The Individual Mandate in Massachusetts

Insurance mandates are commonplace for car insurance. Subsidies promote such activity as buying a home or higher education. For health care, the debate continues over whether mandates or subsidies are the best policy tool to foster greater coverage and expand the risk pool.

Proponents of an individual mandate for health insurance argue that the mandate is necessary to reduce adverse selection in a reformed non-group insurance market by requiring the enrollment of healthy people as well as unhealthy people.  Opponents of the mandate argue that large subsides will instead attract healthier people into the insurance pool.

Experience in Massachusetts provides insight on the impact of heavily subsidized insurance for residents with incomes below 300 percent of the federal poverty level prior to mandated insurance coverage.  As part of the Massachusetts reform, the state program offered free or subsidized insurance beginning in October 2006.  The state’s mandate phase-in started in mid-2007 and was fully effective as of December 2007.  The researchers were able to offer an assessment of the additive effect of the mandate over that of the subsidized insurance alone.

Prior to the state mandate phase-in and with the onset of subsidies that were much larger than those provided by the Patient Protection and Affordable Care Act, 35.5 percent of new enrollees had a diagnosis of chronic illness (hypertension, high cholesterol level, diabetes, asthma, arthritis, an affective disorder, or gastritis).  Comparatively, there was a greater increase in the number of healthy enrollees than in the number of enrollees with chronic illness.

After the phase-in began, 29.6 percent of new enrollees had a diagnosis of chronic illness.  Once the mandate was fully effective, only 23.9 percent of new enrollees had a diagnosis of chronic illness.  There was an initially large increase in healthy enrollees, but the gap narrowed (greatest between December 2007 and May 2008) as compliance with the mandate increased.  The authors concluded that there was indeed an effect of the mandate; however, the relative size of insurance subsidies are posited to affect the impact of the individual mandate.

Commentary

Massachusetts provides data that mandates do indeed promote higher enrollment, but that in the long term, subsidies may indeed come close to accomplishing the same goal. Being that the subsidies in Massachusetts are indeed higher than those included with in the Affordable Care Act, the need for a combined approach from the federal government – high subsidies and an individual mandate – may be necessary to achieve greater coverage.

But with the many exemptions from the individual mandate – especially for those who will find it too expensive to obtain health insurance coverage –  the question still remains: how do we best address the actual cost of insurance in the first place?  As we questioned in , health care should not be left at the whim of health insurance corporations who are not adequately regulated.

While the Affordable Care Act does apply some regulation to the health insurance industry – guaranteed issue, no lifetime limits, and modified community rating – the individual mandate is only a temporary fix. Making health care affordable will encourage broader coverage. One way to accomplish this would be additional insurance regulation, in effect in Germany and Switzerland, that bans profit on the basic health package.

Chandra, A, et al.  “The Importance of the Individual Mandate – Evidence from Massachusetts.”  N Engl J Med; 2011 Jan 12. [Epub ahead of print]

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Kameron Matthews, MD, Esq.