|By: David Nather January 13, 2013 11:22 PM EST|
|Can’t get enough of Obamacare’s individual mandate? Get ready for “mandate plus.”
The Obama administration always said there was a practical reason it needed the mandate, which starts next year. It wasn’t to be mean to people — it was supposed to pull in enough healthy customers to help pay for all the sick people who will get coverage. That’s why the White House stuck with it all the way to the Supreme Court — however unpopular politically, it was the best tool to make the new health system work.
Here’s the catch: The individual mandate penalties will be pretty weak as they are phased in over two years — only $95 when they start in 2014, much less than it costs to buy insurance. And yet, everyone with pre-existing conditions will have to be accepted for coverage right away.
That’s why insurance companies are telling the administration the mandate won’t be enough for the first two years. They want more incentives — such as a late enrollment fee — to get healthy people to sign up quickly. Without getting the healthy folks in, the fear is that everyone’s health insurance premiums could shoot through the roof when all those sick people get their coverage.
The idea is being called “mandate plus” — because some of the ideas were floated by health experts last year as replacements, in case the Supreme Court struck the mandate down. Now that the mandate is here to stay, insurance companies and some policy experts say the other ideas should go hand in hand with the coverage requirement to make the whole system work — and be affordable.
The states could impose some of these incentives, too, and they could become a future lobbying battleground. But right now, the insurers are focused on persuading the Department of Health and Human Services to add them on its own.
“The key really is, how do you get younger people to buy coverage?” said Justine Handelman, vice president for legislative and regulatory policy at the Blue Cross and Blue Shield Association. “If you can jump in and out every time you need services, costs will go up.”
The mandate is the “stick” that’s supposed to prevent that, by making people pay a penalty (or as the Supreme Court called it, a tax) if they don’t get health coverage when they’re eligible. When the mandate is at full strength in 2016, people will pay $695 or 2.5 percent of their income, whichever is greater.
But from a practical perspective, it’s really not that much of a stick in the first two years. Next year, if you don’t get health insurance, you’d pay $95 or 1 percent of your income — a little less than you might pay for an iPod Nano. In 2015, you’d pay $325 or 2 percent of your income.
“Certainly, we are concerned that the penalty is just $95 in the first year, which is far below the cost of coverage,” Handelman said.
That’s why some insurers want HHS to give them more sticks.
America’s Health Insurance Plans, the main trade group for health insurance companies, has asked HHS to impose late enrollment fees, so people who don’t sign up until they need the coverage will pay more than people who enroll right away. It’s the same concept that Medicare uses now for doctors’ and prescription drug coverage: Seniors don’t have to enroll right when they turn 65, but if they wait too long, they pay a penalty when they do sign up — and their premiums will always be higher as a result.
The insurers have suggested other penalties for people who delay, such as not letting them choose the most generous health plans and allowing insurers to impose waiting periods.
The Blue Cross and Blue Shield Association is asking HHS for the late enrollment fees and penalties, too. The National Association of Health Underwriters, which represents health insurance agents and brokers, called for late enrollment penalties too, warning that the impact on premium costs would be “enormous” if too many people wait until they’re sick or injured to buy coverage.
And the American Academy of Actuaries — the people who crunch all the numbers for health insurers’ costs — suggested late enrollment penalties and other measures, like not letting people sign up for coverage as often and requiring small employers to sign their workers up automatically.
It’s all a critical part of the smooth launch of the exchanges — which, if all goes well, will be the health plan marketplace for people with pre-existing conditions, and for those who can’t get covered through another source, like their employers or Medicare.
“There’s broad agreement that in order for the exchanges and the insurance market reforms to work, the coverage needs to be affordable, and there needs to be as many healthy people in the risk pools as possible,” AHIP spokesman Robert Zirkelbach said.
Some of these ideas used to be discussed as lighter alternatives to the individual mandate, which Congress would have to pass to add them to the health care law. But now, these groups are asking HHS to impose the measures on its own, saying it has the power to keep the health insurance market stable in the first two years.
It’s also an acknowledgment that, with the toxic politics of a divided Congress and lasting Republican opposition to the health care law, the chance that Congress would pass any legislation to help Obamacare work better is pretty much zero.
“Ever since the beginning of this, we’ve been concerned about the strength of the mandate,” said Cori Uccello, a senior health fellow at the American Academy of Actuaries. “These same kinds of things can be used to strengthen the mandate. They don’t need to be seen as an either/or.”
HHS officials won’t say whether they’re actively considering the measures, but the department specifically asked for these suggestions when it put out its proposed rule on the health insurance market reforms in November. The rule asked for comments on “additional strategies consistent with the Affordable Care Act that [CMS] or states might deploy to avoid or minimize disruption of rates in the current market and encourage timely enrollment in coverage in 2014.”
Insurers say that line in the rule was an encouraging sign. “That’s an indication that they’re interested in ways to mitigate any problems,” Zirkelbach said.
The health insurers have a vested interest in asking for the extra measures, of course. They want as many customers as possible — which is one of the reasons they pushed for the individual mandate in the first place.
But even some health care experts who are sympathetic to the health care law acknowledge it’s not a sure thing that the mandate alone will attract the needed number of healthy people, especially in the first two years.
“I am somewhat worried since penalties are low,” said Jonathan Gruber, the MIT economist who consulted on both the federal and Massachusetts health reform laws. “I think additional measures would certainly help, but they should not be overly painful” to consumers, he said.
Not everyone is convinced that the health insurers need extra sticks, though.
“I’m not going to say there are no concerns. There’s some uncertainty involved,” said Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center. But the law’s subsidies to help people buy coverage — which also start next year — should already make the coverage more attractive to young and healthy people, she said.
Several strategies built into the law, such as risk adjustment payments to help health plans that attract more than their share of sick people, do address the problems insurers are worried about, Blumberg said. And a strong outreach and enrollment campaign ahead of next year — stressing that generous coverage is available and people can get subsidies to help pay for it — should be more effective than adding new punishments for people who don’t sign up, she said.
“If you have a positive outreach campaign with the message, ‘Here they are, here are the exchanges, here’s affordable coverage, come and get it.’ Isn’t that more effective than, ‘Come and get it or we’re going to come get you?’” Blumberg asked.
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