POLITICS
12/15/2010 01:31 pm ET | Updated May 25, 2011

Virginia Panel Acknowledges Utility Of Individual Mandate, Urges State To Build Off Of Obamacare

Virginia's attorney general may have successfully challenged the president's health care law in court. Its governor may have spent the last few days saying that the same legislation needs to be revamped in its entirety. But on Tuesday, a panel appointed by that same governor to look at the state of health care, determined that the health care system in Virginia is woefully inadequate and that officials would be well served to meet the new law's requirements and even move beyond them.

Without wading into the legal debate, the Advisory Council to the Chairman of the Virginia Health Reform Initiative concluded that having a strong individual mandate -- the very provision that the state's attorney general, Ken Cuccinelli, argued is unconstitutional -- is likely needed to prevent people from waiting to get coverage until they are already sick.

The study, first reported by Kaiser Health News but flagged by a Democratic source, is not a direct repudiation of the efforts being launched by Cuccinelli and Virginia Gov. Bob McDonnell. If anything, it's an indictment of the status quo within the state.

Even with impressive examples, it is hard to defend a system when nearly 1 million Virginians -- and 150,000 children -- lack health insurance and the timely access to high quality care that insurance helps enable. It is also hard to argue a system needs no change when only 37 percent of small firms (those with fewer than 50 workers) offer their workers health insurance, compared to 48 percent ten years ago.

Headed by Virginia Health and Human Services Secretary Bill Hazel, the advisory council recommended that Virginia implement a series of largely conservative reforms in addition to creating a state marketplace where individuals and small businesses can buy insurance. But while the panel's focus is insular, the report does offer support for the changes being implemented at the federal level -- even proposing, in some cases, swift movement to make those changes.

"Where appropriate," reads one section, "the Commonwealth should leverage federal funding and policy initiatives to advance Virginia initiatives for service delivery and payment reform."

The most noteworthy element of the report, however, might be the section at the very end which touches on the debate over the individual mandate. While avoiding opining on the argument over the constitutionality of the federal government forcing individuals to buy insurance, the panel does seem to acknowledge the utility of the provision.

Today we do observe that higher income people are the most likely to be insured (remember Table 2). It is an empirical question, and a risk, to see if "enough" people would buy insurance to avoid an adverse selection meltdown with the penalties this low. CBO thought enough would, but a wide range of people are worried about this issue going into 2014. We don't risk a meltdown now, because insurers are allowed to underwrite. But the insurance reforms scheduled to go into effect in 2014 - especially guaranteed issue (insurers must sell to all comers) and modified community rating (no differential rating by health status) - would make adverse selection a much greater risk if there is no mandate or if the mandate is ineffectual. Given the lawsuits challenging the constitutionality of the individual mandate, as well as the controversy over the weak mandate penalty if it does remain in place, the likelihood of national reform legislation changing between now and 2014 is relatively high.

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