MA vs. US: Round 1: Individual Mandate

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A mandate made sense in MA for a few reasons.  First, it was clear that our non-group market was failing due to adverse risk.   It was sort-of like a high-risk pool but there were no options for healthy people.  Because of changes that were made to the insurance laws in the mid-1990’s including guarantee issue, adjusted community rating (no underwriting allowed), and very limited product choice in the non-group market, the market was unaffordable.  The only people purchasing in this market were people who really “needed” insurance.  We saw large drops in enrollment each year  (insurance jargon calls this a death spiral) leading up to the reforms in 2006.

Second, we had VERY EXPENSIVE safety net, the Uncompensated Care Pool, growing in leaps and bounds each year with relatively little in the way of checks and balances.   The question was simple: Can we eliminate the black box and convert those funds to subsidies so people can more easily access primary care in cost-effective settings instead of relying on expensive emergency department care?

When we ran the models, and for our market the direction was pretty clear, we needed to include a mandate that required people to get some basic coverage.  We understood some would not desire insurance and had the wherewithal to cover their medical expenses.  The administration’s proposal allowed for this via a bond similar to the way auto insurance works in Massachusetts. The main point was to decrease bad debt in hospitals from uninsured people showing up in emergency departments without the means to pay large hospitals bills.

The bill that ultimately came out of the legislature and was later signed by Governor Romney called for the Connector Board to determine what would constitute “creditable coverage” and the idea of the bond was also dropped.  As we all know now, the board, under the Patrick Administration, adopted a standard that was more generous than a basic package.  And, while there was a lot of angst over the decision (some still remaining) most Massachusetts residents had coverage that was similar to the standard that was set.  At the time, it was estimated that 200,000 MA residents had insurance coverage that would not meet the standards set by the board.  This decision, however, locked us into insurance that pushed us further away from consumer-directed health care and had us embrace first dollar coverage with little cost-sharing.  This key decision might have looked very different had the election in 2006 gone differently in MA.

Creditable coverage in MA now includes limits on deductibles and overall cost sharing, inclusion Rx coverage, and no sickness or annual limits allowed.  Only adults must be covered and only if insurance is deemed affordable.  All people under 150% FPL are exempt from the requirement and the maximum penalty for anyone this year is $1068/yr.

The Federal law is modeled after MA’s regulatory framework (remember creditable coverage was not outlined in CH 58).  The benefit package looks remarkably similar.  There are some differences worth mentioning.   Younger people (to age 30) can purchase a more basic plan (MA only allows this until 26), there can be no lifetime limits on policies (a very expensive provision), the Federal law also requires children to be covered (not so in MA) and the penalty for wealthier people can be quite steep at 2.5% of income.

Probably the biggest difference is that most people in MA were already receiving coverage that was heavily subsidized by their employer, and that looked pretty similar to the package defined as creditable coverage (with the exception of Rx coverage) but this is NOT true most anywhere else.   Requiring everyone to purchase this level of “insurance” is a big deal.