Careful What You Wish For

For all the sideshow talk about death panels and pulling the plug on grandma, it seems we’ve had practically no serious debate this year on the one health reform proposal that would most profoundly affect Americans: the requirement that individuals purchase insurance.

The theory of the insurance mandate is simple. Sick people cost insurance companies more money than they contribute, so insurers need premium dollars from healthy people to make up the difference. You can’t forbid insurance companies from rejecting the sick while allowing the healthy to reject insurance. Besides, when uninsured people do receive healthcare, they pass the costs along to everyone else. The liberal Center for American Progress claims that the average insured American is paying more than $1,000 a year in additional premiums just to cover the uninsured.

I get the theory. I’ve argued in the past for an individual mandate. You can’t achieve universal coverage without it. And yet:

I don’t think most Americans, including those who are currently insured, have the slightest idea how this new mandate will affect them or what it will cost them. And I doubt that they’re going to feel good about it when they find out.

At this writing in mid-October, Congress was still haggling over the details of how a mandate would work. But any mandate will require millions of Americans to purchase something very expensive - individuals are looking at premiums of more than $3,000 a year; families, perhaps more than $10,000 - and most versions offer paltry subsidies.

In particular, here’s what the all-important Senate Finance Committee came up with:

Individuals whose employers offer insurance would be required to buy it; they would be ineligible for subsidies and excluded from the insurance “exchange” the government would set up. There would be no other choices for such people.

Those who don’t have access to employer-sponsored coverage (and who aren’t eligible for Medicaid) would be required to purchase insurance individually, typically via the government exchange, and pay for it out of pocket. Subsidies would be designed to cap the cost of insurance for those making as much as four times the federal poverty level, or $43,320 for an individual. The cap for someone at that income: 8 percent of pretax income, or $3,465. (The caps would go lower on a sliding scale for lower-income people.)

Am I the only one who thinks this scenario carries huge political risks for the president and Democrats in general - bigger, perhaps, than getting nothing at all?

Imagine a young professional, a few years out of college or graduate school, trying to make ends meet in the big city on $40,000 a year. After taxes, this person is bringing home no more than $2,500 a month, and probably less. If her employer doesn’t offer coverage, the new mandate could eat nearly $300 a month, almost 12 percent (or more) of her take-home pay.

How will people in such a position react? You’ll have a lot of scofflaws, for one thing. With a yearly penalty of about $750 (again, this is tentative), it doesn’t make much sense for our young professional to spend almost five times that much to buy insurance that, at her age, she’ll probably rarely use. Millions of these people will remain uninsured despite the mandate, defeating its purpose.

Of those who gulp hard and buy the insurance, how many will pay for it by reducing, delaying, or discontinuing 401-k contributions? How many will increase high-interest personal debt? Or stop saving for that house?

And whatever they do, how will these people feel about this huge new expense and the politicians who invented it? These are the young idealists who wept at Obama rallies, knocked on doors for him, and came to the polls in record numbers for him. What will they think when they get stuck with the tab?

If you think scenarios like my imaginary young professional are rare, consider the mandate’s effective date: January 2013, just after the next presidential election. Or you might think that if she gets hit by a bus or falls seriously ill, she’ll be glad she has the coverage. Maybe, but only a small few will face this fate, which is why the mandate makes economic sense. Anyway, isn’t it usually when insured people get sick that so many realize how lousy their coverage actually is?

An insurance mandate makes sense when it comes in the context of a robust market with plenty of choices for all Americans and fair subsidies for those who need them. In fact, it is essential. But this? This is not right.

And there will be a backlash.

Bob Keaveney is editorial director for Physicians Practice. He can be contacted via e-mail at bob.keaveney@cmpmedica.com.

This article originally appeared in the November 2009 issue of Physicians Practice.