That individual mandate

THAT INDIVIDUAL MANDATE…. For health care reform proponents who now want to see the Senate’s reform plan defeated, most of the opposition is based on what’s not in the bill, namely a public option. But over the last 48 hours or so, there’s been a renewed push from progressive activists on something that’s still in the Democratic proposal.

The provision, of course, is the individual mandate.

You may recall that, during the Democratic presidential primaries, the Clinton and Edwards campaign unveiled plans that guaranteed expansive coverage through an individual mandate, while Obama’s plan did not. Clinton was right, Obama was wrong, and as the debate got underway in earnest this year, the president conceded that he’d changed his mind on this point.

Now it appears that many high-profile progressive activists would like to see him change it back. The argument is pretty straightforward: if consumers are required to purchase coverage, and there’s no public option, the new reform plan would necessarily require Americans to get insurance through private companies with a record of screwing over their customers. (I’ve seen some progressive criticism about this provision turning Americans into possible “criminals,” which, oddly enough, was a major right-wing talking point up until very recently.)

There are, however, some reasons to question the argument. For example, what was left of the public option in the Senate bill was so narrowly tailored that a large majority of the uninsured would have been required to purchase coverage but weren’t going to be eligible to choose a public plan anyway. Scuttling a watered down public option with a state opt-out doesn’t change the picture much.

But more to the point, does the policy itself have value? Kevin Drum noted that the “purpose” of an individual mandate is “sound,” because “it keeps the insurance pool broad and insurance rates down.” Ezra Klein fleshes this out in more detail this afternoon.

Pick your favorite system. Socialized medicine in Britain. Single-payer in Canada. Multi-payer with a government floor in France. Private plans with heavy public regulation in Sweden, Germany and elsewhere. None of these plans are “voluntary.” In some, there’s an individual mandate forcing you to pay premiums to insurance companies. In some, there’s a system of taxation forcing you to pay premiums to the government. In all of them, at least so far as I know, participation is required except in very limited and uncommon circumstances.

Holding the price of insurance equal, insurance is gamble on both sides. From the insurer’s perspective, it’s a better deal to insure people who won’t need to use their insurance. From the customer’s perspective, it’s precisely the reverse.

Right now, the insurer sets the rules. It collects background information on applicants and then varies the price and availability of insurance to discriminate against those who are likely to use it. Health-care reform is going to render those practices illegal. An insurer will have to offer insurance at the same price to a diabetic and a triathlete.

But if you remove the individual mandate, you’re caught in the reverse of our current problem: The triathlete doesn’t buy insurance. Fine, you might say. Let the insurer get gamed. They deserve it.

The insurers, however, are not the ones who will be gamed. The sick are. Imagine the triathlete’s expected medical cost for a year is $200 and the diabetic’s cost is $20,000. And imagine we have three more people who are normal risks, and their expected cost in $6,000. If they all purchase coverage, the cost of insurance is $7,640. Let the triathlete walk away and the cost is $9,500. Now, one of the younger folks at normal cost just can’t afford that. He drops out. Now the average cost is $10,600. This prices out the diabetic, so now she’s uninsured. Or maybe it prices out the next normal-cost person, so costs jump to $13,000.

This is called an insurance death spiral. If the people who think they’re healthy now decide to wait until they need insurance to purchase it, the cost increases, which means the next healthiest group leaves, which jacks up costs again, and so forth.

No individual mandate means higher premiums, less affordable coverage, and fewer options to control costs. It may be unpopular — though the polling is interesting on this — but it’s necessary.