Friday, February 25, 2011

A Fresh Look at Mandating Health Insurance Coverage

Requiring individuals to maintain health insurance coverage is a good idea. There, I said it despite my libertarian leanings.

Yes, an individual mandate may be unconstitutional. And the prospect for more government control is not appealing but there is a strong case to be made that this is perhaps the one redeemable provision (in concept) within the 3,000-page health care law.

The obvious advantage is that by creating a health care system where everyone has insurance you dramatically expand the risk pool, which is a proven way to drive down costs especially when more younger and healthier individuals are covered.

On this latter note, high deductible plans should certainly be an option to fulfill a coverage requirement.

Proponents of an individual mandate cite the auto insurance analogy to support their position that there is precedent for compelling individuals to take responsibility for financial risk but they get caught flat-footed with the counterpoint that driving a car is voluntary activity and therefore it is appropriate for government to establish conditions unlike health insurance where there is no such activity.

But let’s take a closer look at this comparison.

If someone gets in an automobile accident and does not have insurance, their car will not be towed into an automotive emergency room and fixed without consideration to ability to pay. Rather, The car will remain damaged, or totaled until such time the owner can pay to repair or replace it. The financial liability is not shifted to anyone else.

Now if the driver gets admitted to the hospital as a result of this accident they will get “repaired” regardless of their ability to pay. And if they aren’t able to pay the cost will be shifted to other health care payers, including self-insured employers.

This fact should give even libertarians pause in opposing an individual mandate because a person’s decision not to maintain insurance has an adverse impact on the larger population and compromises the principal of self-reliance. After all, when is the last time you heard of someone refusing essential treatment because they knew they could not pay?

Requiring health insurance coverage would also benefit the self-insurance industry because more individuals would chose to enroll in their employers’ group plans, thereby expanding the risk pools for employers while increasing revenue potential for service providers.

To be sure, the way the individual mandate provision as incorporated in the PPACA is flawed, largely because the specific penalties and incentives will not likely achieve the desired results. But that is not to say that this approach should be rejected outright. Properly structured, an individual mandate could help put our health care system on the right track.

It’s unfortunate that President Obama and the Democratic Congress wrapped so much bad stuff around this targeted health care reform approach that we will likely never know how it may have worked.

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