Passenger Protection and Affordable Car Act

Let’s look at a fictitious car comparison to better understand health reform that has been in the news lately. The column below, a satire, aims to show how the health insurance industry could be jeopardized if the individual mandate is thrown out by the Supreme Court.

(Note: Medical care for the sick and wounded is very different and we should always provide for those who cannot provide for themselves.)





We have troubles, right here in River City: cars are wrecked daily and 14 percent of people do not have collision insurance. If we mandate that everyone must have this insurance, then our problem is solved. But some people have a car that was wrecked before they took out insurance and need help getting insurance. OK, we will mandate that every insurance company must accept even cars that are known to need repairs.

Let’s say insurance costs $500 per year but the penalty for not having the mandated policy is $100 per year. Why pay for insurance if you are given the right to be accepted for insurance, when and if you ever need car repairs? Insurance companies will have fewer customers and more payouts for repair. They raise rates and find that even more people get off of it. Even those who buy the high-priced insurance when they have a wreck just cancel the policy after repairs. New standards for a policy state that you cannot get a high deductible and it must include check-ups, including oil changes.

How is this fictitious Car Act similar to the Patient Protection and Affordable Care Act ( ACA or commonly called Obamacare) ?

· no one is denied insurance based on pre-existing conditions.

· penalty for not taking out the mandated individual health insurance policy is only a few hundred dollars a year. Many will just pay the small penalty and take out a policy when and if it is needed.

· The penalty for an individual making $20,000 is about $500 per year; and only half of this the first years. Who can get health insurance for $40 per month?

· The penalty for a family is about $2,000 per year, so for a family of five it is $33 per person per month.

· The penalty for an employer with over 50 fulltime employees is $2,000 per year or $166 per person per month – cheaper than providing insurance for your staff.

· policies have standardized premiums and coverage, and less options for trying to save money but choosing a plan with a higher deductible that limits coverage for something like maternity. “Essentials” that must be included in a package of benefits: ambulatory and emergency services; hospitalization; maternity/pediatric; mental health/substance abuse ; prescriptions; rehab; lab; preventive services including oral and vision care.

· all preventive services are covered with no copay or deductibles

· no million-dollar limits to what insurance must cover.

· local communities will address: health disparities, reduction of chronic disease, promotion of healthy living, posting calorie counts at chain restaurants.



If the Supreme Court rules that the individual mandate is illegal, then under ACA there would be 8 to 23 million fewer people insured. Estimates for increases in premiums range from nine to 27 percent. For many who are barely able to pay for insurance, this increase will cause people to lose insurance coverage.


The theory goes like this: without a mandate, we do not get the young and healthy to pay into the insurance system. Mostly the sick sign up because they need insurance to pay for ongoing problems. Insurance premiums would rise steeply and eventually even the sick can’t afford it. The insurance industry goes into a “death spiral,” paying out for sick customers, increasing premiums and getting fewer customers to buy insurance. Eventually the insurers will bust.

What are these troubles in River City and how many will have the potential for getting insurance? This presumes that the insurance industry survives. Of the 320 million people living in the U.S., about 90 million are excluded from the mandate due to already being covered by programs like Medicare and being in poverty.

This leaves 180 million people subject to the mandate of having to get their own insurance policy. Only 14 percent of these people (18 million) do not already have insurance, presuming the insured do not drop coverage. Now, 11 million of these can get a federal subsidy to get insurance. So the mandate really only affects 7 million people in the U.S. This is 2 percent of the population.

Joel Cantor, Rutgers professor, states: “You would be irrational to buy health insurance until you are sick and the insurance industry simply can’t exist with that model.”


John Sheils of the Lewin Group: “The problem with eliminating the mandate is that it will create a situation in which people aren’t taking much of a risk by going without health insurance.”

Or let’s leave it on a more cheery note (if you see this as cheery and realistic): Susan Dentzer, an analyst for the PBS NewsHour: “ … is the individual mandate really the “linchpin” ?.. Probably not … [but] …Clearly, the market – and many millions of people – would be worse off … it’s not at all clear that the Affordable Care Act could be amended … But with two-thirds of Americans opposed to the mandate … it’s a good time to start talking about alternatives.”