Individual Mandate

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The individual mandate included in the Massachusetts reform has generated significant interest nationally, yet the idea of making insurance compulsory is a complex one. If the aim is to achieve near-universal coverage, state experience so far has demonstrated that a voluntary system is not sufficient. Nevertheless, an individual requirement to buy insurance raises serious political, administrative, and policy questions.

From a policy perspective, those pursuing an individual mandate must consider: a) how to make the policy affordable to those who are being required to buy it; b) the richness of the package of benefits that people are required to purchase; and c) how to enforce the requirement. In general, researchers have found that “the effectiveness of a mandate depends critically on the cost of compliance, the penalties for noncompliance, and the timely enforcement of compliance.”[i]
While the policy challenges are significant, the benefits are substantial. They include:
  • Distribution of Risk. An individual mandate requires everyone to be part of the risk pool, which prevents people from waiting until they get sick to buy coverage. It more broadly spreads risk and allows the premiums of healthy people to support the costs of those in need of medical services; this is the very purpose of insurance. It also enables the government to require insurers to sell policies to everyone, regardless of health risk.
  • Fairness. Because a mandate brings everyone into the system, it reduces the amount of uncompensated care that health care providers must offer. The cost of these uninsured patients currently is passed on to other health care purchasers. Therefore, a mandate would reduce cost shifting from the uninsured to the insured.
  • “System-ness.” A mandate reduces the current fragmentation of care, with uninsured patients currently seeking care from emergency rooms and other safety net providers. In theory, if everyone had insurance, they could maintain a continuous source of care with consistent preventive and primary care, which would improve their overall health and reduce long-term costs to the overall system.


Continue reading on: Benefit Design and Affordability

[i] Glied, S. et al. “Consider It Done? The Likely Efficacy of Mandates for Health Insurance,” Health Affairs, Vol. 26, No. 6, 2007, pp. 1612.