Pretend you’re an insurance agent. Someone comes to you and wants to buy fire insurance for their home. Upon questioning, you realize that their home is actually on fire as you speak. Do you sell that individual fire insurance at any price? Of course not. He has a pre-existing condition (his house is on fire), and there is no rate you could set that would possibly be profitable to your company unless that rate were more than what it would cost to repair the home. And, in that case, it would be cheaper for your customer to repair his home himself than to ask you to do it for him. You don’t sell insurance against things that have already happened.
But what if the government came along, as it did in Washington state in 1993, and said that your insurance company must provide health insurance to everyone who applies for it even if they have diabetes or cancer or Lou Gehrig’s disease? Wouldn’t that just put your company out of business? The answer is, yes, that would put your company out of business unless it refused to sell any more health insurance policies in that state. And that’s what happened in Washington state, where by 1999 it was no longer possible to buy an individual policy. Was the Washington state legislature really that stupid and short-sighted? Well, not exactly.
The original plan was to have an individual mandate, just like the one in the president’s Affordable Care Act. But when the Republicans took control of the state legislature after the 1994 elections, they got rid of the mandate without getting rid of the provision that the insurance companies must accept all applicants. Why did spiking the mandate wind up destroying the individual market for insurance in the whole state? Because the mandate assured that the insurance companies would have hundreds of thousands of new healthy customers who would cost so little to insure that it would make it possible to cover cancer and diabetes patients and still be profitable. In fact, this is the only way anyone has been able to come with that we can cover everyone with private insurance without bankrupting the insurance industry or having everyone pay impossibly high rates.
Speculation is running high that the Supreme Court of the United States (SCOTUS) will soon strike down the individual mandate in the president’s Affordable Care Act. If they do, they will leave us no option but to create a Medicate For All plan. And this is true whether they let the rest of the Act stand or they strike the whole thing from the books.
If the SCOTUS rules that the individual mandate is unconstitutional, it will destroy the only private means anyone has come up with to make sure that everyone can have access to medical care. Even if the subsides for the poor remain in place, meaning that no one will be denied care because they can’t afford it, the insurance companies can’t remain profitable if they are required to cover people with pre-existing conditions unless those costs are offset by tens of millions of relatively healthy customers. Ezra Klein provides proof of this here. This isn’t a matter of choice on the insurance industry’s part. It is just the nature of underwriting.
It is not possible to have a private health insurance industry that covers people with pre-existing conditions unless there is also an individual mandate requirement. Under those circumstances, the government would be forced to do away with its insistence that people with pre-existing conditions get coverage. And if the health care reforms don’t cover people with pre-existing conditions then not only will people with cancer and diabetes and other chronic diseases go bankrupt or go without treatment, but we won’t see any downward trend in the cost of health care. Without the mandate, people will wait until they get sick to seek insurance (which they will be denied) and treatment (which the insured will have to pay for with higher premiums). And we’ll go back to a system where getting sick while uninsured lands you in bankruptcy court.
In an attempt to avoid all this havoc, the SCOTUS could strike down the Affordable Care Act in its entirety. And then we will be left with all the old problems and no way to solve them through any kind of private-public partnership.
If only the mandate is struck down, or if the whole bill is struck down, we’ll have no other way forward but a single-payer system like Medicare. Without the mandate, private health insurance that covers everyone is impossible.
A Medicare for All system, on the other hand, has no need for private insurance companies. To be sure, they could still offer supplemental plans for those who want bells and whistles, but if people pay for their health care through taxes or tax withholdings, then we avoid any constitutional problem. We avoid any underwriting problem. People are covered regardless of whether or not they are employed or they’re sick.
But the most important thing is that, without the individual mandate, the left will have no other mechanism or avenue to push for if we want to make sure people get adequate health care. The Democrats will become the single-payer party. Is that what the conservative Justices on the Supreme Court want?
[I am a consultant for Democracy for America]