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Book Excerpt: How The Individual Health Insurance Mandate Will Work

A simple rule lies at the heart of the Patient Protection and Affordable Care Act: Starting in 2014, almost every American will need to carry health insurance or pay a fine. That rule is known as the individual mandate.

What It Means for You

The mandate requires all citizens and legal immigrants to have “qualifying” health coverage. People eligible for employer coverage can satisfy the requirement by enrolling in their employer’s plan. Employer plans will need to meet certain standards-covering preventive care and disallowing lifetime limits-but will not need to have all of the minimum benefits that will be required of plans sold to individuals and small businesses.

People without insurance through their employer will be able to buy plans on new state-based insurance marketplaces called exchanges, where most will qualify for subsidies. The lowest-price conventional insurance plan for sale on the exchanges must meet the minimum standard for qualifying health coverage: It must cover 60 percent of costs, and out-of-pocket expenses must be limited to $5,950 for individuals and $11,900 for families.

Why A Mandate Matters

The thinking behind the individual mandate is that, in the absence of a government-run “single payer” insurance program like Canada’s, the only way to achieve universal health insurance is to require people to obtain coverage on their own, with government assistance for those who can’t afford it.

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 Book Excerpt: How The Individual Health Insurance Mandate Will Work

There is an important exception: People younger than 30 will be able to satisfy the mandate by buying low-cost, high-deductible plans. The plans will require about $6,000 in out-of-pocket spending before most benefits kick in, though they will cover certain screening tests and immunizations before the deductible, and may cover some primary-care visits as well. One advocacy group estimates that premiums for these plans will be $138 per month, compared with $190 per month for the least expensive conventional plan on the exchange. The thinking behind this option is that it will appeal to so-called young invincibles who believe they can do without broader coverage. Insurers argue, though, that if too many young people sign on to these plans, the risk pool in the conventional plans will be weighted too heavily toward older people.

What will happen if I choose not to obtain coverage?

You will be assessed a tax penalty that is the greater of a flat sum or a percent of income: $95 or 1 percent of income in 2014, $325 or 2 percent of income in 2015, and then the penalty’s full level in 2016, $695 or 2.5 percent of income. After 2016, the flat dollar amount increases by a cost-of-living adjustment.

For children, the per-person sum is half the adult one. The maximum family penalty is the greater of 2.5 percent of income or three times the per-adult penalty ($2,085 in 2016). All penalties are capped at the cost of the lowest-priced conventional plan on the exchanges.

What if I can’t afford coverage?

Hardship exemptions will be granted for those who are truly unable to afford insurance even with the subsidies that will be available-those for whom the least expensive plan option in their area exceeds 8 percent of their income. (See Chapter 1 for more on the subsidies.) People who qualify for the hardship exemption also will be allowed to buy the high-deductible plan through the exchanges, even if they are older than 30.

Are there any exemptions?

People who lack coverage for a short period-up to three months-will not have to pay a penalty.

Exemptions also will be granted to people who choose not to seek medical care because of their religion, to Native Americans who are covered by the Indian Health Program, to veterans who are covered through the Department of Veterans Affairs, and to people in jail or prison.

Illegal immigrants will not be subject to the mandate, nor will they be allowed to buy insurance through the exchanges. They will instead have to purchase coverage from companies that are still selling plans outside the exchanges, where government regulations and consumer protections will be lighter. They will be able to seek
care, as they do now, at federally funded community health clinics and in hospital emergency rooms.

Book Excerpt: How The Individual Health Insurance Mandate Will Work

Hospitals that treat large numbers of poor patients will receive less federal support than they do now, on the rationale that more of their patients will be covered. But they will still get some aid in recognition of the fact that many immigrants will remain uncovered, and that some of their other patients will, at least at the out-
set, not obtain coverage. Whether that aid proves adequate remains to be seen-particularly in states such as California and Texas, where as many as 25 percent of residents are uninsured and there are high numbers of illegal immigrants.

What will happen if I do not obtain coverage or pay the fine?

