Your Healthcare Guide

Why Do I Have to Buy Health Insurance?

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Unless youve been living under a rock, you know that President Barack Obama has signed a health-care bill that contains several landmark reforms to the nation's health insurance system. Some parts of the Affordable Care Act sound great: Insurers will no longer be able to deny coverage for preexisting conditions, and young adults will be allowed to stay on their parents' health plans until the age of 26.

Others sound less favorable. Uninsured people will have to buy health insurance—a policy known as the "individual mandate"—or pay a fine. Some of those people will qualify for Medicaid (which will be expanded under the new law), and some may choose to buy into their employers health-care plans. Most, however, will have to select a private insurance plan through new, state-run insurance marketplaces (known as exchanges).

The individual mandate goes into effect in 2014 (open enrollment starts in October 2013), and it has generated some serious controversy. More than a dozen state attorneys general have challenged it as unconstitutional and an encroachment on state sovereignty, and some people have suggested that the fines—which are as low as $95 in the first year—won't persuade people to buy an insurance plan that may be far more expensive.

What will the individual mandate mean for you? Will it actually work?

To find out, we asked Michael Doonan, PhD, an assistant professor at the Heller School for Social Policy and Management at Brandeis University, in Waltham, Mass., and author of American Federalism in Practice: The Formulation and Implementation of Contemporary Health Policy. The buy-insurance-or-pay policy is closely modeled on the one that took effect in Massachusetts in 2006 as part of the states health-care reform. Doonan has studied the individual mandate in his home state extensively, and has suggested that the experience in Massachusetts holds many lessons for the national version.

Q. Why is the requirement to purchase insurance an important feature of health reform?

A: Ending preexisting-condition exclusions and requiring health insurance companies to provide insurance to all takers would be difficult without the mandate. If people knew they could get coverage for an illness at anytime, they might just wait until they were sick to sign up. Having a significant number of people paying premiums only when theyre sick would cause health-care premiums to spike and would be a disaster for the American health-care system.

The mandate will lead to more healthy people being covered, and adding these people to the health insurance "risk pool" will theoretically lower the per-person cost of insurance. Who's buying individual health insurance policies right now? People who think they're going to need health insurance. Therefore, costs are really, really high. And so if you say, "Alright, healthy people, you need to jump into that pool," then those costs are going to be lowered.

Former Massachusetts governor Mitt Romney made the argument [for a mandate] based on the concept of individual responsibility. For example, if someone is uninsured, but gets into a car accident, they still receive care. And if they can't pay, the costs are passed along in higher premiums to everyone who is covered.

Next Page: What will prevent employers from dropping health coverage for their employees?

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