One of Obamacares dark secrets is that its individual mandate—forcing nearly all Americans to buy health insurance—is too weak. If youre going to double the cost of health insurance for young people, and thereby increase premiums by thousands of dollars, many people will be better off going without insurance and paying the mandates fine. Insurers have always understood this problem. Today, Politico reports that some insurers are asking the Obama administration to impose additional penalties and fees on top of the mandate, so that more people are forced to buy Obamacares costly products.
"Heres the catch," observes David Nather in the Politico piece. "The individual mandate penalties will be pretty weak as they are phased in over two years—only $95 when they start in 2014, much less than it costs to buy insurance. And yet, everyone with pre-existing conditions will have to be accepted right away." This is a problem that PriceWaterhouseCoopers identified with Obamacare way back in 2009. But Congressional Democrats, instead of reforming the bill accordingly, pilloried the PwC report as political sabotage.
Proposing a mandate plus
Now that President Obama has been reelected, and Obamacares imposition is assured, people are starting to pay attention to this problem. "Now that the mandate is here to stay, insurance companies and some policy experts say [that additional measures] should go hand in hand with the coverage requirement."
The Blue Cross and Blue Shield Association, Nather reports, has asked the Department of Health and Human Services to unilaterally impose late enrollment fees on those who dont sign up within a given time frame, along with other penalties, such as barring late enrollers from fully benefiting from the laws pre-existing condition provision, and preventing them from opting into the most generous insurance plans.
BCBS isnt alone in advocating a "mandate plus." According to Nather, the National Association of Health Underwriters, and the American Academy of Actuaries, agree that the individual mandate ought to be strengthened.
"If you can jump in and out every time you need services, costs will go up," notes Justine Handelman, BCBS vice president for legislative and regulatory policy. "Certainly, we are concerned that the penalty is just $95 in the first year, which is far below the cost of coverage." (In 2014, the average individual insurance policy will cost more than $6,000.)
Indeed, the measures that Handelman is supporting—limited open enrollment periods, and applying guaranteed issue only to those who maintain creditable coverage—have long been proposed as an alternative to the individual mandate, an alternative that would have saved us from the Supreme Courts constitutional legerdemain last summer.
Another idea: make insurance cheaper
But theres another approach, one that insurers have also advocated: eliminating some of the dumbest and costliest insurance regulations in the health law, such as the excise tax on insurance premiums, the youth tax that goes by the name of "community rating," and the "essential benefits" mandate that forces insurers to provide services that consumers wouldnt otherwise buy.
The basic logic of an individual mandate is that, for the majority of uninsured Americans, buying health insurance is a raw deal. Two-thirds of the uninsured are in their twenties and thirties, with average annual health-care expenditures of around $800 to $1200. The optimal way to get these young people to buy insurance is to offer them an affordable product that reflects their actual health-care needs. But that would be too straightforward for Washington.
HHS shouldnt go around Congress
Notably, the insurers who want to strengthen the mandate are asking HHS to act by imposing additional regulations, instead of by asking Congress to pass legislative modifications to Obamacare. "With the toxic politics of a divided Congress and lasting Republican opposition to the health care law, the chance that Congress would pass any legislation to help Obamacare work better is pretty much zero," Nather writes.
Its not clear that HHS has the power to strengthen the individual mandate on its own. Any attempt to do so would likely face a lawsuit. And theres a far better approach, that might make both sides happy: repeal the individual mandate and replace it with these alternative provisions, like limited open-enrollment periods.
Repeal and replace the individual mandate
As Princeton health-reform historian Paul Starr has noted, Germany has used a limited open-enrollment period quite successfully. "The law could give people a right to opt out of the mandate," proposes Starr, "if they signed a form agreeing that they could not opt in for the following five years…For five years they would become ineligible for federal subsidies for health insurance and, if they did buy coverage, no insurer would have to cover a pre-existing condition of theirs."
This is a far superior approach to the problem of adverse selection than the individual mandate, one that is more in keeping with American ideals of choice and voluntarism.
The left believes that there is no legitimate role for private insurers in a just health-care system. That constant political pressure puts insurers on the defensive. But if insurers alienate the right, by insisting on expanding the individual mandate instead of reforming it, they shouldnt be surprised if they wake up one day with no friends at all.
Original Source: http://www.forbes.com/sites/aroy/2013/01/14/insurers-to-obama-make-the-individual-mandate-stronger/