Why is the ACA individual mandate the most lambasted part of the ACA when the ACA couldn't be funded without it?

Question

First -- Please, if there is a challenge to the frame of the question, go that route. I don't know what I'm talking about here -- So I'll try not to take corrections to heart.

The Affordable Care Act (ACA) is a divisive and complex piece of legislation with several components. In the talk of repeal politicians have promised to preserve parts of it and eliminate others. There are a few that are widely praised (Letting children stay on their parents insurance longer, Forcing coverage for preexisting conditions), a few that are somewhat accepted (Minimum care standards, caps on what the elderly can be forced to pay) and a few that are derided by almost all opponents of the ACA, such as the individual mandate.

My question is, I've always been under the impression that without the individual mandate, generally healthy individuals who wouldn't otherwise purchase insurance as on rolls, the things like the preexisting coverage and allowing children to stay on their parents insurance longer couldn't be realistically funded. Getting rid of the individual mandate without getting rid of the some of the other regulations just doesn't add up.

How can politicians promise to keep the ups and ditch the downs?

Answer 1

You are overthinking this.

The individual mandate is unpopular because it penalizes people who want to spend their money on something other than health insurance. Worse, it is a regressive tax, as the people who don't have insurance are primarily low income. High income people almost always have employer-provided health insurance.

In 2007 and 2008, a Democratic candidate for president ran against the individual mandate. As the Atlantic monthly said:

Obama held that position throughout the campaign. Elect Hillary, he said, and the government will compel you to buy health insurance. Elect me, and I'll give you lower costs and let you keep your freedom.

Beyond all that, the individual mandate isn't large enough to actually force people to buy insurance. The mandate starts at about $700 a year (2.5% of income) and average insurance costs about $3700 a year without subsidies. The cheapest insurance costs $1800 a year.

For example, the New Yorker says:

For political reasons, however, the penalty for flouting this "individual mandate" was set at a very low initial level, which is supposed to grow gradually.

It's hard to defend a program that costs comparatively poor people money and doesn't work because it doesn't charge enough money. And the simple fact is that politicians are not encouraged to take and justify tough stances. They would far rather talk about goodies than costs. So Democrats discuss goodies like

1. Increased coverage percentages (total people covered).
2. Increased insurance coverage (type of procedure).
3. Coverage of preexisting conditions.

And Republicans discuss costs like

1. Budgetary impact.
2. Increased taxes.
3. Increased premiums.

It should be obvious that the goodies and costs go together. But politics doesn't lend itself to nuanced arguments. Perhaps covering preexisting conditions and more procedures is worth a 20% increase in premiums. But rather than making that argument, Democrats (e.g. Barack Obama) claimed that premiums were going to go down. Everyone likes falling premiums.

Voters are accustomed to being told that they can have their cake and eat it too. Unfortunately, that's not how reality works.

You say

I've always been under the impression without the individual mandate generally healthy individuals who wouldn't otherwise purchase insurance as on rolls, the things like the preexisting coverage and allowing children to stay on their parents insurance longer couldn't be realistically funded.

Note that this reads a bit misleadingly. The individual mandate provides a trivial amount of revenue, about $1.5 billion a year. Spending per year on health insurance subsidies is $660 billion.

The general argument is that without the mandate, the preexisting condition coverage would get more expensive. This is because people could just wait until they get sick (a preexisting condition) and then buy insurance. But the mandate is not a funding mechanism for the government. People avoiding the mandate penalty increases funding for insurance companies. Of course, there's no real measure of how many people wouldn't buy insurance except for the mandate.

The mandate shouldn't impact children staying on parental insurance costs. In fact, it's more the reverse. Children on parental insurance is another way to avoid paying the mandate penalty. It makes it less likely that there are insurance lapses and keeps the preexisting condition premium down.

Answer 2

The individual mandate requires people to act responsibly at a cost to their wallet/budget. There is a general theme that irresponsible selfishness = freedom that gets pandered to more and more in a day an age when people can select news/information that conforms to their pre-existing opinions.

So, people look at the very short term "I'm not sick at this instant, why should I have to pay for health insurance?"

Most criticisms are based on pandering to fundamental misunderstandings, or having misunderstandings on the following points -

1. It is more costly to society as a whole, and more catastrophic to individuals who do get hit by health care needs and try to deal with those situations without insurance, which results in personal bankruptcies and the costs being passed along to others.

