MIT’s Jonathan Gruber has published a new paper modeling the proposed alternatives to the individual health insurance mandate. While that provision will expand coverage to 32 million Americans, the two most talked about substitutes — auto enrollment and late enrollment penalty — offer less coverage at a higher cost to the newly insured:
- AUTO ENROLLMENT – 24 MILLION GAIN COVERAGE : Under this option, an individual is automatically enrolled in insurance unless she or he opts out. Gruber writes that employers could have an incentive to lower their health care spending by actively discouraging workers to opt of insurance and that younger employees — whose participation is so crucial to balance the health risk pool — would be more prone to going without coverage. That would increase premiums in the non-group market by 11 percent, he estimates. What’s more, auto enrollment would reach a small percentage of the uninsured, since “only about one-third of the uninsured are actually offered employer-sponsored insurance in which they can be auto-enrolled.”
- LATE ENROLLMENT PENALTY – 21 MILLION GAIN COVERAGE: With this alternative, an individual can opt-in to insurance under the Affordable Care Act, but then pay a penalty for enrolling at a later date. The effectiveness of this approach will depend on the size of the penalty, but that poses its own set of politically challenging decisions. As Gruber notes, “It seems highly unlikely that the federal government would be willing to tell a 30-year-old individual with cancer that they can’t get insurance coverage because they didn’t sign up when they were 27 years old — or that they have to pay some very large amount of money in the same situation.” Moreover, if younger people stay out of the risk pool, “they will raise prices for those left behind, causing even further exit — and potentially unraveling the entire market.” Gruber estimates premiums in the exchange “would rise about 20 percent relative to the mandate case as the healthy exit the exchanges.”
Politically vulnerable senators like Sens. Claire McCaskill (D-MO), Bill Nelson (D-FL) and Ben Nelson (D-NE) are publicly considering offering more popular alternatives to the mandate, but in doing so they should be mindful of the fact that any new solution should not go back on the progress made in current law. Democrats also shouldn’t be buying into the GOP’s premise that there is something inherently wrong or terribly coercive about asking able individuals to take personal responsibility for their health care expenses. Instead of playing defense, they should be reminding the public of the long history of Republican support for the idea.