THE BLOG

Health Care Reform Will Succeed Without Individual Mandate

09/21/2010 09:02 am ET | Updated May 25, 2011

The right wing is attacking health care reform by using the courts to file constitutional challenges to the individual mandate. They assume that if they can convince the courts that the mandate is unconstitutional, they can unravel the changes to our health care system that were enacted into law and signed by the President earlier this year. The Obama administration and those many Americans who will benefit from the bill need not be concerned. A narrow ruling on this ground will have minimal effect. As we were able to demonstrate in Vermont, the expansion of our health care system can work without a mandate.

The academic thinking behind the need for an individual mandate suggests that without one, there will be a certain number of "free riders" -- people who will essentially bet that they can go without insurance because if they do get sick they will be taken care of anyway and the costs are passed on to the rest of us. Some argue that the elimination of " pre-existing condition" loopholes necessitates an individual mandate to prevent large premium increases. While the mandate does increase the number of insured Americans, and it does spread risk among a greater number of insured Americans by requiring them to be in the insurance pool, the expansion of the system envisioned in the bill can work without a mandate.

In 1992, Vermont embarked on fundamental health care reform. With help in part from a Medicaid waiver from the Clinton Administration, we have had universal coverage for Vermonters under the age of eighteen for nearly twenty years. Over that time, Vermont has had a generation of experience allowing families who make less than $65,000 buy into Medicaid, and 96% of all young people in Vermont have grown up with health coverage. Of that, one percent are not eligible, and three percent who are eligible do not sign up. Compare these results to Massachusetts, which has the only universal health care program in the country for all its people and includes an individual mandate. Almost the exactly the same percentage of people in Massachusetts choose not to get health care. However, while Massachusetts does achieve a higher percentage of insured than it otherwise would without the mandate, Vermont also has a very respectable percentage of coverage without the mandate. (Granted that we are comparing a population under eighteen which cost less to insure than a universal pool.)

The other major reform Vermont embarked on a generation ago was to eliminate the preexisting condition loophole. Because we were surrounded by states which did not do this, we established a waiting period to minimize being deluged by people moving from other states and skewing our insurance pools. We later split off Vermont Blue Cross from its New Hampshire counterpart to prevent it from becoming a for-profit entity.

In the face of much tougher reforms than even the recent Federal law calls for, the insurance and business communities predicted chaos in the insurance industry, mass exits from the state, and huge rate increases at the time. Under the Vermont law, not only were pre-existing conditions eliminated as a cause of insurance denial, insurance companies were not allowed to charge more that 20% over their base rate to any customer. This contrasts to a 300% differential in the recently passed federal bill. After 18 years, while a few bad actor insurance companies have left the state, our market is about the same as many other states and better than most. There are three or four companies who are still in the group and individual markets. And 18 years later, Vermont's insurance costs are in line with most Northeastern states, and significantly less than Massachusetts, New York and New Jersey.

So, once again in their zeal to obstruct, the Republicans have struck out and America will be stronger because of their failure. As a generation of experience in Vermont has shown, an individual mandate is not essential either to achieve near universality or to have a stable insurance market. While its true that the new federal law will expand health care coverage and make the system fairer if it contains an individual mandate, the most important changes will survive, and the bill will still achieve all of it's major goals even without a mandate.