Health reform with a mandate: the Massachusetts story
The Supreme Court could decide as soon as Thursday whether the federal government can require Americans to purchase private insurance coverage, a policy already in place in Massachusetts.
Over the course of five years, insurance coverage in the state has increased, premiums have decreased and virtually everyone has abided by the new requirement. While public opinion is favorable - two-thirds of Massachusetts residents support the law - the state does face challenges ensuring that the law is affordable.
“What we’ve seen in Massachusetts, and what the modeling has supported, is that we wouldn’t really be where we are today without an insurance mandate,” said Sarah Iselin, president of the Blue Cross Blue Shield Foundation of Massachusetts. “You can get closer to where we are, but you wouldn’t be all the way there.”
Not all of that, however, has to do with the state’s health care law: a report this year from the Massachusetts Taxpayers Foundation found that, in 2011, the law was responsible for an increase of just over 1 percent in state spending. The Massachusetts Legislature is now weighing legislation that would reduce the growth of health care costs.
The state has long had one of the lowest rates of uninsured in the country. But in the mid-2000s, it was facing a big problem: Health coverage was becoming prohibitively expensive. The cost of an individual market plan spiked by 62 percent over two years, from $5,257 in 2005 to $8,537 in 2007. Premiums that year in New Jersey, the next most expensive state, were still more than $2,000 cheaper.
Massachusetts has long tended to have higher health care costs than other areas of the country. But a series of changes passed in 1996 also contributed to the rising price of insurance premiums. The measures required insurance companies to accept all customers, regardless of any pre-existing conditions and limited how much sicker customers could be charged.
The result: plans got more expensive and Massachusetts’ uninsurance rate, which hovered around 7 percent in the early 1990s, crept up into double-digits.
“The market really was limping along, not functioning at a level that anybody from a policy perspective would want it to,” Iselin said.
In 2003, Iselin’s group convened local policymakers, business leaders and consumer advocates to discuss how the state could move to universal coverage. The plan they developed, “Roadmap to Coverage,” strongly resembled the universal coverage package that then-Gov. Mitt Romney signed in 2006.
That package left Massachusetts’ “guaranteed issue” provisions in place, meaning health plans would still need to accept all applicants. But it added two significant, elements: A requirement that everyone purchase health insurance and subsidies to guarantee that coverage was affordable.
“Massachusetts was a three-legged stool,” said MIT health care economist Jonathan Gruber, who worked on both the Massachusetts and federal laws. “First, you had the insurance reforms, already in place. It was clear to make that work, you needed a mandate. Then, if you’re going to tell people they have to buy insurance, you have to make it affordable.”
The subsidies became available to all Massachusetts residents whose income was less than 150 percent of the federal poverty line in July 2007.
When the subsidies became available, enrollment increased. Those who signed up before the mandate were 50 percent more likely to be chronically ill and had health care costs 45 percent higher than those who signed up after the mandate began.
“We learned that the subsidies really were not enough to get the healthy people to sign up,” said Harvard University’s Amitabh Chandra, who has studied the Massachusetts law. “You really needed the mandate.”
The biggest jump in enrollment, however, was after the mandate took effect and more healthy individuals enrolled in coverage. Between 2006 and 2007, Massachusetts’ uninsured rate dropped from 9.6 percent to 4.9 percent. It stood at 5.6 percent in 2010, the most recent year for which U.S. Census data is available.
The cost of insurance, also due to a number of other insurance reforms, dropped dramatically, from $8,567 in 2006 to $5,143 the year after the Massachusetts law took effect.
The fine for not carrying insurance wasn’t especially big: for 2007, $219 in 2007. Paying that penalty would have been significantly less expensive than buying a plan. Still, most Bay State residents have opted for the latter, more expensive option.
“If people in Massachusetts were economists, they would have said I’m not going to comply,” Chandra said. “But they aren’t economists, and they hate the word penalty. I think Americans generally tend to be law-abiding people, and they hate the idea of not complying with a requirement.”
Massachusetts’ penalty for not carrying coverage has increased over the years; in 2012, it could be as high as $1,206 for an individual. Compliance has tended to be very high. In 2010, the most recent year for which data is available, fewer than 1 percent percent of 6.6 million residents - approximately 44,000 people - were assessed a penalty for not carrying coverage.
While Massachusetts’ law has expanded coverage, it has not helped the state control health care costs. The governor’s office projects health spending will eat up 41 percent of the state’s budget by next year (in 2006, that number stood at 29 percent).
Whether an individual mandate would be implemented as successfully nationally remains to be seen. Unlike the federal health overhaul, the Massachusetts law tended to have widespread support among business and community leaders. The individual mandate was the law’s least-liked provision, but it still regularly received majority support from Bay State residents in public opinion polls.
“Technically, can a mandate work? In Massachusetts, we learned, yes it can,” said Harvard University’s Robert Blendon, who has studied public opinion of the Massachusetts and federal laws. “But the answer about how it would play, in completely different political cultures, that could be completely different.”