In yesterday's Wall Street Journal, there was an article titled, "Mandated Health Insurance Squeezes Those in the Middle" by Vanessa Fuhrmans. Based on the stories in this article, the response to the question posed in the title of this post is "yes".
Why would it be rational? And, assuming that we agree on the argument that it is rational, what does this suggest about any attempt to mandate coverage through a system that is at least partially private at a national level?
Economists have made the argument for years that it can be rational for some to remain uninsured. Who are these people for whom it is rational? They are relatively healthy, relatively young people who have too high an income to receive assistance yet enough other expenses that the purchase of insurance is unaffordable. Why does it remain rational even when there is a mandate?
The mandate (at least in Massachusetts which is the only state to have the mandate so far and the one featured in the article) is for purchase but does not provide a very inexpensive option. Why not an inexpensive option? Well, without subsidies the policies are expensive in general. If a state has a substantial number of mandates for what has to be covered that pushes up premiums. And in some cases, the deductible prior to when coverage kicks in is so high that it seems like a bad value to pay a substantial premium while getting only very limited coverage. The mandate also provides a financial penalty if the individuals don't buy. It is large, but smaller than the premium by far. And, people will still receive emergency care regardless. This interesting situation means that even with a mandate it makes sense for people not to purchase insurance. In fact, only 2/3 of those who were previously uninsured in Massachusetts have become insured in the three years since the mandate was passed. They still have the lowest rate of uninsurance in the country—but it is not zero.
What does this tell us about attempts to mandate coverage nationally? First, if the system is similar to Massachusetts, there will continue to be a group of middle income individuals and families who simply cannot afford the mandates insurance given other expenses. Perhaps they could shift some expenses, but most policies are hundred of dollars per month. Second, on the way to trying to get this passed—especially now that people have seen what happened in Massachusetts—there is likely to be a lot of political opposition. In this case, it is not necessarily because the opposition doesn't think that everyone should have insurance—although there may be people in that group. Rather, it is because the opposition can't figure out how some people would ever pay for it given other financial constraints. In that case, we need a better solution for subsidizing or bringing down premiums and making care more accessible. For that, there are no easy answers.
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