Individual Insurance Mandate Ignites Debate

A grand bargain on healthcare reform is being shaped behind the scenes, The New York Times reports. Sen. Ted Kennedy’s office has hosted meetings among the major national stakeholders, and a consensus has emerged that all Americans should be required to purchase insurance. But James P. Gelfand, senior manager of health policy at the United States Chamber of Commerce, is reported as saying: “Forcing individuals to purchase insurance in the current market would be a disaster. Before we even have that discussion, we need to make health care more affordable and improve its quality.”

As if to underscore his point, USA Today notes that costs for individual health plans are rapidly increasing. Anthem Blue Cross in California is raising its rates in double digits and, for many policyholders, by more than 30 percent; Blue Cross Blue Shield of Michigan, a state where the unemployment rate is unusually high, wants state approval to jack up its individual rates by 56 percent; and Regence Blue Cross Blue Shield of Oregon is charging 27 percent more for individual policies. Aetna says its increases for individual coverage range from 8 percent to 22 percent.

These huge rate hikes are occurring against the backdrop of nationwide layoffs that have contributed to a big rise in applications for individual insurance. A provision in the federal economic stimulus law may mitigate this trend by having the government cover 65 percent of the COBRA group premiums for people who lost their jobs after September 1, 2008 or are fired before the end of this year. That should encourage more people to apply for COBRA. But once the 18-month COBRA period ends, the unemployed who want insurance must seek it in the individual market.

According to data from eHealthInsurance, the average monthly premiums for single people ranged from $107 to $301 in 2007, with an average deductible of nearly $2,000. For family coverage, the monthly cost ranged from $219 to $494, with an average deductible of $2,600. Nor is everyone eligible for coverage—although America’s Health Insurance Plans says that could change under health care reform that included an individual mandate.

What people are up against in the individual market is vividly demonstrated by a Commonwealth Fund study. Using 2005 data, the New York think tank found that 89 percent of the adults who had individual coverage or who sought to buy it in the prior three years didn’t renew or purchase a policy. Eighty-six percent of people who had no health problems did not buy an individual policy. Cost, inadequate coverage, or the inability to find a plan that would insure the applicant were the major reasons.

Ironically, the Commonwealth Fund has joined the chorus of voices calling for an individual mandate. Its reform plan combines that feature with a government-run, national insurance exchange and a public plan option–both of which, proponents argue, would lower individual insurance costs. Even so, many people would still require government subsidies. Nevertheless, the Commonwealth Fund claims that its plan could cut national health spending growth to 5.5 percent while covering 99 percent of the population.

The question is, will government subsidies be enough to make individual insurance affordable for everyone? And what will that insurance cover? Stay tuned.