Wednesday, February 09, 2011

Affordable Care and The Individual Mandate

There is a lot of discussion going on about the Affordable Care Act and the constitutionality of the Individual Mandate. The Individual Mandate is a key part of the Affordable Care Act. Increasing the size of the insurance pool is essential to spread the risk and balance the additional costs incurred as a result of the expanded coverage the ACA provides.

The constitutionality of the Individual Mandate will probably be decided in the Supreme Court. If the court sets the Mandate aside what are our alternatives?

One option might be for the Federal Government to provide individuals with a tax credit to contribute to the cost of their Health Care. Insurance companies would provide a certificate of Insurance in much the same way we are currently provided with a W2. The challenge with the current plan to penalize individuals that do not have Health Insurance is that the penalty is a fraction of the cost of purchasing insurance coverage. This isn't a deterrent to people going without insurance until an incident occurs. This situation could be changed if Insurance companies were allowed to provide back dated coverage.

How would this work... Let an insurance company collect insurance premiums back to the prior insurance coverage expiration, or to 12 months prior, whichever is the shorter period. The back payments could be apportioned over 12-24 months of the new contract.
Changing the rules to allow cost recovery for gaps in coverage would help discourage people form dropping coverage until they are sick.

This change could overcome the constitutional issues that surround the Individual Mandate. The combination of tax credits and cost recovery for up to a one year gap in care would allow people to choose not to have health insurance, but if they change their mind they have to pay a catch up penalty which can be partially offset by qualifying for health care tax credits.

I am sure there are numerous challenges to address but we shouldn't just sit back and wait for a Supreme Court decision. After all, in the State of the Union Address the President indicated a willingness to look at improvements to the Affordable Care Act. There are many positive elements to the ACA, such as the extension of coverage to young adults on their parents health policy, the removal of the pre-existing condition, the removal of benefit caps and improved preventative screening benefits. We don't want to see those disappear.

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