2. The "me" perspective of "why should I have to pay for others?" conveniently ignores the fact that if something does happen, the decision to not be insured means others will have to pay for you (defaulting on all debt, except student loans, not just medical, when bankruptcy is filed, costs passed onto others in point #1)

3. While health insurance covers normal, expected and preventative costs, the purpose of it is for the unexpected and higher ticket possibilities which the premium payer is protected against.

4. No one chooses to get sick or terminally ill. Everyone dies eventually. This means that everyone, against their will, will need health care in their lives, unless they are completely healthy and die by some instantaneous event. This makes the idea of "opting" for health care as some kind of a consumer choice a fallacy.

5. Universal insurance coverage is not a short-term proposition. You are buying in for your lifetime. When you are younger/healthier, you are probably paying in more than you are taking out. When you get older or more ill, you get out more than you are currently paying in. The idea is that it balances, plus you are paying for that catastrophic protection.

6. People who look at it as "I'm not currently using x, y, z" or "I probably won't ever use x, y, or z" do not understand the concept of insurance, which is pooled risk/use.

7. Much of the opposition was because Obama proposed it, and is reflexive by nature. The idea of the Individual Mandate as a necessary component of a health care overhaul was proposed by the conservative Heritage Institute in response to the Clintons' failed proposals of the 90s, and was successfully implemented by GOP presidential candidate Mitt Romney when he was governor of Massachusetts. Clearly, there is nothing about the Individual Mandate that fundamentally conflicts with GOP or conservative values, overall, as an idea. A big part of the opposition, in addition to the basic ignorance, is "shooting the messenger" mentality.

Answer 3

First off, the answer to your actual question is easy. You ask "how could a politician lambast the individual mandate if it's crucial to the ACA." The obvious answer is that, generally speaking, the politicians who disagree with the individual mandate also disagree with the ACA as a whole. It's like asking how you could argue against killing if you're against war. The more interesting question would be someone arguing against killing if they were for war. That's where the interesting arguments lie.

Politicians promise to keep the ups and remove the downs because that's what politicians do. They make promises like that. It's how the political machine works.

As for the specifics of the individual mandate, there was budgetary arguments made. The truth is that you could fund almost everything in the ACA without the individual mandate, simply by increasing premium costs. That's how insurance works. However, there was a specific issue regarding pre-existing conditions which caused problems. There was a desire (mostly from the democrats, though I won't exclude republicans) to have insurance cover pre-existing conditions. However, if you look into how insurance actually works, the insurance companies would be forced to pool these risks. If they pooled them into a "high risk pool" (which is a term that has been thrown around), then premiums would be uselessly unaffordable. If you know that you are going to need a $300,000 treatment in the next 5 years, it's not even a risk: it's a known factor. Under normal market conditions, an insurance company looking at a guaranteed $300k expense in the next 5 years would naturally charge at least $300k in premiums!

This was deemed unacceptable by many. The logic is tricky but reasonable. If you had a big-ticket item, and it was unacceptable to be charged at market rates for that, the ACA would need to artificially suppress those rates. This means someone else would have to pay for it -- others in the pools. But who would choose to be in a pool which is mathematically provably more expensive than your expected medical costs in order to cover someone else's known issues? People in that pool would flee, seeking other solutions. This would raise the prices higher, causing more fleeing.

The ACA's solution to this was the individual mandate. It took away your "freedom" to decide whether to pay for health insurance, and instead mandated that you must put yourself into one of these pools. No matter what price the insurance companies feel you should pay for healthcare, you pay for it.

Many parts of the ACA could be tweaked and funded without the individual mandate, but the pre-existing condition coverage has a natural snowballing effect that would destabilize insurance without it.

So what is a politician doing by attacking the individual mandate? They're attacking a leg that the vast majority of supporters of the ACA don't fully understand (really, a vast majority of citizens don't understand...) That means those supporters do not rally as hard as they would if you attacked the ACA head on. Once that leg is destabilized, they'll say "Look, this whole system isn't stable. Let's renegotiate." Then they'll try to focus on the pieces they want to see and let the parts they don't want to see fall away. That's politics. Today, it's the republicans doing it, but rest assured the process is decidedly non-partisan. Every poltician has done it since the dawn of time.

