An Economic Rationale

The economic rationale for a mandate (individual, employer-based or a hybrid) is based on avoiding adverse selection: consumers will logically opt out of the system if they feel their personal health (past predicting future) is better than average and insurance companies will overprice the product, expecting only the highest-risk customers to enroll. In the absence of some mandate, the individual insurance market devolves to the current state: many individuals rationally choosing to be uninsured, not because they don't value health insurance, but because they refuse to overpay for the offered product.

But beyond the economics of this mandate, there is a cultural change that might follow. Perhaps if everyone knows that they will always need to be insured (rather than planning for that day in the future when they anticipate the "need"), they will become more informed consumers. Perhaps they will also take health preservation and illness prevention more seriously. Perhaps our health-care providers will find greater motivation to incorporate preventive measures in their day-to-day delivery of care. And with more healthy risks in the insurance pool, perhaps we will actually stand a better chance of truly preventing disease and/or detecting it at a stage when we can affect positive change.

While some of the narrative bears proof-of-concept, there is little risk and a huge potential reward. Mandates are a necessity if we can make this work.

By Howard Forman  |  July 6, 2009; 11:26 AM ET  | Category:  Health Care Reform , Insurance , Prevention , Primary Care , Public policy , market competition
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Posted by: lensch | July 7, 2009 12:30 PM
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