Editorial: Uncompelling Mandate
Dismal as things may be now, we have not completely given up hope that adult members of Congress eventually will gain the upper hand and do more than refight old battles when the federal government reopens. When that day arrives and attention is turned to improving the Affordable Care Act and meeting the essential goal of providing affordable health coverage to all, one of the first matters that should be reviewed is the adequacy of subsidies.
With the online insurance markets known as health exchanges not even a week old, it would be ridiculously premature to render any judgment about how well any component of so-called Obamacare is working. But the final install ment in the Sunday Valley News series on the implementation of the Affordable Care Act raised serious questions about how well the individual mandate — the federal requirement that all people carry health insurance — will work in practice.
The reasons for requiring near-universal participation are easy to grasp. From an actuarial perspective, insuring a wide range of people reduces risk by spreading it. That is particularly true for health insurance: Younger people tend to be healthier, and their participation lowers overall costs and helps reduce premiums, which might otherwise become unaffordable if the pool of policyholders skews too much toward older people. While forced participation may seem unfair to healthy people who might otherwise do without insurance, the perceived injustice is counterbalanced by the certainty that those young adults will age and eventually benefit from the same risk pool. Moreover, allowing them to try to get by without insurance poses a collective problem: When an accident or unexpected illness burdens a young person with a huge bill and no way to pay for it, the person still will seek and receive treatment, with the cost simply getting shifted to others. Overall spending on health care increases when uninsured people seek treatment because they tend to resort to the most expensive venues, such as hospital emergency rooms. Bottom line: The mandate makes sense and is a critical element of the new system.
The Affordable Care Act attempts to lessen the burden of the individual mandate both by spreading the Medicaid umbrella wider through more generous eligibility rules (a benefit available only in those states such as Vermont that have accepted the federal government’s offer to pay for expanded coverage) and by offering subsidies on a sliding scale. With all health exchanges offering a range of plans — from cut-rate catastrophic plans to high-premium/low-deductible ones — individuals who don’t receive insurance through their employers have a range of choices about how much they wish to spend on insurance. Exactly how much of the monthly premium they have to pay — ranging from none of it to the whole thing — depends on individual or family income.
Not surprisingly, most people want insurance, at least judging by the comments of young adults in the Upper Valley interviewed by staff writer Sarah Brubeck. Who wouldn’t want to be liberated from the anxiety of knowing that a brush with bad luck could impoverish them and their families?
But many of those interviewed were seriously considering doing without insurance and instead paying the penalty for failing to comply with the mandate. That’s because the penalty — initially $95 per adult and $47.50 per child, or 1 percent of family income — is often less than the cost of insurance, and many considering doing without insurance feel too cash-strapped to do anything but opt for the less-expensive choice.
Considering that it takes but one unexpected medical problem to render the decision to forgo insurance a poor one, one could easily fault the wisdom of those who decide to pay the penalty. And while it’s entirely possible that the choice to do without insurance might be the result of a lack of good information or a reflection of a person’s unwillingness to spend a reasonable portion of her income on something as essential as health care, it’s likely that many simply feel they have no choice. Among the 200,000 people in Vermont and New Hampshire who lack health insurance, a large percentage are between 18 and 34 and earn less than $40,000 a year. For someone living paycheck to paycheck, making wise long-term financial decisions is possible only in the abstract.
And that raises the question of whether the subsidies are generous enough. Perhaps these young adults will be induced to acquire insurance when the penalty is ratcheted up — but that raises concern about whether their already precarious financial situation will become more so.
We’re not suggesting that supporters of Obamacare refuse to raise the debt ceiling or otherwise hold the government hostage until the matter is addressed, but the adequacy of health insurance subsidies certainly bears examination when Congress resumes playing a constructive role in the life of the nation.