Book Excerpt: 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.

Insurance-whether for cars, homes or health-works by spreading the risk. For the tens of millions of Americans who receive health coverage through large employers, the costs are shared broadly: Older workers pay the same as younger workers, and the costs of care are spread across the pool.

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Book Excerpt: Why A Mandate Matters

But in today’s individual insurance market where people without employer- provided coverage buy plans, the spreading of risk does not function so well. About one-third of people age 20 to 29 go without coverage, double the rate for those age 30 to 64. This leaves the individual insurance market dominated by older, sicker people who tend to use more medical care. As a result, rates in the individual market are high, and that, in a kind of vicious cycle, makes it even less likely that younger or healthier people will decide to buy coverage.

Meanwhile, when those without insurance need care, many of the costs end up being borne indirectly by those who are insured: Hospitals and doctors frequently make up the losses by charging other patients more and by relying on government money to help pay for uncompensated care. And because people without insurance often wait longer to seek treatment, the cost of tending to them is higher than it would have been if they had gone in earlier.

This is where the mandate comes in: One of the primary goals of healthcare reform is to keep insurance companies from refusing to cover people with preexisting conditions, or from covering them only at exorbitantly high rates. But insurers argue, with justification, that if they have to offer affordable coverage to people with serious medical conditions, then they need to have younger and healthier people in the pool. And the only way to make sure that those people obtain coverage is to require it.

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