Answer 4

Quite simply, the individual mandate is the part of the law that requires that ordinary people do something, so it is the part of the law most visible to those ordinary people.

While some critics of the ACA oppose the various requirements it puts on insurers, this is largely academic to most ordinary Americans, who themselves are not insurers. To (some of) those ordinary people, the rest of the law doesn't really matter to them. At the very least, it's not a particularly personal issue whether costs for some large company goes up.

As for your final question:

How can politicians promise to keep the ups and ditch the downs?

This is just what politicians (and dishonest salespeople) do. In the particular case of the ACA, the Republican party is a coalition of social conservatives, fiscal conservatives, minarchists, and (increasingly) populists. Some Republican voters really like the "Good" parts of the ACA, others really want a repeal of the mandates (particularly the individual mandate). Promise both, and you'll get votes from both.

Answer 5

A common argument against the mandate goes this way:

Before the ACA, insurance was very expensive and I couldn't afford it.

With the ACA, insurance is very expensive, I can't afford it, and I get fined for not having it.

An argument has been made that the ACA could not succeed. The increased costs of the system would in a large part be paid by all of the young and healthy people between the ages of 18 and 30 who would now be required to purchase the insurance. However, at the same time, they increased the age that people could remain on their parents' insurance.

While there are limits on being able to remain on the family's plan, a significant number of people that the ACA was depending on to pay the costs, were not actually required to do so.

Answer 6

The individual mandate... the requirement to purchase health care insurance... was the lynchpin of Obamacare, what would make the system affordable. It is sort of social security for health care - pay into it when you're young, benefit when you get older.

It was what John Roberts ruled to be a tax, thus not finding obamacare to be unconstitutional.

The real problem isn't so much the mandate to buy insurance - you are required to buy insurance if you own a vehicle, can't get a license plate without proof of insurance. It was how obamacare was put in place.

Obamacare was a major change, that had a major financial impact on a lot of people. When almost half the nation was ignored in putting this in place, those represented by the republicans who were essentially locked out of discussions on the bill, some very hard feeling arose, strong enough for the tea party to rise up and get people elected to congress on a 'stop Obama' platform in 2010. For better or for worse, that is what they did, and we got six years of gridlock as a result.

It should also be noted that the repubs are repeating this same mistake right now - they are disregarding the dems in crafting a replacement. The results will be equally dismal. It's a pity that the fine art of cross party communications and compromise has been forgotten.

Making the low penalty for not buying insurance ties into the other requirement: to cover any preexisting condition. That one, by itself, is a good requirement, provided there is no way to opt out until you get sick. The pitifully small penalty of the individual mandate, far less than an actual policy, is the way to opt out in a relatively risk free manner - you just buy a policy if you get really sick.

To get back to the car model, this is roughly the same as having only a small penalty for not buying auto insurance (instead of denying a license plate) while also requiring auto insurance companies to cover any pre-existing accidents. In that situation, most of us would just opt out and buy only after we had a wreck, and the price of an auto insurance policy would go through the roof... as the cost of an obamacare policy has done lately.

If that was put into law with automobiles, any halfway intelligent person would ask - what bonehead legislator came up with that? Of course that won't work. Duh just doesn't say it.

That's pretty much how the individual mandate and mandatory coverage of pre-existing conditions parts of Obamacare read. They didn't think that out very well... Pelosi's 'we have to pass it to find out what's in it' remark comes back to haunt all of us.

This was a case of pinning a major economic model on a hopelessly optimistic concept: that people would willingly pony up several thousand extra dollars a year (or tens of thousands, in the case of a family), when the 'cover existing conditions' clause and the absurdly low 'penalty' meant they didn't have to.

As of today, the only really workable solution would be to extend the Medicare system to all citizens. A payroll deduction, so it's a sliding scale of payments based on income, and everyone who is capable of paying into the system, pays into it, with no way to opt out.

Either that, or make the penalty for the individual mandate equal to what a health care policy would have cost the person. May as well just go ahead and make it a payroll deduction and be done with it.

Why the dems didn't do this in 2009 is beyond me. Why the repubs don't do it today is beyond me.

