In a recent New York Times op-ed (January 31, 2003), Ted Halstead, the president of the New America Foundation, called for a new universal health insurance plan based on mandating individuals to obtain insurance. Louisiana senator John Breaux has recently proposed a similar model.

The idea of offering basic affordable insurance coverage is a good one. Both men deserve credit for advancing the goal of universal insurance coverage and helping to put it back on the national agenda. The number of Americans who lack health insurance dropped only slightly during a decade of national prosperity. With a faltering economy and the states’ fiscal crises, the problem of the uninsured is only likely to worsen.

• Would these plans really reduce the numbers of the uninsured and lower premiums?
  
• Is the analogy such proposals make to automobile insurance appropriate? In what ways?
  
• Would this plan be a big improvement over the status quo? Are insurance policies purchased individually through state-run programs preferable to a comprehensive federal plan?
  

One of Halstead’s principal goals, a worthy one, is to get uninsured Americans who could afford individual health insurance to buy it. This would expand insurance pools and reduce premiums.

Halstead writes that “most of the uninsured are members of the middle class.” To be sure, both the income levels of the uninsured and the scope of the middle class are a matter of some dispute. However, a 2001 study (based on 1996 survey data) found that over half the uninsured make less than 200 percent of the federal poverty level. The majority of those without insurance are far from being middle class by any definition.

If a majority of the uninsured could afford care, then public subsidies and new government spending on health care would be modest, making Halstead’s plan politically attractive. But because the reality is that the uninsured are less well-off, very high subsidies would be needed to offer decent basic coverage.

High subsidies would probably be needed whether participation in the basic plan were mandatory or voluntary, like Part B of Medicare. (Halstead presumably envisions individuals purchasing coverage at group insurance rates, though this is not specified in the Times article.) To be sure, we would be better off as a society if all Americans had health insurance. But the advantages that Halstead cites, such as better care, regular checkups, and peace of mind, are primarily social benefits. They aren’t likely to spur individuals to comply with a mandate to buy private insurance.

Moreover, government subsidies attractive enough to generate enrollment in a basic plan would certainly induce employers to try to reduce their health expenditures by dropping coverage and using this basic government plan as a safety net. (This is why Senator Breaux’s plan includes a “maintenance of effort” clause aimed at employers.)

In some respects, requiring auto insurance coverage is a poor analogy. In others, it points out challenges that a mandatory individual health insurance plan would find it hard to overcome.

There is still no guarantee that the uninsured will join the insurance pool. Despite auto liability insurance being mandatory in almost all states, large numbers of uninsured drivers take to the roads anyway. In New Jersey, the highest-cost state for auto insurance, about 12 percent of drivers are uninsured, contributing to higher rates for others.

Penalties for non-compliance for lacking health insurance would be harder to assess. The uninsured driver can be fined or have his license revoked. Most Americans would find it draconian, on the other hand, to refuse medical care altogether to the uninsured. Assessing financial penalties on the uninsured who have sought health care would be similarly counterproductive.

Moreover, slapping thousands of dollars in tax bills onto those who are caught seeking care without health insurance is surely likely to prompt a surge in tax evasion.

Halstead writes that “insurers would have to accept all comers and be prevented from discriminating on the basis of pre-existing conditions.” But which private insurers would reliably offer a community-rated basic plan of this sort, especially to a population that might contain large numbers of sick and poor individuals? This seems like a perfect recipe for the kinds of high costs, heavy-handed regulatory policies, and insurer exits that have chronically plagued New Jersey’s automobile insurance system.

Some would-be health care reformers, like Halstead, start with a private insurance (individual responsibility) model and try to fix the problems that a competitive marketplace poses for equity and access. His individual mandates proposal reveals many of the difficulties with this approach. Others begin with a public insurance (social justice) model, like Medicare, and try to adapt it to deal with issues such as overall cost or overuse of health care. On balance, the latter strategy makes more sense.

Leif Wellington Haase is a senior program officer and Health Care Fellow at The Century Foundation.