Mandates for Health Insurance

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

Covering the uninsured is a key policy goal of the Democratic Party and its remaining two Presidential nominees, Hillary Clinton and Barack Obama. Although both have announced similar plans for health care reform, their strategies to achieve universal health insurance coverage differs. The key difference between the two and the Republican Party involves the use of mandates.

Purpose of health policy or idea

Health care is high on the policy agenda. Covering the uninsured is a central goal for all candidates, but their strategies to achieve universal health insurance coverage differ. A key difference involves the use of mandates, which require individuals or employers to purchase health insurance or face penalties. 

The Democrats propose an employer mandate. One proposal is to require large employers to provide health insurance or pay the cost of care into a public fund; small employers would be given tax credits to keep or begin offering coverage. This is similar to what is being implemented in the state of Massachusetts. Another approach is that employers who do not offer coverage or contribute towards their employees' health care would be required to pay a payroll assessment. 

A key difference between the two Democratic candidates (as well as between Democrats and Republicans) involves the use of an individual mandate which would require all adults over the age of 18 to purchase coverage (Clinton's proposal). Another approach is that near universal coverage is achievable by providing affordable insurance options in combination with a mandate for children and employers (Obama's proposal). One estimate is that if the individual mandate is not included that approximately 15 million individuals would be left uninsured.

Compared to a voluntary system, an individual mandate offers several advantages. First, previous analyses have shown that voluntary strategies such as public program expansions and subsidies for low-income individuals would only reduce the number of uninsured by 29-40 percent; the addition of an employer mandate could further reduce the number of uninsured by 50 percent (Blumberg, 2008). Second, older and sicker individuals are most likely to voluntarily enroll, leading to adverse selection concerns. Third, funds currently used to provide care for the uninsured would be available to invest in other health care reforms (Blumberg, 2008).

On the other hand, experience with mandates in several sectors including health care has shown compliance rates ranging from 30-99 percent (Glied, 2007). Glied and colleagues identify three key features necessary for mandates to be effective. The cost of complying with the mandate must be affordable - studies of automobile insurance - mandated in 47 U.S. states - show that the number of uninsured drivers rise with increases in premiums. Second, the penalty for non-compliance must be heavy but not excessive. Penalties that are too low will encourage non-compliance if the penalty is cheaper than the cost of compliance. Penalties that are too high can also encourage non-compliance if it is believed that excessive penalities will not be enforced. Third and related, timely enforcement is critical, often requiring triangulation of multiple data sources and strategies to identify individuals and enforce penalties.

Main points

Main objectives

Reducing the number of uninsured is a central goal of both parties in the Presidential campaign. One key difference is the use of mandates to achieve universal health insurance.

Type of incentives

Mandates for health insurance typically impose a financial incentive for non-compliance. Non-financial incentives include prison time.  

Groups affected

Insurance companies, consumers, providers, employers, federal government, chronically ill

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

Massachusetts is the only state to have implemented both an individual and employer mandate. Initial evaluations suggest that the affordability of health insurance remains a significant barrier, resulting in many individuals remaining uninsured. Employer mandates alone will not result in universal health coverage.

Political and economic background

In 2007, 47 million Americans were uninsured. It has been estimated that the uninsured cost approximately USD 41 billion in uncompensated care. Federal, state, and local governments pay as much as 85 percent of these costs (Hadley, 2004). Reducing the number of uninsured has long been a policy objective in the US. In the current campaign the emphasis has shifted from the common goal of reducing the uninsured to a debate over the details on how to achieve this. One area of contention is the individual mandate.

