Leaders at the American Academy of Actuaries say the individual health insurance mandate is so vital to health reform that if removed, alternatives would be needed.
"To make the provisions that restrict rating and eliminate exclusions for pre-existing conditions work, health insurance markets must attract a balanced cross-section of risks," said Cori Uccello, senior health fellow for the American Academy of Actuaries. "This means finding a way to encourage the enrollment of low-risk individuals. The individual coverage mandate may be the best tool available to achieve that."
Health reform law requires individuals to enroll in health coverage that meets basic minimum standards, beginning in 2014. A report by the nonpartisan Congressional Budget Office (CBO) forecasted in 2010 that the health insurance individual mandate will force approximately 4 million uninsured Americans to pay a sizable fine by 2016; the annual penalties will average a little more than $1,000 a piece.
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In late February President Barack Obama told state leaders he's willing to give them flexibility on the law, allowing for opt-outs beginning in 2014, instead of 2017, as long as they enact their own laws to provide health insurance that would cover as many individuals as the federal plan, and that it wouldn't cost taxpayers more money.
But actuaries claim the individual mandate under President Obama's health reform law helps make prohibition on coverage exclusions in the Affordable Care Act possible. Without the mandate, individuals will forgo obtaining coverage until they need it. This will cause premiums to increase, causing more lower-risk individuals to drop coverage and premiums to escalate more. By attracting healthy individuals, the mandate ultimately will keep premiums more affordable and stable.
Uccello said that a newly released U.S. Government Accountability Office (GAO) report provides a significant examination of possible alternatives to the mandate, should it be declared unconstitutional or repealed through legislative efforts. She said some of these alternatives should be explored as possible methods to strengthen and improve the mandate even if it is not eliminated.
"Any mechanism that encourages broader participation will help limit adverse selection," she said. "These tools should be considered with or without the coverage mandate."
Possible alternatives
The actuaries discussed several possible policy options with the GAO during the development of the report. These alternatives include:
- Late-enrollment penalties
- Increasing the time between open-enrollment periods
- Auto-enrollment features
- Limiting the ability to upgrade to more generous benefit plans during open enrollment
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