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Individual Mandate Will Benefit All, But Directly Affect Only a Few

The Supreme Court examined today the requirement in the Affordable Care Act (that is, health reform) that individuals have health coverage or face a penalty.  Apart from the legal questions before the Court, here’s what Americans need to know about this “individual mandate.”

It won’t affect the vast majority of Americans. Most Americans already have insurance — through their jobs or through a program like Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP).  They simply will check a box on their tax forms stating they have coverage.  A new Urban Institute study found that only 7 percent of people under age 65 will have to buy health insurance or face a penalty — and many of them will get subsidies to make coverage more affordable.

Most uninsured Americans want coverage. Many uninsured people don’t have a job that provides insurance and either can’t afford to buy it in the individual market or would get rejected by insurance companies because they have (or have had) serious health problems.  Only 7 percent of the uninsured report that they don’t have insurance mainly because they don’t think they need it, according to the Kaiser Commission on Medicaid and the Uninsured.

The small number of uninsured people who don’t want coverage will simply pay a modest fee. That makes sense, given the burden that the uninsured place on taxpayers and people with health insurance, who help pick up the tab when an uninsured person receives health care (such as at an emergency room).

The individual mandate makes it easier to reform the individual insurance market. Health reform bans many of insurance companies’ most egregious practices — like denying coverage to people with pre-existing health conditions like cancer, autism, or diabetes or charging sick people higher premiums.  But it’s impossible to end those practices unless almost everyone is covered.

Without an individual mandate, these reforms would tend to make health care coverage less affordable.  Here’s why:  older people and people with pre-existing health conditions, who had been unable to buy insurance, would be most likely to enroll in health coverage after the reforms took effect; healthier uninsured people, knowing they could wait until they got sick to buy coverage, would be less likely to enroll.  As the pool of people with coverage got older and sicker, on average, premiums would go up, since less healthy people cost more to treat and, thus, to insure.  These premium hikes, in turn, would lead some healthier people to cancel their coverage, which would raise premiums still higher, and so on.

Notwithstanding the false claims about the individual mandate, the fact remains that it’s an important part of health reform that will move us a long way toward enabling all Americans to have quality, affordable health coverage.