Massachusetts insurance premiums continued to outpace the rest of United States, however the rate of growth year to year for Massachusetts has slowed as a result of the law. Insurance rates in Massachusetts are reported to be the highest in the country when measured absolutely, but this statistic doesn't tell the complete story: when measured relatively (by taking cost of living into account) Massachusetts premium rates are among the "least expensive of all states when considering the proportion of one's income required to pay for health insurance". The Wall Street Journal reported that mandates squeezed "those in the middle" in Massachusetts. Writing in The New York Times opinion blog "Room for Debate," single-payer health care advocate Marcia Angell (a former editor-in-chief of the New England Journal of Medicine), said that a coverage mandate would not be necessary within a single-payer system and that even within the context of the current system she was "troubled by the notion of an individual mandate." She described the Massachusetts mandates as "a windfall for the insurance industry" and wrote, "Premiums are rising much faster than income, benefit packages are getting skimpier, and deductibles and co-payments are going up."

Other states do provide community rating and guaranteed issue, without mandates and with lower premiums than Massachusetts. For example, New York, which borders Massachusetts, requires pure community rating and individual guaranteed issue.

Employer mandates

In the United States, the Patient Protection and Affordable Care Act (PPACA) includes both employer and individual mandates that take effect in 2014. The PPACA's employer mandate requires that all businesses with 50 or more full-time employees provide minimum affordable health insurance to at least 95% of their full-time employees and dependents up to age 26, or pay a fee by 2016. In the two largest EU countries, France and Germany, Statutory Health Insurance (SHI) mandates employers and employees pay into statutory sickness funds. In France, private health insurance (PHI) is voluntary and used to increase the reimbursement rate from the statutory sickness system. The same applies in Germany where it is also possible to opt out of SHI if you are a very high earner and into a PHI but if a person has reached the age of 55 and is in the PHI sector he or she must remain covered by PHI and cannot opt back into SHI. Persons who are unemployed can usually continue their payments through social insurance and the very poor receive support from the government to be insured. Most workers are insured through compulsory membership of "sickness funds" that are non-profit entities established originally by trades unions and now given statutory status. In Germany and France, as is the case with most European health care finance, the personal contribution to health care financing varies according to a person's income level and not according to their health status. Only 0.2% of Germans are uninsured, mainly self-employed, rich and poor, and persons who have failed to pay contributions to the statutory insurance or premiums to the private health insurance. Between 1990 and 2000 the share of French SHI income coming directly from employees via salaries fell from around 30% to just 3% and employer direct contributions also fell. The difference was made up by a rise in income from government taxation, thus widening the mandatory contribution base to the health insurance system.

References

Health insurance mandate Wikipedia


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