Now that federal judge Henry Hudson has just struck down the individual mandate in the new health care law, the case will likely end up before the Supreme Court. While I suspect, in the end, the constitutionality of the individual mandate provision will be upheld, this individual mandate is not critical. There are many alternative ways to deal with the potential issue of individuals who might try to save money by delaying the purchase of insurance until they get sick that would meet the requirements set forth in Judge Hudson’s ruling. Below are just eight possibilities.
Using Public Programs
1. Single Payer/Medicare for all – The constitutionality of the government taxing people and using that money to provide a service is not in doubt. You could simply create a universal health care program by providing every American with automatic access to Medicare that is paid for through taxes.
2. Add a public option or Medicare buy-in – If you want to leave the new health care law basically intact, all you need to do is add a public option or Medicare buy-in. Make the individual mandate a requirement to buy or “pay the premium tax” to the public option and also create a waiver from that mandate if the individual gets private insurance. Hudson said it was outside the power of Congress to compel an individual to “purchase a commodity in the private market,” but it should be within Congress’s rights to compel individuals to take part in a government program. There is still time in the lame duck session for Democrats to use reconciliation to add a public option to deal with this issue.
3. Default enrollment in a basic public insurance plan – Instead of the mandate, the government could create a very basic default insurance plan. If you fail to get health insurance through other means, the government would automatically place you in the default public plan and charge you a special tax to pay for it. The default public plan will be part of the exchanges risk adjusting mechanism, so the entire risk pool in the exchange would, on net, not be distorted. [cont’d.]
Changes to the Private Market
4. Back premium payments – The point of the individual mandate is to eliminate the incentive to hold off buying insurance until you get sick, but this can be dealt with using other systems besides a government-imposed fee for not buying a private product or even a public program. The government could give insurance companies the right to change individuals up to six months worth of “back premiums” if they try to sign without previously carrying insurance. With the back premium penalty in place, the incentive to hold off buying insurance is greatly reduced.
5. Temporary higher deductibles for late sign ups – If an individual signs up for insurance after previously being uninsured, the company could be given the right to charge them a dramatically higher deductible for the first five months they are insured. This also helps eliminate the finical incentive to wait to get insurance until you get sick.
6. Multi-year waiver – This is an idea put forward by Paul Starr that should eliminate Hudson’s constitutional objections. If the individual doesn’t want to pay the mandate penalty, they wouldn’t be forced to as long as they sign away their right to guaranteed issue, community ratings, and subsidies for a set period of time, like five years. After that time, the individual can get the regulatory benefits or choose to sign another multi-year waiver.
7. Open enrollment period – You can have one month open enrollment period each year. People who sign up that month get the basic rate. The insurance companies would be allowed to charge a set higher premium for people who sign up at any other point for the rest of that year.
8. Extremely strong employer mandate – Even if forcing an individual to buy a private product is declared unconstitutional, it is likely a tough employer mandate regulation couldn’t be declared an over-extension of the Commerce Clause. Hawaii has a modest employer mandate and has the second highest insurance coverage rates in the country. A much tougher employer mandate that covers all businesses regardless how small, combined with a beefed-up COBRA and/or Medicaid for the unemployed should also be able to achieve near universal coverage.
This particular individual mandate is not critical
This particular individual mandate in this new health care law isn’t critical. Its basic function of preventing individuals from trying to get a good deal by delaying their purchase of insurance until they get sick can be severed by a variety of alternatives, only some of which are listed above. These alternatives should avoid any possible constitutional problems and a few of them would actually do a much better job than this individual mandate at increasing the number of people insured. If Congress wanted to, they could easily “fix” the perceived problem of a lack of individual mandate.
Even if not dealt with, simply removing the individual mandate will not lead to the whole design of the new system collapsing. I believe the number of people who would actively try to “game” the system is relatively small, and given that the penalty mandate is so much lower than the cost of insurance premiums, it is unlikely to be an effective deterrent for those people anyway. Many states already have guaranteed issue and age-based community rating without an individual mandate, and, while not ideal health care systems, they show the other provisions of the law can be put in place without the mandate.