Change of government

Addressing the problem of the uninsured is a leading priority among 2008 presidential candidates.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

Massachusetts became the first state in 2006 to implement an individual mandate for health insurance. Employer mandates have a more extensive history. Hawaii was the first state to implement an employer mandate in 1974. Employers are required to offer health insurance to employees who work more than 20 hours a week. Over the next thirty years, employer mandates have been proposed by several other States and in President Clinton's 1993 Health Security Act without success (Oliver, 2004). Legal issues and employer opposition have been the main obstacles. The Employee Retirement Income Security Act (ERISA) of 1974 prevents state governments from regulating the benefit plans (including health) offered by self-insured employers. This allows employers who operate in multiple states to offer a uniform benefit package across the country, without adhering to individual state regulations (Butler, 2005). However, while states cannot explicitly mandate that employers offer health insurance to their employees (i.e. change the structure of their benefits), they can potentially require them to contribute to their health care (Butler, 2005). Typically known as a 'pay or play' or 'fair share' mandates, employers either provide health insurance coverage to their employees or pay into a public fund for their care. States have had varying success with this type of mandate. In Maryland, it was struck down on the grounds that it preempted ERISA, while in California an Appeals court upheld San Francisco's play or pay mandate. Both Massachusetts and Vermont implemented a fair share mandate in 2006, which were not challenged in the courts. 

Initiators of idea/main actors

• Leistungserbringer: Providers' reaction to mandates is mixed. They are generally supportive of policies which would reduce the cost of uncompensated care, unless a substantial number of uninsured remain and continue to access their services.

• Kostenträger: Insurance companies are opposed to insurance expansions which could lead them to enroll a large number of previously uninsured high-risk individuals. The Association of Health Insurance Plan's proposal does not include any mandates.

• Patienten, Verbraucher: Consumers are more likely to support an employer than an individual mandate, which can be viewed as a loss of personal liberty and choice.

• Privatwirtschaft, privater Sektor: Opposition primarily occurs among those not already providing health benefits to their employees.

• Politische Parteien: Most Republicans oppose mandates. The Democratic party is generally more receptive, but issues such as affordability can lead to divisions.

Approach of idea

The approach of the idea is described as:
new: Massachusetts became the first state to implement an individual mandate for health insurance in 2006.
renewed: Employer mandates have been proposed by several states since 1973 (Hawaii, Massachusetts, Wisconsin, Oregon, California, Maine, Maryland, and Vermont) and by previous Presidents - Nixon in 1971 and Clinton in 1993.

Innovation or pilot project

Local level - In 2006, the state of Massachusetts implemented both an individual and employer mandate.

Stakeholder positions

Most employer mandates are structured such that the vast majority of businesses are already in compliance. Opposition occurs primarily among those employers who do not provide health benefits to their employees. Small employers are also concerned with the costs of a mandate if they are not exempt or do not receive adequate subsidies. Implementing both an individual and employer mandate in combination within a framework of shared responsibility by all stakeholders has become more acceptable to employers. 

The Republican party is generally opposed to mandates, but the concept of shared responsibility has gained some support. An individual mandate in combination with tax credits may also appeal to some members of the Republican party. The Republican nominee John McCain, however, has stated that he will not implement any type of mandate. The Democratic party is much more receptive to mandates, although as the differences between the Obama and Clinton campaigns show, details of the mandates such as affordability can cause divisions. 

A majority of American workers support an employer mandate (85%), however, they are conflicted over the details - for example, which employers should fall under the mandate (e.g., small and large business), and which employees should be covered (e.g, full time and part-time workers). Only 50% believe that an employer mandate should affect to all employers (Schur, 2004). An individual mandate can appeal to those who believe it encourages individual responsibility, while others may feel that this requirement is a loss of personal liberty. 

Actors and positions

Leistungserbringer
Physicians and hospitals	sehr unterstützend		stark dagegen
Kostenträger
Insurance companies	sehr unterstützend		stark dagegen
Patienten, Verbraucher
Patients/Consumers	sehr unterstützend		stark dagegen
Privatwirtschaft, privater Sektor
Employers	sehr unterstützend		stark dagegen
Politische Parteien
Republican party	sehr unterstützend		stark dagegen
Democratic party	sehr unterstützend		stark dagegen

Influences in policy making and legislation

The AmeriCare Health Act of 2006 and the Healthy Americans Act of 2007 have both incorporated individual and employer mandates (Collins, 2007). However, the Massachusetts Health Care Reform Plan is the only legislation currently enacted into law. Its key components include: a) An individual mandate for all adults, with a penalty of upto 50 percent of premiums for non-compliance; b) An employer mandate: All employers with 11 or more employees must provide health insurance or pay a contribution of $295 per employee per year; c) The Commonwealth Choice program which links individuals and small businesses to affordable health plans; d) The Commonwealth Care program, which provides subsidies on a sliding scale for low-income individuals (KFF, 2007).

