September 21, 2018 | ° F

O'BRIEN: States should adopt insurance mandates


Opinions Column: Policy Over Politics


connorobrien

One of the most highly-touted accomplishments of the recently-passed Tax Cuts and Jobs Act was a repeal of the Obamacare “individual mandate,” a requirement that Americans purchase a health insurance plan or pay a fine. The policy has long been a top target of GOP lawmakers in their quest to repeal the entire Affordable Care Act, and has also been among the law’s most unpopular provisions.

Lost in the celebration over the passage of the bill and the “freeing” of the American people from this mandate was the fact that this will, according to nonpartisan estimates, damage health insurance markets. The nonpartisan Congressional Budget Office estimated that on its own, a repeal of the individual mandate would lead to 13 million people becoming uninsured by 2027 and a 10-percent increase in premiums above previously-projected levels. After campaigning for years against rising insurance costs, the singular health care “accomplishment” of the Republican Party has been to enact a policy that will worsen the very problems it has so long derided.

To understand why the individual mandate came to be and why its repeal will be bad for insurance markets, we must first examine how insurers determine the prices they charge customers. It involves some very complex probability and mathematics, but at its most basic level, hinges on the health of customers. If a “risk pool” — the pool of people who purchase health insurance — is very sick and incurs high medical costs, insurers will charge all of their customers more in premiums and co-pays. Conversely, if people buying insurance are largely young and healthy, premiums will be lower.

The Affordable Care Act struck a fundamental bargain between consumers and insurers. It required insurers to cover a set of basic services, allow parents to keep their young adult children on their plans and accept people with pre-existing conditions. In exchange, the federal government introduced various mandates meant to incentivize healthy people to buy insurance. As health insurance costs have steadily risen in recent years, the prime culprit has been a shortage of healthy customers. This can turn into a vicious cycle dubbed a “death spiral.” When the customer base of an insurance company becomes sicker, insurers raise prices. But as they raise prices, the healthiest of customers are the most likely to drop their coverage, forcing insurers to raise prices further or drop out of the marketplace altogether.

Any good-faith effort to stabilize private insurance markets has to induce more young and healthy people to buy coverage, not fewer. Repealing the individual mandate does the opposite, raising costs for both the sick and the healthy.  

This refusal by lawmakers to do right by their citizens has been a reoccurring theme throughout the country. State governments run by Republicans who disagree with the Affordable Care Act have refused to implement huge portions of the law, despite the undeniable benefits to their populations. For instance, many states have refused to expand Medicaid coverage for their poorest citizens, despite the federal government agreeing to pick up almost the entire cost. No surprise, these states are also those with the most people paying the penalty for not buying insurance. The poorest people in these states were not only denied nearly-free health coverage that their governments refused to take, but were then hit with the individual mandate penalty because of this refusal. There is further evidence that Republican demonization of the Affordable Care Act has also contributed to its problems, as 54 percent of those who choose not to purchase insurance are, financially, better off buying it

As long as the Affordable Care Act remains the law of the land, state governments should do their best to make it work for their residents. If Republicans want to have another national discussion on healthcare and advocate for a change in federal policy, they are welcome to do so, but in the meantime, they should put the well-being of their citizens above politics. This means accepting the federal government’s offer to pay 90 percent of the cost of insuring the poor. This means being honest with people about the benefits of becoming insured. This means maintaining, not eliminating, incentives for healthy people to get covered. 

Unfortunately, the effort to sabotage the existing healthcare system has expanded from southern state houses to Washington, but states still have the flexibility to salvage their own systems. As of now, at least nine states are considering adopting individual mandates of their own, a list that will hopefully grow to include red states. While political tribalism reigns supreme these days, the ultimate goal of politics should always be to improve the lives of regular people. Republicans should remember this as they contemplate destroying their own country’s healthcare system for purely political reasons. 

Connor O'Brien is a School of Arts and Sciences junior majoring in economics. His column, "Policy Over Politics," runs on alternate Thursdays. 

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Connor O'Brien

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