Five Ways To Fix The Unpopular Individual Mandate
If Democrats are now working on a reconciliation sidecar strategy, they should use this opportunity to make policy changes to make the health care bill more popular, or, at least, less politically toxic. One thing they could do is remove the most unpopular provisions, like the oft-denigrated excise tax on employer-provided health insurance, or the individual mandate, which is extremely unpopular. It does not matter that both ideas were once supported by Republicans–they don’t support them now, and will hammer Democrats mercilessly on them.
If you don’t think the current design of the individual mandate, with the IRS collecting the fine for not buying private insurance, is a big, easy target, just look at this picture on Rep. John Shadegg’s (R-AZ) website. There are some easy fixes to help Democrats deal with the individual mandate.
1. Drop It Completely and Revisit Later
The easiest fix is to just drop the individual mandate completely. Removing it from the bill removes the issue from the debate and the 2010 election. Even if you believe an individual mandate is necessary to make the exchanges work properly, they don’t start until 2014. Also, the individual mandate does not really get teeth until 2016. After passing the bill, Democrats would have basically six years to pass a separate bill with an individual mandate. Presumably, a year or two after most of the reforms are in place, it would be easier to sell people on the individual mandate.
2. Add a Public Alternative
Polling has shown that the option of a public alternative to the very unpopular private insurance companies makes the individual mandate much more palatable. The public alternative could be a public option or a Medicare buy-in. Both are popular and make the individual mandate less unpopular. While there has not been polling on this, it is even possible that a quasi-public/private mutual insurance company, overseen but not owned by the government, similar to Chuck Schumer’s idea of a national co-op, with a board appointed by the president, might serve the same function as a public alternative, removing some of the opposition to the individual mandate.
3. Back Premiums Penalty
If Democrats think it is very important for policy or CBO reasons to include in this bill a penalty for people who might wait to buy insurance until after they get sick, there are politically smarter options that don’t involve the fines being levied by the IRS. One option is a back premium penalty. If someone currently does not have insurance, and goes to sign up for a policy, the insurer would be allowed to charge them a penalty equal to some time period of back premiums. If the person had been without insurance for the previous two months, the insurer could charge them a penalty equal to two months worth of premiums when they sign up. There would be a maximum penalty of, say, five months of back premiums.
This could be designed to create the same type of financial incentive to sign up for insurance before getting sick, and result in the same level of people buying insurance as the individual mandate, without an “individual mandate” enforced by the IRS. A slight variation: instead of allowing the insurer to charge a back penalty, have the exchange itself charge the back premium penalty.
4. Automatic Enrollment in an Extreme Catastrophic Plan
If the goal of the individual mandate is to maximize the number of people with some form of insurance coverage, one option is automatic enrollment in an extreme catastrophic plan. Most people on the exchange will get some subsidies to help them afford insurance. The government could create a very cheap, extremely bare-bones, pure catastrophic plan, and automatically enroll anyone who does not buy insurance, but would, as a result of income level, receive affordability subsidies sufficient to pay the premiums for the public extreme catastrophic plan. Any leftover tax credits would be automatically put in a health savings account for the individual. The employer mandate could also be set to the level of average premiums for the extreme catastrophic plan to serve a similar function.
This catastrophic plan would take part in the exchange’s risk adjustment mechanisms to prevent adverse selection. Insurers would be allowed to deny people if they tried to switch from no coverage or the catastrophic plan to regular insurance anytime besides the yearly open enrollment period. This would have a similar effect of encouraging people to buy better coverage before they get sick, but still make sure people had some minimum coverage.
5. Extremely Strong Employer Mandate
Hawaii has achieved near-universal coverage with a very strong employer mandate. The Senate bill already covers the very poor and unemployed people making less than 133% of the federal poverty line automatically with Medicaid. The Medicaid expansion combined with a very strong employer mandate, requiring every business to enroll all their employees in an insurance plan, could achieve a level of coverage equal to, or even higher than, the individual mandate.
All of the Above
Democrats could go with any of the above plans for mitigating the negative effects of the individual mandate, or a combination of many of them. I would recommend using them all. Adding a public option is a popular standalone provision. The automatic enrollment in catastrophic insurance could work well in combination with the back premium penalty. It is possible that those two provisions together would do an even better job than the individual mandate at getting people to sign up for coverage. The important thing is for Democrats to not use the IRS to force people to buy private insurance. That is an act of political suicide. Most importantly, it is completely unnecessary on a policy level. Near identical goals can be achieved with much more popular policies.