The Mandate and Its Enemies

On the coattails of its second anniversary, the Supreme Court is hearing arguments regarding the constitutionality of the Affordable Care Act (ACA).

The question at hand is the legality of the "health insurance mandate." Requiring citizens to purchase health insurance on the private market, it stands as the first leg of the "three-legged stool" of health care reform -- the others being subsidies to help poor Americans pay for now-required health insurance, and laws forbidding health insurers from discriminating based on pre-existing conditions.

Such a moment occasions a peer back into the history of health reform to ask: Why the mandate in the first place?

There are two answers: the political answer, and then the technical answer.

First, the political answer: Because the multibillion-dollar health insurance industry had a lot to lose in health reform.

Stalwarts on the left have understood health reform to mean a complete reconstruction of the health system -- a move to the single-payer or single-provider system that have worked so well in other high-income countries.

Our health system has been a (pseudo-)market system for decades, and the industry that had the most to lose was the health insurance industry -- proud owners of a market that would no longer exist if the government was to take on health care. Unwilling to tolerate reforms that would destroy its market, the health insurance industry and its partners dumped billions of dollars into lobbying, especially among its natural market-friendly allies on the right, against any reform plan that wouldn't leave room for health insurance. As money tends to in Washington, it won.

The watered-down health reform we got was one that secured the financial future for the health insurance industry.

Which leads to the technical answer: Because that health insurance market health reform ultimately secured is really quirky.

Health insurance is profitable because some people get sick, and others don't. Insurance companies lose when people get sick -- they have to shell out thousands of dollars to doctors and hospitals to pay for policyholders' care. But what more than makes up for those costs are premiums from those who don't get sick. The healthy folks, in effect, subsidize the costs of the ill.

But what happens when the people who are least likely to get sick realize they could probably get away without insurance?

The market takes a nosedive. Because there aren't enough healthy people now to subsidize the sick, insurers scramble to make up for the missing money somehow. They do one of two things: They charge higher premiums, which exacerbates the cost of insurance for the healthy -- in effect forcing more of them out of the market, and in turn driving premiums even higher. Or they make up the extra costs by purging their most expensive (read sickest) customers -- selecting only healthy customers who are willing to pay the premiums but won't cost as much on the back end.

This quirkiness is ultimately what led to the sorry state of American health care pre-reform: 50 million Americans uninsured, and insurance companies rejecting people with pre-existing conditions left and right.

That's where the mandate comes in. It solves this problem entirely because it forces the healthy folks back into the market, keeping insurance prices affordable and relieving (although not entirely) the incentive for insurers to reject based on pre-existing conditions.

Now here's the big secret: Our health care "reform" hasn't actually reformed anything -- all its done is make an existing market, the health insurance market, more efficient. You'd think that the right would laud such a pro-market solution. After all, they came up with the idea.

And that's why I tell this story -- the health insurance mandate was a compromise that effectively guaranteed the health insurance market in America for years to come by making that market more efficient and guaranteeing it paying customers into the future. Why, then, is the right attacking it?

Not because they are the great protectors of the rights of the common man as they might argue -- far from it.

Rather, it's because health care reform will relieve the health care worries of millions of Americans. It is, by most accounts, the most substantial piece of pro-poor legislation since the New Deal. And as it's rolled out over the next several years, the poor will quickly feel the effects in their pocketbooks -- and in their health. Just as the New Deal galvanized support for the left for decades thereafter, the ACA stands to do the same. And its opponents will do anything to stop that from happening. Even go after a pro-market policy they themselves came up with.