Legislative outcome

success

Actors and influence

Leistungserbringer
Physicians and hospitals	sehr groß		kein
Kostenträger
Insurance companies	sehr groß		kein
Patienten, Verbraucher
Patients/Consumers	sehr groß		kein
Privatwirtschaft, privater Sektor
Employers	sehr groß		kein
Politische Parteien
Republican party	sehr groß		kein
Democratic party	sehr groß		kein

Positions and Influences at a glance

Adoption and implementation

The Health Reform Plan established an independent agency, the Massachusetts Health Connector, to implement the plan. Its responsibilities include establishing minimum coverage standards for plans to meet the individual mandate requirement, as well as affordability standards for individuals at different income levels. It also administers the Commonwealth Choice and Care programs. (Health Connector, 2008)   

Monitoring and evaluation

Estimates of the number of uninsured in Massachusetts at the time the legislation was signed into law in 2006 vary from 400,000 to 650,000 (State vs. Federal). The Commonwealth Connector Board estimates approximately 300,000 newly insured individuals since the time of the legislation. In FY 2008, the Board underestimated the number of individuals who would enroll, shifting the number of uninsured nearer to 650,000 (Health Connector, 2008).  This leaves a substantial number uninsured - In 2007, the Board estimated up to 2 percent of the population would be exempt from the mandate because they could not afford coverage (KFF, 2007). 

Results of evaluation

N/A

Expected outcome

Mandates have historically encountered opposition, however the recent legislation in Massachusetts has encouraged both the Presidential candidates as well as other states to incorporate them in their coverage expansion plans. Affordability, appropriate penalties for non-compliance, and timely enforcement are necessary for individual mandates to achieve their intended outcome. Some experts believe that both an individual and employer mandate are needed to achieve the largest reduction in the uninsured.  

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch

Mandates for health insurance will not affect features of the US health care system such as the quality of care, unless funds previously used to care for the uninsured are redirected towards these efforts.

References

Sources of Information

• Blumberg L, Holahan J, Hadley J, and K. Nordahl. Setting a Standard of Affordability for Health Insurance Coverage. Health Affairs (358) 4: w463-473, June 2007.
• Blumberg L and J. Holahan. Do Individual Mandates Matter? The Urban Institute, January 2008.
• Butler PA. ERISA Implications for Employer Pay or Play Laws. Issue Brief, March 2005. California HealthCare Foundation.
• Collins SR, Davis K, and JL. Kriss. An Analysis of Leading Congressional Health Care Bills 2005-2007. Part I: Insurance Coverage. The Commonwealth Fund, March 2007.
• Glied S, Hartz J, and G. Giorgi. Consider It Done? The Likely Efficacy of Mandates for Health Insurance? Health Affairs (26) 6: 1612-1621, November/December 2007.
• Hadley J and J. Holahan. The Cost of Care for the Uninsured: What Do We Spend, Who Pays, and What Would Full Coverage Add to Medical Spending? Issue Update 2004. Kaiser Commission on Medicaid and the Uninsured.
• Kaiser Family Foundation. Massachusetts Health Care Reform Plan: An Update. Kaiser Commission on Medicaid and the Uninsured, June 2007.
• Massachusetts Commonwealth Connector. Health Connector Facts and Figures. March 2008.
• Oliver T. State Employer Health Insurance Mandates: A Brief History. Issue Brief March 2005; California HealthCare Foundation.
• Schur C, Berk M, and J. Yegian. Workers' Perspectives on Mandated Employer Health Insurance. Health Affairs (w4): 128-135, March 2004.

Author/s and/or contributors to this survey

Petigara, Tanaz and Gerard Anderson

Empfohlene Zitierweise für diesen Online-Artikel:

Petigara, Tanaz and Gerard Anderson. "Mandates for Health Insurance". Health Policy Monitor, April 2008. Available at http://www.hpm.org/survey/us/b11/4