Health insurance: a mandate versus continuous coverage

Each of the proposed Republican healthcare replacements is inferior to Obama’s Affordable Care Act (ACA), all things considered. But Orrin Hatch’s Patient CARE Act nevertheless has the following positive feature which is an improvement on the ACA: it finds a good way to eliminate the unpopular Obamacare mandate to purchase insurance or pay a fine, while at the same time preserving Obamacare’s popular ban on denial of (or charging of a higher premium for) health insurance if one has a pre-existing condition. CARE replaces the mandate with protection for a pre-existing condition that is conditional on one’s having continuously been covered by health insurance as an adult. Significantly, it also provides default enrolment (which one can opt out of) into a basic insurance policy that meets the continuous coverage requirement. Moreover, the premium of the default policy is set at no greater than a tax credit for those who are poor which CARE provides. Assuming that the basic insurance policy meets some minimal standards of adequacy, CARE is superior to ACA in two respects:

1. Default into a basic insurance policy is better than paying the fine for flouting the mandate because one can’t afford insurance that meets the somewhat demanding minimal requirements of ACA. At least one has automatic continuous coverage under CARE.

2. As noted above, under CARE, the ban on discrimination against those with a pre-existing condition is conditional on their having maintained continuous coverage in the past. This makes explicit the implicit rationale for the Obamacare mandate, in a manner that silences the objection that the latter is an infringement on freedom. Everyone is free to opt out of continuous coverage. But one then loses the sort of protection for having a pre-existing condition that is possible only if the risk pool of people paying insurance premiums includes a sufficient number of the lucky (i.e., those who are healthy) as well as the unlucky (those who are ill). One can’t effectively pool risks only or mainly among the unlucky. And if one refuses to contribute while one is lucky, then one can’t coherently complain against losing affordable insurance when one is unlucky.

PS: I see from this linked Vox post that a problem with the Obamacare mandate combined with pre-existing condition protection is that it creates an incentive simply to pay the fine if it isn’t set punitively high, because people can just wait till they become sick and then enrol without having to pay a higher premium:

But the other thing they did was make the fee for not abiding by the mandate pathetically small. If you decline to buy health insurance, you must pay a fine of $695 per adult and $347.50 per child up to a household maximum of $2,085. The downside is, obviously, you don’t get health insurance. But insurance plans come with deductibles anyway, and if you do get sick, thanks to the [pre-existing condition protection] you can now go get insurance at the next open enrollment period. Consequently, remaining uninsured is a reasonably good financial option for many younger and healthier Americans.

A lesson I draw is that a requirement of continuous coverage would give healthy people more of an incentive to take out insurance than any mandate that isn’t so punitive as to be highly politically problematic in the US.

P.P.S: Here’s a link to a useful piece on continuous coverage by three analysts from the Rand Corporation.

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Professor, Dept. of Philosophy, Logic & Scientific Method, LSE

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