Obamacare without the mandate 

My colleague Conn Carroll and I have been having a back and forth over the benefit of repealing the individual mandate as part of a trigger within the debt deal. Conn takes issue with my assertion that repealing the mandate would unravel the insurance regulations, and he insists that, "Repealing it would make health insurance marginally more expensive..." But I think he drastically understates what would happen to premiums without the mandate, and our experience at the state level bears this out.

Just to refresh everyone's memory, when the government forces insurers to cover those with preexisting conditions, healthy people exit the insurance market because they know they can wait until they get sick to purchase coverage, and this effect gets compounded by regulations that also prevent insurers from charging based on health status. So as more healthy people leave the market as a result, premiums go up even higher, which drives more of them out, and so on. This was the experience in Kentucky, which instituted the other regulations without a mandate in 1994. Within two years of enactment, 60 insurers had exited the state, leaving it with just one private insurer in the individual market, plus a now defunct state-run plan.

As for premiums, here's what a joint study (PDF) by the Council for Affordable Health Insurance and the Heartland Institute found:

As competition in Kentucky’s individual insurance market fell and the few remaining insurers offered benefit packages mandated by the state, Kentuckians got a rude awakening. Out-of-pocket expenses rose above what they had been in pre-reform days, and average premiums jumped between 36 and 165 percent.

This is not what I would consider a "marginal" increase. The backlash against the disastrous experiment in Kentucky ended up forcing the state to roll back the onerous regulations to attract insurers into the state.

After these and other failed experiments, health policy analysts determined that the best way to fix the problem caused by government distorting the private market was yet more government intervention, through the unconstitutional individual mandate. The pre-existing condition ban is popular because people don't realize the broader effects of the requirement. If there were no mandate, let's see what happens when the insurance market is being destroyed and premiums are skyrocketing for all Americans. My guess is that the combination of public pressure and insurance industry lobbying would force their repeal, too.

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Philip Klein

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