Rebuilding the stool

PPACA is said to be a three legged stool. The first leg is expanding coverage by restricting underwriting to be limited by age, geography and smoking status. Insurance companies can not turn people away due to their medical history or projected future medical cost risk. This leg of the stool makes insurance available to everyone. It also makes insurance more expensive.

The next two legs of the stool address the cost problem. The next leg is subsidies to enable people to afford the more expansive and thus more expensive insurance. This allows relatively healthy people to look at their post-subsidy costs and believe that they are getting a good deal from a personal finance point of view. The other leg of the stool is the mandate penalty which does two things. The first it encourages the marginal deciders who are on average healthy and low cost users to buy a policy as the net cost savings of not having a policy won’t be too large. Secondly, the mandate penalty/tax funds some of the emergency care that people who opt-out will use over the course of the year. It eliminates some of the free rider problem.

The mandate is not perfect in eliminating free riders nor moving all people onto the Exchanges as there are numerous exemptions and a number of special snowflakes who don’t think they’ll ever get sick until they do. The recent South Carolina handyman going blind is a good example of such a special snowflake.

Shit happens, and insurance helps clean up. As long as the mandate moves enough people who are relatively healthy and relatively reluctant to buy an ACA policy without the final kick in the pants of paying something for nothing instead of something for something, it will work to keep the risk pools healthy enough to keep net premiums down.

The analogy is right but the details are wrong on the last part. That last leg has to be a participation enforcement mechanism that gets healthy people into the pool. An individual mandate is a type of participation enforcement mechanism but it is not the only one. If there is a negative ruling in King v Burwel giving up the individual mandate and replacing it with two or three year contracts with very limited open enrollment is a viable trade.

Andrew Sprung at Xpostfactoid is riffing off of Jonathan Bernstein’s argument that a reactionary victory at the Supreme Court could still lead to a complete Republican surrender on policy as reality hits the road. Andrew argues that removing the poison pill of repealing the individual mandate by speeding up the Wyden Waiver process would be an enticing piece of policy bait that everyone could live with:

think there’s a third possibility: with both sides under heavy pressure and public opinion as to who’s to blame hanging in the balance, Republicans might settle for amending the ACA in a conservative direction without destroying it. (See Michael Leavitt, Bush Jr.’s HHS Secretary, on this.) But how much amendment would be enough to satisfy the wrath of the party’s base?

Here’s one possibility: detoxify Bernstein’s poison pill a bit. Give each state the option of repealing the individual mandate.
Like most viable amendment proposals, this is really a version of enabling ACA innovation waivers without the waiver.

As long as there is a viable participation enfocement mechanism in place, the structure holds water, insurers stay viable, and the state hospital associations still get paid instead of increasing their charity care expenses. There are numerous work-arounds that could perform the same basic function of the individual mandate, so the individual mandate is trade-able as long as there is a functional replacement for it.