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The PPACA Mandate and Individual Rates

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Some people love the Patient Protection and Affordable Care Act of 2010 (PPACA) the way a mama hippopotamus loves a baby hippo.

Some people view PPACA, and especially the provision that’s supposed to require most individuals to have health coverage, as an attack on civil liberties.

Some on both sides, and in the middle, are curious about what exactly the mandate might do to lower or increase prices.

Matthew Buettgens and Caitlin Carroll try to answer that question in a new PPACA individual mandate paper distributed by the Robert Wood Johnson Foundation, Princeton, N.J.

The foundation is the kind of foundation that generally supports PPACA, and the Urban Institute also a PPACA-friendly kind of place, but the researchers have tried to show their work and explain how they came up with their numbers.

The researchers estimate that the average premium per covered life would have been about $5,100 in 2011 if all PPACA health insurance access rules had been in effect, along with the PPACA individual health insurance ownership mandate.

If PPACA had been in effect with no mandate, and consumer use of the new health insurance exchanges and subsidies was low, the average could have been 20% higher, or about $6,100 per month, the researchers estimate.

The researchers do not say what they think the coverage premium per covered life actually was, without PPACA, but they estimate elsewhere in the report that total costs for employers and individuals will be about 2.5% with PPACA, including the mandate, than the costs would be without PPACA

The researchers say the results of their simulations show that predicting how PPACA might work is complicated and will depend on how various PPACA features work together.

“The current nongroup market in New York, which is guaranteed issue and pure community rated, but does not have an individual mandate is cited as a doomsday example of what could happen,” the researchers write. “This market has an enrollment of less than 40,000 and premiums around $1,200 a month. However, New York does not have the provision under [PPACA] that provides subsidized coverage in the exchanges.”

The researchers say they’ve shown in an earlier paper that strong use of the exchanges and subsidies could help, even if the PPACA health insurance access rules took effect without a mandate, but, they say, how well the exchanges and subsidies will work will depend on the effectiveness of implementation and outreach.

ASSUMPTIONS

The U.S. Supreme Court is considering suits filed by states and other parties that contend that the PPACA individual coverage ownership mandate is constitutional.

If PPACA takes effect on schedule and works as drafters expect, it’s supposed to require carriers to sell coverage on a guaranteed-issue, mostly community-rated basis starting in 2014.

State and federal agencies are supposed to set up a new system of health insurance exchanges that will help individuals and small groups use new tax subsidies to buy high-quality coverage.

Buettgens and Carroll have based their predictions on the results of simulations they made using an Urban Institute health policy simulation model.

The researchers looked at what might happen if the PPACA changes were fully implemented in 2011. The researchers did separate simulations for scenarios in which consumers make heavy use of the exchanges and tax subsidies and scenarios in which consumers avoid using the exchanges or the subsidies, or both.

The researchers note that they had to make a number of assumptions to model how consumers might respond to the mandate, because, for now, Massachusetts is the only state that imposes a health insurance mandate.

The researchers say they developed their own assumptions about the effects of a mandate independently, then compared their assumptions with what actually happened in Massachusetts to try to calibrate their assumptions.

Over the past year, the researchers say, they have adjusted the model to reflect the fact that the Massachusetts individual mandate and the PPACA individual mandate provide exemptions for residents who can show that, even with any available subsidies, they have found health coverage to be unaffordable.

RESULTS

Under the current system, about 50 million people, or 19% of all U.S. residents ages 1 to 64, were uninsured in 2011, and 165 million, or 61%, had some kind group or individual private coverage, the researchers found.

If PPACA had been in effect with a mandate, the percentage of nonelderly residents with private coverage might have increased to 64%, and the percentage with no coverage might have dropped to 9.8%, the researchers say.

If PPACA had been in effect without a mandate, and consumers had failed to make much use of the exchanges or the tax subsidies, the percentage of people with private coverage might fall to 59%, and the percentage who were uninsured might be about 16%, the researchers say.

The researchers estimate employers and individuals were spending a total of $889 billion on health care in 2011 without reform, and that the cost of uncompensated care amounted to about $78 billion.

With PPACA and a mandate, employers and individuals would have spent more — $911 billion – but the cost of uncompensated care would have fallen to $39 billion.

With PPACA, no mandate, and low use of exchanges and subsidies, individuals and employers would have spent just $857 billion, but the cost of uncompensated care would have still been $61 billion, the researchers estimate.