Health insurance require that all individuals buy health insurance. Most voters views on an individual mandate depend on how you frame the question. If you ask voters: “Should everyone buy health insurance?” Most people will say yes.
If you ask “Should the government compel all individuals to buy health insurance regardless of the cost?” Then the response is much less positive.
Michael Cannon of the Cato Institute is against individual health insurance mandates. Whether you are for or against them, Mr. Cannon make some valid points concerning the drawbacks of health insurance mandates in his “Perspectives on an Individual Mandate” article. Below are some of the highlights.
- An individual mandate ≠ universal coverage: Even if there is an individual mandate, many individuals will still forego insurance coverage. Currently, Massachusetts has an insurance mandate, but there are still uninsured individuals.
- Reduced Choice. Let us say you are a typical middle class worker. You 401(k) just took a nose-dive, and your job may be at risk as your company’s sales drop in the weakened economy. Do you use your limited savings for rent, utilities, school books for your kids or health insurance? While this is a tough choice, it is one that families would no longer be able to make on their own. A mandate would compel them to buy insurance.
In an unregulated society, an insurance mandate does not make much sense. If we want to give health insurance to the poor, we should just give them more money through a more progressive tax system and allow them to choose for themselves what type of insurance to buy.
However, in the society we actually live in, the uninsured can use the emergency room as a source of free medical care. This imposes a significant cost on the American medical system. Cannon does note that “One-third of uncompensated care in the United States goes to patients who have insurance but don’t pay their share of the bill.” It could also be the case that individuals who have insurance do not want to wait 2 weeks to see their doctor and will still use the emergency department even if they have health insurance. Nevertheless, it is likely that emergency department utilization will decrease with an insurance mandate. Do the cost-savings from fewer emergency room visits outweigh the cost of restricting individual choice? That is the key issue with individual mandates.
Cannon also makes some other claims as to the drawbacks of an individuals mandates. However, many of these issue do not technically correspond to an insurance mandate; rather they are created when the government legislates a minimum insurance benefits package. For instance,
- Higher cost. A mandate where insurers must provide a minimum benefit package will necessarily increase the cost of care, since the lowest cost, least generous insurance packages will be outlawed. Over time, interest groups will lobby legislators to include their medical subspecialty in the minimum benefit package. As the minimum benefit package grows over time, the cost of health insurance will grow with it.
This is a major issue with a minimum insurance benefit package. However, Canon does not mention some of the benefits. First, with a minimum benefits package, it will be easier to decipher what health insurance benefits are included in your health insurance plan. This should reduce administrative costs from patients and insurers arguing over what is covered. Also, if a minimum benefits package is in place, it would be much easier for consumers to shop for the lowest cost, highest quality health plan.
Then there is the issue of the employer mandate. Cannon accurately demonstrates that the majority of the cost of an employer mandate will fall on small businesses.
“Not only do employer mandates take away the freedom to run your small business how you see fit, but they also put small business at a competitive disadvantage. The cost of administering health insurance is much higher for small business than it is for big business. In a world of employer mandates, big business would have a significant advantage.”
Most people would agree that businesses need to get out of the business of insuring individuals. The problem is that employers provide a decent pooling mechanism. In your workplace, individuals come together for reasons that are (generally) unrelated to health. Thus, employers have been able to offer more generous, less expensive health insurance than individuals could buy in the non-group market due to the benefits of this risk pooling.
So what is the right answer? It is important to realize that most health care proposals have significant pros and cons; weighing the costs and benefits of each proposal is imperative in order to create the best health care system possible.