Early this evening, by a 187-230 vote, the Congress rejected a Republican effort to strip the individual health insurance mandate from the new health care law. Twenty-one Democrats crossed party lines to vote in favor of the measure, while one Republican, Rep. Joseph Cao (R-LA), voted against it. The effort was led by Rep. Dave Camp (R-MI), who attempted to attach the measure to a motion that would have sent a small business tax credit bill back to committee with instructions to insert language invalidating the measure.

Camp claimed that the mandate violated “the basic principle of freedom and individual choice.” “No American should be forced to buy or purchase health insurance they don’t want or can’t afford,” Camp said, arguing that the measure would “uphold the freedom upon which this nation was founded” and obfuscate the need for more IRS agents. The Democrats’ argument was far less grand. Ways and Means Committee Chairman Sander Levin (D-MI) pointed out that the individual mandate was birthed by Republicans in 1994 and that removing the measure now would only increase premiums for families and undue the new insurance market reforms:

LEVIN: Colleagues, individual responsibility is the cornerstone of health reform is to ensure that every American has affordable health insurance coverage. And that’s why it was included in the GOP 1994 reform. So this is nothing more, nothing more, than a disingenuous political stunt to undermine health reform. Without individual responsibility it would mean that we could not eliminate exclusions for pre-existing condition. We could not prohibit insurers from refusing to cover someone when they apply. We could not prohibit insurance companies from charging more when you get sick. And according to the CBO, if this were to pass, it would result n a loss of coverage for more than 16 million Americans…it would raise health insurance premiums for every American buying coverage through the exchange by nearly 20%.

Watch highlights from the debate:

Indeed, in 1993, Sen. John Chafee (R-RI) introduced an alternative health care bill that compelled every American to purchase health insurance coverage. Four current Republican Senators including, Hatch, Grassley, Bennett, and Bond co-sponsored the measure — and for good reason. The individual mandate creates incentives for otherwise healthy Americans to purchase insurance and may be the only way to achieve affordable universal coverage. Without a mandate, only the sick who need health care would be motivated to purchase it. The pool of insured would be weighted with sick individuals, forcing the costs of the premium to escalate. According to a study by MIT economist Jonathan Gruber, “a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion.” As Paul Krugman concludes, a plan without mandates would cost $4,400 per newly insured person, the plan with mandates only $2,700.

As Levin points out, the mandate is also essential for reforming health insurance markets. Demanding that insurers accept every applicant without regard for pre-existing condition and charge every beneficiary a community rate is impossible if healthy people game the system and wait until they fall ill to purchase coverage. Under the GOP’s scenario, why would anyone spend their healthier years paying insurance premiums if the neighbor across the street can obtain the same coverage for the same rate on a need-it-now basis?

Indiana Governor Mitch Daniels (R-IN) moved further away from the Republican orthodoxy this afternoon, during a lunch panel discussion at the American Enterprise Institute about the state challenges to implementing the new health care law. Just days after coming under criticism for suggesting that the next president “might have to sideline controversial social issues to broker a ‘truce’ focusing on fiscal problems,” Daniels dismissed GOP efforts to repeal the law and predicted that it “will be there for the foreseeable future.” “Start over [is] not really a permissible response,” Daniels said.

Responding to a question from Galen Institute President Grace-Marie Turner, Daniels said he didn’t necessarily believe the suits were “frivolous,” but suggested that they would not succeed:

TURNER: Do you see this becoming a real confrontation between the states and the federal government over state rights issues?

DANIELS: Maybe. Um, obviously this is being raised by some states, among other issues in a constitutional challenge. I don’t know how to rate the odds of that succeeding except to say that literally not frivolous. If I thought if I thought this really had no prospect or no merit to it, I wouldn’t have supported our joining those suits. I think you’re asking apart from that, will states at least push back hard and I would expect to see a lot of that, but I’m not certain to what avail. This law not only in being and likely to be there at least for the foreseeable future, but again, gives enormous, as I understand it, enormous authority to the Secretary of HHS and her department to color in these lines and I think you can count her on doing it in a way that’s very adverse to state prerogative. I think we’ve got a scrap coming.

Watch it:

Daniels highlighted the costs of the new law to states and argued that policy makers and regulators would struggle in implementing the measure, but hinted that his state would begin complying with the law. “We have to wrestle with a question about whether to set up an exchange or not,” Daniels said. “I have to be honest, just reading all of the, watching all of this in the newspapers I thought it was something we were ordered to do by the law, required to do, it’s not so.” “It is optional. And I have to tell you we’re going to spend a lot of time before we decide to do this.”

Under the law, states that do not establish an exchange would cede that authority to the federal government, but Daniels — in a moment that underscored the flexibility of the new law — said he would consider allowing the state insurance commissioner to handle the regulatory functions of the exchange, but subcontract the management and distribution of coverage to a private entity.

Throughout the event, Daniels did his best to paint the new law as a boondoggle without noting any of the benefits in coverage expansion. According to a new Kaiser Family Foundation survey, which Daniels disputed, 215,803 previously uninsured Hoosiers would have health care coverage in the Medicaid program alone by 2019.

The problem with President Obama’s statement that “if you like the coverage you have you can keep it” is that it lends itself to a very literal interpretation — the suggestion that health care plans won’t change, rather than the correct interpretation that health reform won’t force you to enroll in a new plan. And now, it’s opening the door for critics and the media to argue that the new grandfather regulations undermine the administration’s claims.

In reality, insurers and self insured employers make policy adjustments all the time and over the last few years they’ve been slowly shifting the risks and costs of coverage to the individual. For instance, just yesterday, a report from Pricewaterhouse Coopers predicted that with medical costs increasing by 9% in 2011, individuals will bear even more medical costs in the form of greater coinsurance and deductibles. The group surveyed 700 companies and found:

- Employers will use more coinsurance at the point of care, moving away from co-payments, which will result in employees paying more out-of-pocket to health providers.

- More employers are dropping health benefits for retirees.

- For the first time, the majority of U.S. workers are expected to have a deductible of $400 or more next year.

The new grandfathered rules wouldn’t prevent plans from changing. They would only discourage employers and insurers from stiffing beneficiaries with very higher costs and insufficient benefits or increasing costs and reducing benefits too quickly. To argue that grandfathering would force people out of their plans assumes that market forces aren’t already pushing people out of existing coverage or leading to significant cost increases and benefit reductions. The grandfathering rules aim to prevent the worst of these changes.