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Health Insurance Plan Mandate in Senate Bill

Armen Hareyan's picture

In a late night vote, 60 senators voted to allow healthcare reform to go forward. This is a big victory for Senate Democrats, such as majority leader Harry Reid. The bill is intended to cover millions more Americans with a health insurance plan. Strident Republican opposition, as well as controversies surrounding abortion and the possibility of a government-run public option, have received the most press. However, the Senate's legislation includes a game-changing provision: the health insurance mandate.

When healthcare reform fully takes effect, all U.S. citizens and legal residents will be required to buy a health insurance plan. If they do not, they will be subject to annual fines. This is similar to the reform enacted in Massachusetts earlier this decade. Proponents believe that mandates result in lower health care costs, since the cost of care is spread among more individuals. Although the concept of insurance is that the majority of people paying premiums in any given time do not use the insurance; therefore, covering costs for the few that do, in practice it is often the unhealthiest who make having a health insurance plan a priority. Coverage is more expensive as a result, because the risk pool is more expensive to insure when it is a relatively small group with many pre-existing conditions involved. The theory is that by encouraging younger, healthier people who use less health care to sign up, costs will decrease for all.

However, the results of the health insurance plan mandate in Massachusetts are mixed. While the number of uninsured has decreased in the state, many residents still prefer to forgo insurance and pay the fine instead. Those fines can reach up to $750 if the Senate has its way; that amount is equal to or less than the cost of 12 months of many health insurance plan premiums. Failing to pay the fine or get health insurance can lead to jail time, just as failing to pay your income taxes can.

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Such actions may appear draconian, but they were required in order to have the interests of multiple groups coincide. Liberals have successfully pushed for bans on several common health insurer practices: denying health coverage to people with pre-existing health conditions, dropping people from their health insurance plan after they become sick, charging varying rates based on gender or occupation, and applying overly restrictive lifetime and annual limits to coverage. These regulations are very helpful to consumers, but may increase health care costs if the rest of the health insurance system stays the same; without prodding, only the sickest and most expensive patients will buy coverage. The public option was proposed largely as a method of controlling costs by competing with private health insurers and driving prices down, but it was unacceptable to moderate and conservative Democrats. Hence, the mandates were enacted to satisfy their key objection.

There is still significant concern on how mandates will impact the average American. Even after fully regulated health insurance exchange markets are created in 2014, a health insurance plan is still a daunting expense. The Senate's bill doesn't leave low- and middle-income individuals out in the cold. First, it expands Medicaid eligibility to those with yearly incomes reaching up to 133% of the poverty level. The health insurance plan for poor individuals and families has millions of Americans enrolled--and more have qualified as a result of the current recession, but many states have had far lower limits.

For those who earn too much to qualify for Medicaid, the federal government will provide subsidies. These subsidies can be used towards buying a private health insurance plan on the exchange market. Anyone whose annual income is at or below 400% of the poverty level is eligible for the health insurance subsidy. For an individual, that amount is $43,320. A family of four is eligible if their combined annual income is under $88,200.

Democratic leaders in the Senate are looking to pass their massive healthcare reform legislation by Christmas Eve. The recently hyped vote was simply a procedural measure that would conclude debate on the bill; while it is an important milestone, it does not mean that reform is a sure thing. It is also important to remember that the Senate's version of the bill must be combined with that of the House of Representatives. The House's version differs in significant ways: first and foremost, it includes a public option health insurance plan. Where the bills vary, the more conservative Senate version is most likely to stand, as a result of its greater likelihood to pass.

Written by Yamileth Medina
VitalOne Health Plans Direct, LLC.