For Health Reform to Work, the Mandate is Mandatory

A federal judge in Florida ruled last week that the health care reform law is unconstitutional because it requires every American to purchase health insurance—the so-called individual mandate. The Senate held a hearing on the constitutionality of the individual mandate, and the House will soon follow. Everyone expects the question to end up in the Supreme Court.

I’m not a Constitutional scholar; I’m a health care guy. I don’t know whether the individual mandate is unconstitutional. But I do know that Florida judge is right about one thing: if you strike the individual mandate from the health reform law, you have to strike the whole thing. If you don’t have that reform, you simply can’t have all the rest.

Here’s the situation as it is now. In some states, health insurance companies have been allowed to pick and choose whom they’ll cover. Some companies have chosen to insure only healthy people, which means other insurance companies in the same market have to do the same just to compete. If health insurers insure only healthy people, premiums can be nice and low, but many people who are not so healthy get left uninsured. Covering only healthy people isn’t right.

On the other hand, if health insurers are required to accept everyone, but not everyone is required to buy health insurance, healthy people often opt out—at least until they get sick. Then they buy.  That’s the market we currently have in New York.   But an insurance market that covers only sick people leads to very expensive insurance premiums.

Imagine how expensive homeowner’s insurance would be if every single house insured against fire routinely burned down—or if you could buy homeowner’s insurance as soon as you smelled smoke! It wouldn’t work. And it isn’t working for health insurance either.

The simple fact is that health insurance works best by spreading the cost of health care among a broad cross–section of the community—from the most healthy to the most ill—that is, when everybody pays for health insurance  but not everybody uses it.

The solution, which will be law beginning in 2014, is the middle ground.  Health insurance companies will be required to cover everyone, and everyone will be required to buy health insurance.  While many states (including New York) already have laws that require health insurers to cover everyone, the requirement on the other side of the equation—that each person buy health insurance—will be new.

And that requirement, the individual mandate, is what’s being debated now in the courts and in Congress. Do we as individuals have a right not to buy health insurance? That’s the question making its way to the Supreme Court. And the answer will determine whether health insurers are not just required but are actually able to cover all Americans.