If the Supreme Court strikes down the individual health insurance mandate, but leaves most or all of the rest of the Affordable Care Act intact, Congress will have some work to do. Without some way to push uninsured healthy Americans into the marketplace, insurance prices could creep upward until they become unaffordable for everyone.
There’s no guarantee such a specter would motivate a divided Congress to work together to find a solution, of course. But if Congress was able to operate effectively, there are a number of ways the Affordable Care Act could be patched to function without an individual mandate.
One is to change the tax code. The individual mandate as it now exists in health reform would be enforced by fining Americans who choose not to have health insurance. This would happen through their income tax returns. The same goal could be accomplished by levying a new health insurance tax on everyone and giving an equally sized credit to those who purchase coverage.
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Another alternative would be to create a rule that Americans can buy affordable new health insurance policies in the individual market only during strictly enforced open enrollment periods. During these times, consumers would be guaranteed to get policies and those policies would not be priced on risk–in other words, health status. Anyone who missed this window and decided to buy a policy only once he or she gets sick would face rates charged based purely on risk, which could mean paying astronomically high prices.
In February 2011, the Government Accountability Office published a report offering a list of nine alternatives to the individual mandate:
- Modify open enrollment periods and impose late enrollment penalties.
- Expand employers’ roles in auto-enrolling and facilitating employees’ health insurance enrollment.
- Conduct a public education and outreach campaign.
- Provide broad access to personalized assistance for health coverage enrollment.
- Impose a tax to pay for uncompensated care.
- Allow greater variation in premium rates based on enrollee age.
- Condition the receipt of certain government services upon proof of health insurance coverage.
- Use health insurance agents and brokers differently.
- Require or encourage credit rating agencies to use health insurance status as a factor in determining credit ratings.
There are a few reasons why Democrats in Congress didn’t choose to pursue any of these alternatives. As Ryan Lizza recently pointed out, Administration officials and advisers knew that the Congressional Budget Office would predict far fewer Americans would gain coverage under any plan except the individual mandate. Here’s what Nancy-Ann DeParle wrote in a memo, acquired and recently published by Lizza, to Obama in April 2009:
Based on our policy analysis, we believe that a weak requirement for all Americans to have insurance may come close to achieving the maximum coverage that can be achieved through aggressive outreach and auto-enrollment. Unfortunately, however, the Congressional Budget Office (CBO) will likely take the position that without an individual responsibility requirement, half of the uninsured will be left uncovered. This reduces federal costs—by roughly $270 billion over 10 years—but also reduces coverage (insuring that only 28 of the projected 56 million uninsured in 2014). Those left uninsured tend to be either low cost (e.g., young adults) or have high income.
Overtly raising taxes, the only alternative that may have been as effective as a mandate, would have presented a considerable political risk. But another reason Democrats may not have pursued an alternative to the individual mandate is that they needed buy-in from the health insurance industry, which agreed to hold most of its fire against health reform only if the public option was off the table and the mandate was guaranteed. The industry lobbed a few bombs during the health reform debate, but didn’t use nearly the firepower it could have. In exchange, insurers stand to gain mightily from tens of millions of new customers and billions in federal money through the subsidies to be distributed to low and middle-income Americans to help them buy coverage and from a huge expansion of Medicaid, which is largely managed by private insurers.