The deepening crisis with insurance companies dumping obamacare isn't like the budget deficit, which is bad but not directly visible to the electorate. People dying because they can't get health care is very visible.

Answer 7

This is obviously a hot issue, but I will try to explain the best I can.

Many parts of the ACA are generally thought of as "good". The visible ones are the "No pre-existing condition", "kid stay longer", and the changes/adjustments to HIPAA.

The Individual mandate is generally the one that is picked on as being bad because it has a few flaws that are, more or less, wrapped up into it. It's true that the ACA would not work without it, at least in theory, and that's the reason why it is often thrust front and center. Get rid of the individual mandate and the entire thing goes away.

Some arguments against the individual mandate include:

• Health insurance doesn't work. You get a lower standard of care and fewer options. Insurance companies dictate your care, and your doctor does not. This is very true. Many doctors prescribe and diagnose, not based on their experience and intellect, but based on a prescribed plan the insurance companies will pay for. This leads to a lower individual quality of care, but in theory makes the greater quality of care better.
• Health insurance is too expensive. I have found this to be true as well. My Families health insurance would cost us around $9,000 this year. The total cost of our health care is only around $2,300. It makes more economic sense for us to pay $2,300 then $9,000. In fact with that difference in cost, we could (and do) save around $5,000 a year to a savings account for medical needs. We are actually covered in a case of emergency.
• The Individual mandate reduces personal choice. We were very happy to have "emergency" insurance that covered trips to the emergency rooms, surgery, etc. We just don't want "Full coverage" unfortunately those planes were discontinued. So now instead of our preferred setup of "we will pay all the medical bills we normally have and get insurance to cover the emergency stuff" We must have "full coverage" that costs too much, and gives us a lesser quality of care.
• The ACA/Individual mandate actually makes going to the doctor more expensive. At times prohibitively so. For example my wife sees a specialist. The Specialist visit, self pay, is $350. The Co-pay through the insurance is around $60. $60 seems smaller, but in order to qualify for that co-pay, she has to go less frequently, AND pay $750 a month.
• Offloading the individual mandate to employers has a huge economic impact. As you can't choose not to provide coverage, no the cost of business has gone up. Some one will need to pay that. Rather it's pay freezes, lower wages, or higher product cost, someone somewhere will need to make up the difference.
• Many Americans did not want it in the first place. The fact is that many, many, Americans didn't want the ACA or the Individual mandate in the first place. They felt that it either didn't do enough, was totally ineffective, or actually harmful.
• It doesn't fix the problems with health insurance. A common theme I hear is that the individual mandate doesn't fix the problem it just forces everyone to have the same problem making the problem more acceptable and harder to fix. Health insurance is not solution to the health problem.

Answer 8

The right wing position is that providing universal health care is not the responsibility of the federal government. If the individual mandate is removed and healthy individuals leave the health insurance system, costs for health care that must be passed to the sick individuals will increase. The increased costs may mean that sick people in lower classes who need health care may not receive it, and right wing politicians are willing to accept this. Their position is, to get better health care individuals need to be working or be independently wealthy.

Answer 9

Similar to Deolater's answer -- with the mandate, the government is requiring individuals to do something and the something is something that some people don't want to do. Opponents of the mandate may say that if people want insurance, they can just go buy it. If the don't, they risk shooting themselves in the foot by being uninsured when they need care. Therefore, they say the government has no business telling them what is best. Framing anything as "Big-brother-ish" or "nanny-ish" in the U.S. is a common way to make it unattractive. (In New York, where I live, we got to hear this for twelve years while Mike Bloomberg was mayor).

Of course all this ignores the fact that before the mandate existed, those who were not wealthy and not eligible for group health insurance (say, via their parents or employer or through an affinity group like the AARP or a union), often cannot afford insurance premiums. Or that the insurance they could afford had coverage so minimal or copays/coinsurance/deductibles so high, that it made the policies effectively unaffordable.

Answer 10

It's important to understand that the individual mandate and the coverage of pre-existing conditions are tightly coupled. The pre-existing condition law, by itself will make selling health insurance a money-losing business. The idea behind the mandate is to create a huge pool of the insured which offsets this problem.

