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Like Car Insurance, Health Coverage May Be Mandated
A Proposed Requirement That All Americans Have Policies Has Broad Support Among Reformers

By Ceci Connolly
Washington Post Staff Writer
Wednesday, July 22, 2009

President Obama's dream of dramatically remaking the nation's health-care system is still a long way from reality. But if lawmakers can reach an accord, one thing is virtually certain: For the first time ever, every American would be required to carry health insurance.

The requirement, known as an individual mandate, is among the most far-reaching changes envisioned this year by those pushing for health-care reform. And it is one of the few common threads running through all three bills being considered in Congress, greatly increasing the likelihood it will survive the legislative process. Obama continued Tuesday to push lawmakers struggling with the large costs and scope of health legislation to move forward, pronouncing reform to be "closer than ever."

Just as drivers must purchase auto insurance, the medical system of the future would put responsibility for health coverage first and foremost on every adult.

For the vast majority of Americans who have health insurance, the change would mean little more than submitting a form with their tax returns proving that the plan they carry meets certain minimum standards. Many of the nation's 47 million uninsured people, however, would be required to purchase a health policy or face financial penalties, though waivers or discounts would be provided for lower-income Americans.

The concept is modeled after a requirement instituted in Massachusetts three years ago as part of that state's broad health-care overhaul. And like the Massachusetts law, the individual mandate proposed by congressional Democrats would be paired with a much more controversial new requirement that nearly every employer contribute to the total cost of care.

"Without an individual mandate, you're never going to get to universal coverage," said Bradley Herring, a health economist at Johns Hopkins University.

Bringing everyone into the insurance pool -- particularly young, healthy customers -- spreads the risk and lowers overall costs. "That will make it more affordable for everyone," Herring said.

Some proponents of a European-style, nationalized single-payer approach say an individual mandate places an unfair financial burden on lower-income consumers. Some conservative analysts argue that such a requirement forces individuals into an overpriced, underperforming health system.

Yet in a nation that prides itself on having freedom of choice, it is striking that such a wide and diverse coalition has formed around the individual mandate. Labor unions, economists, the medical industry, big business, some prominent Republicans and Obama all support the requirement, which has its roots in the conservative philosophy of self-reliance.

In the debate over Massachusetts's measure, then-Gov. Mitt Romney, a Republican with presidential aspirations, touted the approach as a "personal responsibility system."

Hospitals, insurers and drug manufacturers -- salivating at the prospect of up to 50 million newly insured customers -- have lobbied ferociously for the federal provision.

Obama, after sparring last year with his Democratic presidential primary opponents over the concept, is a convert, as long as there are "hardship exemptions" for those least able to pay.

"I was opposed to this idea because my general attitude was, the reason people don't have health insurance is not because they don't want it, but because they can't afford it. And if you make it affordable, then they will come," he said in a recent interview with CBS. "I've been persuaded that there are enough young, uninsured people who are cheap to cover, but are opting out. To make sure that those folks are part of the overall pool is the best way to make sure that all of our premiums go down."

Nearly one-third of the uninsured in the United States in 2007 were between the ages of 19 and 29, and 42 percent were between 30 and 54, according to the Kaiser Family Foundation. A fair number of young, healthy workers choose not to purchase insurance, believing they do not need it.

Advocates of universal coverage want to lure that group into the insurance pool because they tend to use fewer medical services and help keep premiums down. If only the sick buy coverage, premiums will be high. And visits to emergency rooms by uninsured patients increase premiums for the insured -- by $1,000 per person per year, according to some estimates.

The Massachusetts experience with an individual mandate has provided a model, as well as some unexpected results.

"Massachusetts changed everything in the policy community and the political arena," said Karen Ignagni, president of the industry group America's Health Insurance Plans.

The penalty for Massachusetts residents who do not carry health insurance was $220 in late 2007 and rose to about $1,020 this year. Still, relatively few residents have balked at the idea -- and an additional 432,000 people have signed up for health coverage.

Today, less than 3 percent of Bay State residents lack health insurance, compared with about 16 percent nationwide.

Out of the 3.9 million people who filed taxes in Massachusetts in 2008, 86,000 paid the penalty, and 71,000 were exempted because they did not meet the minimum income levels.

One of the great surprises is how many more people -- an additional 148,000 -- have enrolled in plans offered through the workplace, most likely nudged by the individual mandate.

"It's worked out better than I would have guessed," said MIT economist Jonathan Gruber, who serves on the board of the Massachusetts program. "We didn't anticipate the increase in employer-sponsored insurance."

Last year, the average price nationwide for health insurance purchased through an employer was $12,680 for a family plan and $4,700 for an individual, according to the Kaiser Family Foundation.

In Congress, lawmakers are weighing slightly different proposals. A bill being debated in the House this week would charge individuals a penalty of 2.5 percent of income above $9,000, up to the price of the average premium sold nationwide. The fines would begin in 2013.

A bill passed by the Senate Health, Education, Labor and Pensions Committee last week would set the penalty at $750 per person. Individuals earning less than 150 percent of the poverty level, or about $16,245, would be exempt.

Negotiations are continuing in the Senate Finance Committee, where Chairman Max Baucus (D-Mont.) has argued for months that an individual mandate is central to achieving Obama's goal of near-universal coverage and cost controls.

Stuart Butler, a vice president at the conservative Heritage Foundation, agrees that bringing everyone -- especially young, healthy patients -- into the risk pool would be advantageous.

But he advocates beginning with a voluntary "opt out" approach similar to automatic enrollment programs for retirement accounts. If policies are reasonably priced, he expects that few will turn down the coverage.

The challenge, said Butler and experts in Massachusetts, is designing a basic benefits package that is affordable. Writing a law that requires individuals to purchase something they cannot afford is "inhumane," Herring said.

When Massachusetts approved its individual mandate, proponents of the new law braced for a modern-day Tea Party. It never materialized.

"I don't see people revolting over having to have a driver's license or insurance to drive a car," Gruber said. "And we haven't seen it with the mandate."

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