The Obamacare mandate is misunderstood

Members of the tax-writing House Ways and Means Committee work to shape the GOP’s far-reaching tax overhaul, on Capitol Hill in Washington, Monday, Nov. 6, 2017. (AP Photo/J. Scott Applewhite)

Have questions about open enrollment on the ACA health insurance marketplace? We’re here to help. Submit your questions to MONEYQUESTIONS@YAHOO.COM and they may be answered by our experts in an upcoming Yahoo Finance Facebook Live Chat Tuesday, December 5th, 2017 at 2PM EST.

The Affordable Care Act’s individual mandate for everyone to have coverage is frequently described as unpopular, but it also suffers from being misunderstood, making it more difficult to objectively evaluate its utility.

On the one hand, its negatives are easy to see. People must show they have coverage, otherwise they are subject to a penalty of $695 or 2.5% of an individual’s annual income, whichever is higher. If coverage is the carrot, this is the stick, and it’s not surprise that libertarians aren’t the only ones that don’t like being forced to buy insurance.

But the flip side of the mandate is far more arcane, though not as much as some might think.

The logistical benefits of the mandate

The mandate has likely kept Obamacare afloat with insurers, which would not otherwise participate. While there is unpopularity surrounding the mandate — a YouGov poll had it at a 66% disapproval in February — Obamacare’s subsidized coverage had broad support with an 80% approval and its guaranteed issue (covering those with pre-existing conditions) had 75% approval.

The strength of support for Obamacare and specifically for allowing those with pre-existing conditions to obtain coverage sharply conflicts with the mandate’s unpopularity. The two are intertwined, something that polling shows is widely misunderstood.

A pool of insured people will only succeed if it’s made up of a diverse mix of people: those who need to draw from the plan and people who don’t. The ones who do not need coverage may not receive money, but they receive the peace of mind a safety net gives.

For myriad reasons, younger, healthier people may wish to opt out of coverage, and without a mandate they may simply do this, a move that would make the insurance pool heavier with those with pre-existing conditions who do not wish to opt out. Economically, this makes things untenable for insurers, which would have to increase premiums. The mandate, as it were, makes it possible to keep those with pre-existing conditions insured without runaway premiums.

Conservative philosophy popularized the mandate, and it may destroy it

The mandate has an interesting history, making its debut in American politics in 1989 from the conservative side via the right-leaning think tank The Heritage Foundation. Writing about the personal responsibility of self-sufficiency, a principle often at the center of some conservative arguments, the Heritage Foundation’s Stuart M. Butler, Ph.D. made the high-level conservative case.

A mandate on individuals recognizes [an] implicit contract,” he wrote. “Society does feel a moral obligation to ensure that its citizens do not suffer from the unavailability of health care. But on the other hand, each household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself.”

Butler equated having a mandate for health insurance to having a mandate for car liability insurance, seeing a way to square coverage for all without resorting to ideas that some conservatives might consider to be “nanny state” territory.

The goals outlined in the 1989 paper are familiar: “guaranteed universal access to affordable health care,” a reeling in of “inflationary pressures” on the health care industry, and protecting health care innovation. Today, however, both the Foundation and Butler opposes Obamacare’s mandate, having shifted over time.

The mandate may go via tax reform, not by health care reform

Considering the mandate now is starkly different from considering a mandate almost three decades ago, especially since changes to the law of the land may have trickling consequences for millions as the Congressional Budget Office outlined over and over during the repeated efforts to repeal Obamacare, which ultimately failed due to the lack of a viable alternative.

But perhaps the most unusual thing about the current debate over the mandate’s future is that it is not coming via a health care reform process but instead in the context of a tax bill.

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes