Since the Senate eliminated the public option and Medicare buy-in provisions of the health care bill, there has been significant discussion from progressive activists that they could only now accept the bill if it dropped the individual mandate, which forces Americans to purchase health insurance – at this point, private health insurance – or face penalties. Democracy for America made this point in an email to supporters today.

Senate leaders are all over Washington claiming they finally have a healthcare reform bill they can pass, as long as they remove the public option. After all, they say that even without a public option, the bill still “covers” 30 million more Americans.

What they are actually talking about is something called the “individual mandate.” That’s a section of the law that requires every single American buy health insurance or break the law and face penalties and fines. So, the bill doesn’t actually “cover” 30 million more Americans – instead it makes them criminals if they don’t buy insurance for the same companies that got us into this mess […]

Without the choice of a public option, forcing Americans to buy health insurance isn’t just bad policy, it’s a political timebomb. Call Senator Reid and your Democratic Senators today, then report your call here.

The Senate’s individual mandate is actually fairly weak. The penalties start as low as $95 in the first year and are phased in gradually, and there are hardship exemptions if affordable coverage cannot be found. In fact, the insurance industry and The American Academy of Actuaries actually want the mandate strengthened from its current state.

Nevertheless, there is a legitimate political problem with the individual mandate, described by Markos Moulitsas here.

My take is that it’s unconscionable to force people to buy a product from a private insurer that enjoys sanctioned monopoly status. It’d be like forcing everyone to attend baseball games, but instead of watching the Yankees, they were forced to watch the Kansas City Royals. Or Washington Nationals. It would effectively be a tax — and a huge one — paid directly to a private industry.

Without any mechanisms to control costs, this is yet another bailout for yet another reviled industry. Subsidies? Insurance companies are free to raise their rates to absorb that cash. More money for subsidies? More rate increases, as well as more national debt. Don’t expect Lieberman and his ilk to care. They’re in it for their industry pals.

If you want a similar model, watch how universities increase tuition to absorb increased financial aid opportunities. And since the Senate and its industry-bought Senators won’t allow insurance premium caps or an end to the insurance industry’s anti-trust exemption (much less a public option to compete against them), there is nothing keeping those companies from jacking up rates to screw people. In fact, that’s been their modus operandi for years.

The most compelling argument against this is to look at how most other industrialized countries cover their citizens. They typically take on that burden of coverage from the state. In this case, we are outsourcing that social contract to private industry. This would be tolerable if in exchange we had guarantees that industry would deliver quality coverage at an affordable rate. But we’re not there yet in these bills.

The current Senate bill only creates a sham imitation of these systems. This bill completely fails to uphold the government’s end of this social contract, but would still force Americans to buy expensive, poorly regulated, junk insurance. Insurance policies would only be required to have an actuarial value of 60 percent, a shockingly low number. The insurance companies will not be banned from placing annual caps on benefits and there is a massive loophole to get around an already too high “limit” on out-of-pocket cost. The end result is that having this “insurance” will not prevent Americans from bankruptcy if the get sick, nullifying the entire logic behind universal health insurance. For moral, political, policy, and economic reasons, progressives must oppose any government mandate to buy insurance as long as the government refuses to pass laws ensuring that every American actually has access to decent, affordable health insurance.

The Senate bill does not ensure that Americans get value from the health insurance they would be forced to buy. Insurance companies are not mandated to be non-profits. It lacks a strong minimum medical loss ratio that would force insurance companies to spend the majority of the money they take in through premiums on actual health care. There are no serious price controls of any form put on the insurance companies. The bill lacks a strong third-party review of claims denials. The bill also lacks a central reimbursement negotiator to make sure that insurance companies are not overpaying providers and passing on the cost to their customers.

For all these reasons, people are necessarily frustrated with subsidizing private industry for health care that is not guaranteed, not comprehensive and not even secure. If it won’t even stop medical bankruptcies, and if it won’t even provide universal coverage (20 million-plus uninsured by 2019), why should the mandate be accepted?

Single-payer is a mandated system, but the benefits of an “everybody in the pool” approach are pretty clear there. The mandate was somewhat acceptable to liberals when they had a safety valve of the public option, a not-for-profit program. Now it looks less acceptable.

Paul Starr had an interesting approach to this problem last week:

The trouble with the fines is that they communicate the wrong message about a program that is supposed to help people without insurance, not penalize them. Many people simply do not understand why the government should fine them for failing to purchase health coverage when it doesn’t require people to buy other products […]

But Congress could address this problem more directly. The law could give people a right to opt out of the mandate if they signed a form agreeing that they could not opt in for the following five years. In other words, instead of paying a fine, they would forgo a potential benefit. 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.

The idea for this opt-out comes from an analogous provision in Germany, which has a small sector of private insurance in addition to a much larger state insurance system. Only some Germans are eligible to opt for private insurance, but if they make that choice, the law prevents them from getting back at will into the public system. That deters opportunistic switches in and out of the public funds, and it helps to prevent the private insurers from cherry-picking healthy people and driving up insurance costs in the public sector.

Starr would exempt children from the provisions of the opt-out.

There needs to be a way to finesse the mandate or the calls for taking it down will just get louder. And they will have a leader, someone who during his political campaigns said that the problem with insurance isn’t that people don’t want it, it’s that they can’t afford it, and that they shouldn’t be forced into buying unaffordable coverage.

His name was Barack Obama.

David Dayen

David Dayen

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