Consider a group plan through an employer. These plans generally cover pre-existing conditions. The reason that this is possible is that the employer makes a deal with the insurance company that a certain percentage of employees will take and pay for the insurance and/or the company agrees to pay a certain amount. This means that even if there are a few really sick people (a.k.a high utilizers) in the group, there will be a lot of healthy people paying for their care.

The idea of the mandate is to create a gigantic pool of insured people so that insurance companies are willing to sell insurance. It's not simply about costs. Its about whether the market can function. Prior to the ACA, there really wasn't a significant individual market. Relatively few (healthy) people could afford it and most of them were already getting insurance through their employer. For this reason I find all the news about rising premiums to be so misleading. Compared to what? Most people could not even buy insurance on the individual market if they wanted to and it was unaffordable for many people who could get it.

The mandate is not something that was cooked up as part of Obamacare. For example Milton Friedman (the highly influential conservative economist) "advocated replacing Medicare and Medicaid "with a requirement that every U.S. family unit have a major medical insurance policy.". The individual mandate is a core component of Romneycare.

While it's true that some conservatives have long opposed the individual mandate because it means the government must choose what insurance is acceptable (essential benefits), I think it's pretty obvious that when the ACA was passed, the Republicans latched onto this as the most unpopular piece of the law. Then, when they were not in power, they talked about the mandate as much as possible because it played well in the polls.

The problem now is that, despite the rhetoric, the ACA and the exchanges have been successful. There are a few places where the market is not doing well but these are also places where the state and local governments are politically antagonistic to the ACA. In addition, there ways that the current congress is damaging the current exchange system without a full repeal. The ACA is essentially a three-legged stool where the three legs are pre-existing conditions, subsidies, and the individual mandate. To remove the mandate, you need to replace that leg and those proposed so far are too short.

Everyone is congress knows this. There's an army of lobbyists representing the insurance companies telling them that if they remove the mandate without addressing the adverse selection issue the insurance companies will exit the market place and the individual market will basically vanish. That's why the Senate won't pass the 'repeal' without a realist replacement.

P.S. It's kind of orthogonal to the specific question at hand but one of the big misconceptions I see repeatedly is that people think that the rising cost of insurance (the rate of growth of which has actually slowed since the ACA) is caused by the 'insurance companies'. This is patently false. The 'skim' that health insurance companies take from what they get from premiums and what they pay for care and drugs has not changed. What costs more is care and drugs. For example, a course of treatment for Hep-C is about $90,000. This is something that didn't exist a few years ago. Every time a new test and a new treatment comes out, the rates need to increase to pay for the increase in costs.

This misunderstanding makes it seem like it should be no big deal for insurance to cover pre-existing conditions. They think the insurance comapnies have huge vaults of gold coins and cash like Scrooge McDuck or something. This misconception also leads people to be outraged by being forced to carry insurance. It feels like being forced to pay tribute to Croesus.

Answer 11

Mandate is not popular, because freeloaders are very vocal constituency, and mandate (or "no freeloaders") was a standard part of any conservative health care reform suggested by conservative think-tanks.

Using this very vocal constituency allows to politicians to attack ACA which they dislike for other reasons.

Mandate "refuseniks" are freeloaders because they want to pay (low low monthly fee) for insurance only during months they require (expensive) health services, paid by everyone else, gaming the system.

Even Mitt Romney, when he established individual mandate in Massachusetts in 2006, called such people "freeloaders".

It is made worse by the fact that hospitals are required to provide emergency services regardless of the ability to pay (so people are sure they can game the system, even if partially, and are used to be able to do it), even if hospital knows/suspects that person will not pay for provided services. This cost of emergency services is so high that (I read a research somewhere) for few homeless people it would be cheaper to provide them free housing (so they have less medical emergencies) than "free" emergency care they are getting now. Not all homeless, but few. But of course it would not work, because it would give such homeless perverse incentive to consume more emergency services to qualify for free housing.

If you don't want people without insurance dying on the street like in a 3rd world country, we need individual mandate.

Answer 12

This is a bit long, but we can't answer the question without getting the full context in front of us.

First, let's start by asking what people did before there was insurance:

(1) They didn't get sick or have accidents.

(2) When they got sick or had accidents, they just died immediately and saved society the burden of caring for them.

