With momentum toward national health reform, there is wide support for legislation to include an individual mandate that would require all Americans to carry health insurance. Discussion of the individual mandate has relied largely on whether the mandate will generate universal coverage as a gauge for success. This article challenges the notion that an individual mandate is successful if it leads to universal coverage, revealing a critical problem the individual mandate will face even if all Americans were to have health insurance. To uncover this problem, this article sets out a novel framework that disentangles the three different policy objectives an individual mandate might serve: (1) to facilitate greater health and financial security for the uninsured (“paternalism”); (2) to eliminate inefficiencies in health care delivery and financing (“efficiency”); and (3) to require the healthy to buy insurance to help fund medical care for the sick (“health redistribution”). Health redistribution is a shifting of wealth from the healthy to the sick through risk pooling so that everyone can access medical care on the basis of need.
Drawing on evidence from the use of an individual mandate in Massachusetts’s health reform, this article reveals that the fragmented American health insurance market will thwart the mandate’s ability to achieve these objectives - in particular health redistribution. Fragmentation is an atomization of the insurance market into numerous risk pools. It prevents Americans from sharing broadly in the risk of poor health and, in doing so, entrenches a system where access to medical care remains tied to factors other than need. Short of creating a single payer system, solving this problem requires defragmentation of the insurance market to enable Americans to share more collectively in the risk of poor health. This article examines how policy solutions, such a public plan option or more stringent insurance market regulation, can reduce fragmentation and proposes a new solution of consolidation of public insurance programs.
Hoffman, Allison K., "Oil and Water: Mixing Individual Mandates, Fragmented Markets, and Health Reform" (2010). Faculty Scholarship at Penn Law. 1889.
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