Tuesday, December 21, 2010

Individual Mandate Struck Down in Court, But Plank Not Necessary


Individual Mandate Struck Down in Court, But Plank Not Necessary for Successful Health Reform
Jon Walker
Monday December 13, 2010

Today, U.S. District Judge Henry E. Hudson become the first judge to rule that the individual mandate in the new health care reform law is unconstitutional.

Hudson concluded that the individual mandate exceeded Congressional power because the federal government doesn’t have the constitutional authority to compel an individual to purchase a commodity on the private market.

Given that two other federal judges have ruled the individual mandate constitutional, the likely result is that the issue will soon end up before the Supreme Court.

This problem could have been avoided

This problem, of course, could have completely been avoided. You don’t need an individual mandate penalty forcing Americans to buy insurance from a private company to create a near universal health care system. There are dozens of ways to design a health care system without using the government to force people to give money to private companies.

An easy way around the constitutional issue would have been to include a public option and make the whole system more like Medicare. Instead of an individual mandate, you could “tax” individuals and provide them with insurance through the public option. You could then grant everyone who had private insurance a waiver from the tax. Even if the state doesn’t have the right to compel an individual to buy a private product, its constitutional right to tax individuals in exchange for government services is not in doubt.

It is important to note that there is still time to deal with this problem. Reconciliation can be used to add a public option to the health reform package if it is done before the end of this lame duck session.

Instead of an individual mandate, you could also just allow insurance companies to charge a back-premium penalty as a way of preventing people from signing up only when they were sick. This would give insurance companies the right to charge the previously uninsured a set amount of “back premiums” upon sign-up, reducing the financial incentive to remain uninsured until ill.

Completely eliminating the individual mandate shouldn’t have a huge effect on the insurance companies, despite what the administration and the defenders of the bill claim. Several states require guaranteed issue for individual coverage already. You don’t need the individual mandate in order to outlaw the denial of coverage based on pre-existing conditions.

Because the cost of insurance in the current law is so much greater than the cost of the mandate, making the decision to not buy insurance is still viable–the price of the penalty would still not make buying insurance a smart economic decision. Therefore, the mandate was unlikely to convince many additional people to buy insurance, and likely wouldn’t have that much impact on the number of people in the risk pools.

There is no reason the health care bill can’t stand as-is without the mandate. The fact that insurance companies have already been complying with things like guaranteed issue at the state level for years without a mandate means the law can stay in effect without one.

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