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.
Kill the individual mandate and you're probably killing the bill, too. The mandate is what keeps average premium costs low, because it keeps healthy people in the insurance pool. It's why costs have dropped in Massachusetts, not jumped. It's why every other country with a universal health-care system -- be it public or private -- uses either a mandate or the tax code. It's why the Obama administration flip-flopped.
*This item previously stated that Beck was referring to the individual mandate provision of health care reform. Media Matters regrets the error.
This item previous stated that Beck was referring to the individual mandate provision of health care reform. Media Matters regrets the error.
