“It’s probably the the biggest area of uncertainty around all estimates about the law,” said Larry Levitt, a health insurance expert with the Kaiser Family Foundation.
The Obama administration argues that requiring individuals to get coverage is essential to the success of two of the most important — and popular — regulations that the law will impose starting in 2014: a rule that insurers can’t discriminate against people with preexisting conditions, and limitations on how much they can vary rates among customers.
Many of the law’s supporters insist that without the mandate, these rules would impose an unsustainable burden on insurers, ultimately causing the market to implode.
In fact, the government contends that if the mandate falls, these provisions should be struck as well. With no requirement that they buy insurance ahead of time, this argument goes, people could wait until they were sick to purchase a plan, skewing the insurance pool toward the ill, who are more costly to insure.
“That’s not a hypothetical,” said John McDonough, a professor at the Harvard University School of Public Health.
He points to New Jersey, New York, Kentucky and Washington, which attempted to introduce similar insurance regulations in the 1990s. None included a requirement that residents obtain coverage. The resulting disruption to the states’ insurance markets was cataclysmic: Rates skyrocketed, and many insurers simply stopped offering plans.
But Levitt argues there is an important reason that the impact at the national level might not be so dramatic: In contrast to the state laws, the health-care statute will offer millions of Americans generous subsidies to help buy private plans.
This means that many more people — including healthy people — who are not currently buying insurance because of its cost will be prompted to enter the market voluntarily.
“It becomes a much better deal for you. So you are more likely to enroll even without a mandate,” Levitt said.
Paul Starr, a health policy expert at Princeton University, agrees and points to the high enrollment rates for Medicare’s Part B and Part D plans, which cover doctors and prescription drugs; in contrast to Medicare’s hospitalization plan, they are optional.
“Seniors don’t have to sign up, but they do because it’s a good deal,” Starr said.
He also notes that complex “risk adjustment” mechanisms would protect private insurers that end up with a disproportionately sick pool of customers.
The potential interplay of all these factors may explain the tremendous variation among statistical estimates concerning the mandate.
The Congressional Budget Office has calculated that without the mandate, insurance premiums on the individual market — the sector most vulnerable to fluctuations — would be 15 to 20 percent higher than with it. One respected researcher puts the difference as low as 10 percent, another at 27 percent.
Similarly, while the CBO estimates that the number of Americans remaining uninsured would jump by about 16 million without the mandate — about 40 percent more than if the health-care law were implemented intact — other analyses suggest that the number could be nearly half that.
Starr and others also contend that estimates of the mandate’s effect may be overblown.
For all the controversy it has ignited, the mandate is actually fairly weak. Penalties will ultimately be set at $695 or 2.5 percent of income — whichever is higher — and there is a hardship exemption for people who can’t afford insurance even with a subsidy. While the government can collect the penalty by counting it against a person’s federal tax rebate, it will be barred from using other collection tools such as placing liens or threatening incarceration.
There is a robust debate within health policy circles about alternative approaches that could achieve the same aims as the mandate through less controversial means. For instance, Congress could automatically sign up uninsured people for the least expensive private plan available to them, allowing them to opt out but counting on human nature to ensure that most wouldn’t bother doing so. Or, give people the choice to either buy insurance or give up the consumer protections in the law for five years. States could also step in and enact their own mandates.