Uwe Reinhardt has a new food-for-thought blog post in the New York Times this morning, suggesting an alternative to the contentious (and unpopular) individual health insurance mandate. Using the German health care system as a model, Reinhardt argues that rather than encouraging younger and healthier enrollees (who would otherwise go without coverage until they become sick) to purchase insurance by leveling a penalty up front, the government can offer everyone the following choice:
1. joining the community-rated health insurance offered through the insurance exchanges called for in the Affordable Care Act;
2. remaining in a private insurance system that is free to charge in any year “actuarially fair” premiums, that is, premiums that reflect the applicant’s projected health status and spending for that year and is free to refuse issuing a policy altogether;
3. simply self-insuring, by remaining uninsured? [...]
For want of better terms, we might call the exchange system the “social insurance track” (because it leans heavily toward social insurance) and the second and third options the “rugged individualist tracks,” because they cater to Americans with individualist preferences. For people choosing the rugged individualist tracks, Professor Starr proposes to shut the door to the social insurance track for only five years.
I believe his stricture is too weak and propose instead to follow the German example by shutting the door permanently to social insurance to any individual who chose one of the two rugged individualist tracks, unless such individuals were truly pauperized. A return then would have to be allowed, because, for better or for worse, our civic sentiments preclude letting anyone – even a myopic rugged individualist — die for want of critically needed health care.
So an individual can opt-out of insurance and pay a penalty for enrolling at a later date. The policy may be worth considering, but it’s not without its problems: if younger people stay out of the risk pool, costs will increase for those who purchase coverage and will rise even more if that population only buys coverage once it falls ill. And of course, how can we properly do prevention if a good size of the population will only seek health care when they become so sick that paying the penalty is worth it? The Germans seem to make it work, but they have a long history — and culture — of universal insurance. We don’t.