(3) If they didn't have enough resources (including, but not limited to, savings) people who were close to them -- people in church, sodalities and fraternities, etc., friends, neighbors, relatives, sometimes even strangers would help them until they got back on their feet. And life went on.

Correct answer? Drumroll, please ...

(E) All of the above.

If you don't understand that much, we can't talk meaningfully about this.

Second, let's ask what happened with insurance:

(1) Check. Lots of people were still not needing help. One point of difference, some of these people are voluntarily joining the strangers I mentioned above who help other people in need, by contributing to one of many independent companies that establish these pools that we talk about.

(2) Check. Lots of people were still getting sick or having accidents and dying. One point of difference is that some of those who died were covered by insurance and some weren't.

(3) Check. But with more insurance available, fewer neighbors and strangers feel the need to get involved, unless they get involved by buying insurance. And, with money going out in insurance premiums, there was less available for savings.

Overall result?

There was a new way of making a living called working for (or running) an insurance company. (I'm speaking loosely here, some of those weren't really companies in the legal sense. There were several legal categories besides company for insurers. I think some of those categories still exist.) This is not a strictly bad result -- has both pluses and minuses.

Also, it became easier for people without good neighbors, church or other abstract community, close relatives, etc. to get help. This contributes to alienation, but it also contributes to reintegration. Again, there are both pluses and minuses.

Unnoticed tertiary results?

Insurance companies start making rules that our government is Constitutionally forbidden from making. This is an essential bit of information here.

Third, let's ask what will happen with mandatory insurance.

(1) Will people stay healthy?

We should hope so. We aren't sure, however.

(2) Will people get seriously ill or have accidents and die?

How can we expect it to be otherwise?

(3) Will family, neighbors, friends, relatives, people in their abstract communities, and strangers still help?

Ouch. Yes, but everyone is paying insurance, so it's harder for those who are not making a lot of money to help. And most people don't make a lot of money.

Wait, let's back up to (2). Insurance companies are motivated to reduce risks, so they will be making even more rules to try for force people to be healthy and safe.

They will also escalate the social narrative about "responsible behavior" as if conformance to any arbitrary set of rules could really be called such.

Does letting the insurance companies get their fingers in every little aspect of individual lives actually make anyone healthier, safer, or more responsible?

I hate to be rude, but use your common sense --

When was the last time society was benefited by someone, or by some group, asserting they should be allowed to play God?

You say the rules aren't that bad, but I'll point to some examples. Flu shots are considered a moral requirement in Japan, in no small part due to the social narrative from the insurance companies.

Do they work? For some people, they seem to work, but there is a growing percentage of people who have bad reactions and end up becoming seriously ill, permanently disabled, or dying. The insurance companies started backpeddling on this recently.

Surely things are not that bad in the US?

Vaccinations.

Oh! Think of the CHILDREN!

I am thinking of the children. Most vaccinations were recommended not to be given before six months or so for very important biological and medical reasons. It was not that they were not recommended before six months, they were recommended against.

But the pharmaceuticals salescrew works on the insurance salescrew and the staffs at hospitals, and "Oh! Let's just get them done with and over before the parents forget!"

And the vaccinations don't work like they used to. They change children's biology, and the new generation is, no, not superhuman by some chemist's accident. The new generation is susceptible to a new class of diseases that are harder to deal with.

Vaccinations are not the only problems here.

And, finally we get to the question of mandatory premiums.

I've been sidelined from my original career path for more than fourteen years or so. I've been working entry-level/temporary jobs, just barely making a living. I haven't been making enough to send my kids to school, and that fact makes me something of a social pariah in Japan.

I just crossed an age line three years ago where it has become difficult both to renew the contract, and to get a different entry-level/temporary job. I paid about $150 yesterday for August's mandatory insurance premium when I don't have money for August's rent or next week's food.

Fortunately, because I live in Japan and not the US, I don't have to pay an additional mandatory premium to the fatherland. (Fortunately, somebody who wrote the law realized we expatriates would have good cause for class-action suit against the government if they tried to double-down on us.)

(JFTR, I'm writing this while I wait for a friend to give me permission to use her as a reference on a job application.)

There are a lot of people in any country who are physically healthy, who, for reasons they really don't control, are one step away from being in the sort of situation I am in.

Now do you understand why the question of mandatory insurance, and the ACA that underlies it, is considered "nuanced".