Why health reform has a mandate

So, the insurance exchanges are open, and demand is so high that servers strain to keep up. A young man in Flintstone, Chad Henderson, receives affordable health insurance for the first time, Tweets about it, it gets picked up nationwide, he’s interviewed by major media outlets, and the Cato Institute and right-wing smear machine goes after him because Chad is a threat to freedom or something. Funny, I know Chad personally, never seemed very threatening to me.

First they forced us to educate the kids and not work them in factories… then came the 40-hour work week… then they forced retirement benefits upon us…then they fluoridated our water and improved our teeth….then they made health insurance affordable…and finally….tyranny!

But this article isn’t about old men behaving badly. There’s enough of that in the news already.

Many people who are otherwise neutral about politics and health care, but influenced by the deluge of falsehoods about how the new system works, express concern and anger about aspects of healthcare reform, with the “mandate” to have health insurance at the top of the list.

Putting aside the hyperbole about “unprecedented action” in forcing insurance on people… have you made your liability car insurance payment yet?...let’s look at the economics of why the mandate is there.

Within economics, there is something called the “adverse selection” problem. This occurs in markets where buyers and sellers have vastly different information and needs, and thus “bad” products get selected. This idea originated long ago in the insurance industry, because with insurance, an individual’s demand for insurance goes up as the individual’s risk of loss goes up.

But the insurance company has no way of knowing this about a person beforehand, and the company simply can’t allow this tendency to continue, because it would leave them mostly with high-risk customers.

That isn’t a profitable situation for an insurance company, so over time, they begin to devise ways to deny insurance, things like lifetime limits on claims or ”pre-existing conditions.” This in turn leaves more and more needy people without coverage, and as that number grows, some of those people inevitably have accidents or become very ill, go to the hospital, receive some care that they have no way of paying for, and that cost gets passed along to all the rest of us.

As costs rise higher, more people drop out of the insurance market, leaving more uninsured expenses to be borne by the people who still have insurance. And the cycle grows more negative as time passes.

I think this sounds familiar to you by now?

The public is solidly behind getting rid of things like pre-existing conditions. But why not stop there? Why the mandate?

Because with insurance, the broader the pool, the more the average cost of healthcare, both to provider and providee, goes down. And because healthier people, who tend to not want insurance as much, will inevitably need it, they have to pay into the system as well. If there was no mandate, the same “adverse selection” problem would continue to exist, the insurance companies would simply find some new ways of denying coverage, and nothing would change.

That’s why young people like Chad, or the millions who are already on their parent’s health insurance thanks to the ACA, are a reason to celebrate.

It’s sad that there are people out there who are so full of bile that they can’t see that. Tom McMahan is a public school teacher in Catoosa County and the Chair of the Dade County Democratic Committee. He can be reached at dadedemocrat@gmail.com.