|Insurance Prices If Individual Mandate Is Eliminated|
|Nation - Finance|
|TS-Si News Service|
|Sunday, 19 February 2012 03:00|
Santa Monica, CA, USA. A new RAND Corporation study concludes that eliminating a key part of health care reform that requires all Americans to have health insurance would sharply lower the number of people gaining coverage, but would not dramatically increase the cost of buying policies through new insurance exchanges.
According to estimates created using a microsimulation model created by the RAND Comprehensive Assessment of Reform Efforts (COMPARE) program, the number of Americans predicted to get coverage in 2016 under the Affordable Care Act would drop from 27 million to 15 million if the individual mandate were eliminated. Despite that drop, the study estimates that eliminating the individual mandate would increase an individual's cost of buying insurance through the individual exchanges by just 2.4 percent.
Under health care reform, health insurance exchanges will be established to provide policies to individuals who do not have work-based coverage and those who work for small employers.
A key issue underlying the relatively small increase in premiums relates to the manner in which premiums in the exchanges are allowed to vary by age.
Several other research groups previously studied what might occur if the individual mandate was eliminated. The RAND study predicts dips in overall insurance coverage and changes in government spending similar to those predicted by the earlier studies.
However, Christine Eibner and co-author Carter C. Price used a more-precise method to estimate the effect that ending the individual mandate might have on insurance premiums. It does not predict price consequences as great as those predicted by others.
Other research teams estimated the overall average increase in premiums that would be expected if the individual mandate is eliminated. The RAND analysis focuses on the annual increase that might be faced by individuals, taking the age of enrollees into account.
Under the Affordable Care Act, individuals cannot be charged higher premiums because of preexisting medical conditions or current health problems.
But the law does allow older people to be charged as much as three times more than younger people for health insurance.RAND developed the Comprehensive Assessment of Reform Efforts (COMPARE) microsimulation model to provide objective facts and analysis to inform the dialogue about health policy options.
"Our analysis suggests eliminating the individual mandate would sharply decrease coverage, but it would not send premiums into a death spiral that would make health insurance unaffordable to those who do not qualify for government subsidies," said Christine Eibner, the study's lead author and an economist at RAND, a nonprofit research organization.
Another consequence of repealing the individual mandate would be a sharp increase in the amount of government spending for each person newly enrolled in a health insurance plan. Because most individuals who remain enrolled if the mandate is eliminated are eligible for significant government subsidies, government spending for those newly insured would more than double, rising to $7,468, according to the RAND Health study.
"The individual mandate is critical not only to achieving near-universal health care coverage among Americans, but also to yielding a high value in terms of federal spending to expand coverage," Eibner said. "Without the individual mandate, the government would have to spend more overall to insure a lot fewer people."
The study comes as the U.S. Supreme Court prepares to hear arguments in March regarding the constitutionality of the individual mandate, a key provision of the 2010 Affordable Care Act.
One of the most contentious provisions of the Act is the individual mandate that requires most adult Americans to either obtain health coverage or pay an annual fine. Supporters say the mandate is necessary to encourage young, healthy adults to get coverage, and help spread costs and risks across a larger, healthier group of insured individuals.
If the mandate is eliminated, there is concern that the insurance exchanges established under the Affordable Care Act would suffer from "adverse selection" as only sicker, higher-risk adults would sign up for coverage. Such a trend could lead to higher per-member spending and drive insurance premiums higher.
The simulations done by RAND and other researchers suggest that most of those who would forgo health coverage if the individual mandate were eliminated would be younger. That would leave the insurance exchanges with proportionately more people purchasing insurance in the older age brackets, where premiums are higher. Taking these age issues into consideration, RAND researchers estimate that the premiums paid by individuals using the exchanges would be 2.4 percent higher if health reform moves ahead without the individual mandate. This is a more modest impact than others have predicted.
When the individual perspective is dropped, RAND's estimate of the overall average increase is roughly in line with the studies done by other groups. The overall average premium among all people using the exchanges would be 9.3 percent higher -- an increase caused largely because a disproportionate share of people left buying policies after the mandate is repealed would be in older, more-expensive age brackets.
FundingSupport for the project was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff.
The Comprehensive Assessment of Reform Efforts (COMPARE) microsimulation model is funded by a consortium of individuals, corporations, corporate foundations, private foundations and health system stakeholders.
CitationThe Effect of the Affordable Care Act on Enrollment and Premiums, With and Without the Individual Mandate. Christine Eibner and Carter C. Price. RAND Corporation, No. TR-1221-CMF (2012).
This report describes the results of an analysis using RAND's COMPARE (Comprehensive Assessment of Reform Efforts) microsimulation model to predict the effects of a possible Supreme Court decision invalidating the individual mandate provision in the Patient Protection and Affordable Care Act of 2010 while keeping the other parts of the law intact. The authors predict the effects of such a decision on health insurance coverage overall and for subgroups based on income. They also estimate where people will obtain insurance in scenarios with and without the mandate and how the elimination of the individual mandate will affect insurance premiums.
The analysis predicted that, if the individual mandate were to be eliminated: (1) 12.5 million people who would have otherwise signed up for coverage will be uninsured. (2) Premium prices in the non-group market will increase by 2.4 percent. (3) Total government spending will increase modestly, from $394 billion to $404 billion in 2016. (4) The amount of government spending per newly insured individual will more than double, from $3,659 to $7,468. The study estimates a smaller effect on premiums than comparable studies because the RAND team uses a method that accounts for the difference in the age composition of enrollees with and without the mandate.
|Last Updated on Saturday, 18 February 2012 20:58|