Wednesday, March 28, 2012


The Supreme Court and the Insurance Mandate

No one knows what the outcome will be in the case now before the Supreme Court.  The case deals with several features of the new law regarding health insurance coverage.  The aim of the law is to make sure that everyone is covered.  To achieve that goal with private insurance, it is necessary that the insurance pool be as large as possible.  That is, just as in the case of home or auto insurance, everyone shares the risk.  The system will break down if only those individuals who expect to use the insurance actually buy it.  If home insurance were restricted to those whose homes were in real danger of being damaged by flood or fire, the premiums on this restricted pool would be high enough that the insurance would not be worth while.

Once the decision was made to create a system based on what now exists, it was necessary to create a large enough pool that insurers could insure everyone, regardless of existing conditions, at reasonable and affordable premiums.  Insurers naturally tend to try to insure healthy people.  Healthy people tend not to buy insurance because they don't expect they will need it.  Hence, the requirement that everyone should either buy an insurance policy or pay a special tax, to be used to reduce the premiums charged to those people who do buy health insurance.

The system won't work unless everyone pays a share of the total health care cost for the whole nation.

The Court will decide, among other things, whether Congress has the power under the Constitution to require everyone to buy health insurance.  If the Court decides that the mandate is unconstitutional, the whole scheme will have to be revised.  It probably will be necessary to enact a national health care plan, paid for with taxes, to cover everyone.  The people who have brought the case to the Court because they object to the mandate are providing the justification for the need of a national plan that covers everyone, similar to the "single-payer" system in Canada or the National Health Service in many European countries.

I have mixed feelings about this case.

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