The Individual Mandate–A Fool’s Errand By Another Name

Over at Kaiser Health News Roni Caryn Rabin made the argument that the reason New York insurance rates are dropping so dramatically is because of the individual mandate. Here is what she said:

The nosedive in health insurance prices that New York officials announced earlier this week was driven by many factors, but the most important was the individual mandate, a central component of Obamacare.

Arguably the poster child for the Affordable Care Act and the Individual Mandate has to be Massachusetts health care system, so let’s look at their experiences. Back in 2011 Austin Frakt pointed out in “The individual mandate: Evidence from Massachusetts” that the “mandate did the job it was designed to do”. I pointed out in a comment that this success did not translate into lower insurance rates in the individual health insurance market.  When I entered my demographic data into the Health Connector for Massachusetts in 2011,, the lowest Bronze plan available would cost me $1,296 per month. When I looked up comparable plans on for Ohio and it costs me $305 per month. In fact there were 15 plans available for less than $400. It is interesting to note that Ohio seems to have a lot more competition than the states whose health insurance regulations look most like the Affordable Care Act, Massachusetts and New York. From the Massachusetts experience we can conclude that the individual mandate has not been a significant factor in reducing the cost of the health insurance in Massachusetts. In John McDonough’s article, “Does Massachusetts Have the Nation’s Highest Health Insurance Premiums? It Depends.”, he argues that the higher cost for Massachusetts is primarily the result of higher household income. A cynical person might conclude that Massachusetts is paying the highest rates it’s population will bare without screaming. What the Massachusetts experience has shown us is that the Affordable Care Act and in particular the Individual Mandate will drive the premium costs in the individual market upward to the rates paid by the large group plans and we are not going to know why. Are the higher rates because of the individual mandate, higher household income like they have in Massachusetts, or less competition as a result of more regulations like they have in New York and Massachusetts? The ironic part is that none of these reasons for higher rates are likely to result in better health care outcomes for the general population. So if you purchase health insurance in the the individual market you are confronted with the painful dilemma. Your health insurance rates will soar out of control if the individual mandate does not work or your health insurance rates will go up probably up to the point where they are barely affordable if the individual mandate does work. In either case you lose. The best solution is for us to go back to the system we had before the Affordable Care Act and think up a more equitable single payer system to pay for guaranteed access.