Some opponents of the legislation conjured images of the government rounding up people and sending them to jail. But the law expressly states that failure to pay the penalties will not result in criminal prosecution or even in property liens. Also, the government probably will enforce the mandate loosely because of the political sensitivity of the health-care law. In fact, those who wrote the legislation set the penalty for not carrying health coverage
lower than what many health-care experts believe is necessary for the mandate to work, precisely because they were worried about the political fallout from making the requirement seem too onerous.

Will It Work?

The relatively small penalty and the prospect of loose enforcement create a big potential problem: If many younger and healthier people decide to pay the fine instead of buying coverage, rates will increase for those who do buy it.

Some health-care experts argue that the government will need to adopt a different approach. One option: Encourage everyone to obtain insurance but present those who do not with a choice. They could pay a much larger penalty than the one in the new law, while still retaining the ability to seek subsidized coverage if they do become
sick; or they could sign a form on their tax return acknowledging that they were not insured and would therefore be ineligible for a fixed period-say, five years-for federal subsidies or for the protections in the law that allow people to buy coverage even if they have preexisting conditions. This would leave them facing a market with all the uncertainties of the current one. But creating an opt-out of this sort would address critics’ concerns about the propriety or political risk of requiring people to have insurance.

The Massachusetts experiment

Some of the law’s supporters take heart in Massachusetts’s experience with the individual mandate. Since that state adopted universal coverage in 2006, it has managed to get all but about 3 percent of its population insured. But Massachusetts started with a much higher percentage of the population covered than the rest of the country-9 percent of its residents were uninsured in 2006, compared with 15 percent in the entire United States now.

How did Massachusetts get to 97 percent coverage? The state government-working with hospitals, insurers and community groups-began an aggressive campaign to inform the public about the mandate and encourage compliance. The goal was to get people to think of having health insurance as a social norm, not unlike
wearing a seatbelt-something they would do because it was right and expected, regardless of the penalty for noncompliance.

The state made it easy to sign up: People who qualified for subsidized coverage received help filling out forms at hospitals and clinics, while others could use a Web site to determine whether they qualified for subsidies or could telephone the Health Connector, the state’s version of the exchanges in the new federal law.

Residents were deluged with publicity. The Boston Red Sox promoted the mandate, pharmacy loudspeakers intoned it, grocery store receipts carried reminders and churches coaxed congregants. The Health Connector held 200 meetings with employers and two dozen outreach sessions; community groups received funding to
help people sign up; and residents received red-lettered postcards in the mail.

It worked. A Health Connector board member said that a typical comment from young adults coming to apply for coverage was: “My mom said I had to sign up for health insurance or I would get into trouble.”

But Jon Kingsdale, the program’s executive director, says he worries about the prospects for duplicating the state’s success nationally.

He thinks the penalty in the federal law is insufficient-in Massachusetts, the fine started at $219 and rose above $1,000 in 2010.

In addition, Massachusetts residents are accustomed to an activist state government, and the mandate was part of a law that had bipartisan support. It was signed by a Republican governor, Mitt Romney, who wrote in 2006: “Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on the government is not libertarian.”

Political challenges

The national mandate will be implemented in a far more toxic political environment, making it more difficult for the government to create a nationwide expectation of compliance. The administration plans to start a promotional campaign as 2014 nears, much as George W. Bush’s administration promoted the new Medicare drug benefit.

Within weeks of the signing several legal challenges were already in the works from state attorneys general arguing that it is unconstitutional to require people to buy a given product, in this case health insurance. Most constitutional law experts, including those with conservative leanings, say that the mandate is constitutional, falling under the powers granted the federal government to impose taxes and to regulate interstate commerce.

Whatever the lawsuits’ outcome, the momentum behind them suggests that come 2014, regardless of whether Democrats hold on to the White House, there will be deep pockets of resistance to the mandate. This could seriously complicate the implementation of a health-care program that relies so much on the premise that everyone obtain coverage.

From the book Landmark: The Inside Story of America’s New Health Care Law and What It Means for Us All by the staff of The Washington Post. Excerpted by arrangement with


, a member of the Perseus Books Group. Copyright © 2010.


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