Importance of the individual insurance mandate: Evidence from Massachusetts

The 2010 U.S. Patient Protection and Affordable Care Act bears a number of similarities to the Massachusetts health care reform enacted four years earlier. Among them is a requirement that individuals buy insurance coverage or pay a fine, sometimes referred to as an “individual mandate.”

One of the requirement’s purposes is to help ensure that the insurance pool includes both low- and high-risk individuals, spreading the burden of coverage as widely as possible and thus reducing premiums. Some have argued that the requirement isn’t necessary for successful reform, however, and the provision’s constitutionality has been challenged in several U.S. states. (It was ultimately upheld by the U.S. Supreme Court.)

A 2011 analysis by researchers from Harvard University, MIT and Wellesley College, “The Importance of the Individual Mandate: Evidence from Massachusetts,” indicates that the insurance-coverage requirement and how it was enacted played an important role in the state program’s success.

To better understand the requirement’s effects, the researchers measured the health mix of those enrolling in the state’s Commonwealth Care program before, during and after the enforcement of the mandate; data included individuals’ age, health care spending and chronic illnesses. The results, published in theNew England Journal of Medicine,included:

• Enrollees who signed up before the mandate’s phase-in were nearly 4 years older, had about 45% higher health care costs, and were nearly 50% more likely to have a chronic condition than those who signed up once the program was fully effective.
• At the beginning of the mandate’s effectiveness, there was a significant increase in the number of healthy enrollees versus those with chronic conditions.
• When the mandate became fully effective, there was an enormous increase in the number of healthy enrollees. Afterward enrollments declined to historical levels as the state’s remaining uninsured residents complied with the law.

The researchers suggest that the significant increase of healthy enrollees as the program was phased in had a causal role in improving risk selection. Moreover, because the Massachusetts law provides higher subsidies than the federal legislation, the authors state that the national law’s mandate “could play an even larger role in encouraging the healthy to participate in health insurance markets.”

Tags: consumer affairs, health care reform