Overview of Individual Mandate

Require Individuals to Obtain Health Insurance Coverage

What is it?

Individual mandates have emerged as one of the policy options for significantly reducing the number of uninsured in the United States. An individual mandate requires that individuals have health insurance, either through an employer, an individual plan, a purchasing pool, or by enrolling in a public insurance program (such as Medicaid). One impetus for individual mandates is to increase enrollment of younger, healthier people into insurance pools in order to spread the risk of high expenses across a large number of people.

How would it work?

Two key design features for an individual mandate are the size and nature of the penalties for nonparticipation, and the availability of subsidies to assist people who cannot afford to purchase insurance. Larger penalties are likely to encourage more people to comply with an individual mandate. The availability of subsidies similarly is likely to improve participation rates. In addition, there may be associated tax benefits for expenses related to insurance premiums, some sort of minimum basic package specified by the mandate, and reforms to the individual health insurance market, such as creation of purchasing pools to make insurance more affordable.

Has it been tried before?

Within the United States, a number of states have proposed individual mandates. Massachusetts became the first state to successfully pass legislation mandating individual health insurance coverage in 2006. The law went into effect on July 1, 2007. The first year? penalty for noncompliance with the individual mandate was the loss of the state income tax exemption (about $200). The penalty in subsequent years will be up to 50 percent of the premium an individual would otherwise have had to pay. The reform measure also includes a variety of other elements--e.g., an employer pay-or-play provision and expansion of public programs. Health care reform proposals that included individual mandates have been considered by legislatures in California, Maryland, Maine, and Washington (Glied, Hartz, Giorgi, 2007).

Several European countries have implemented individual mandates. Switzerland passed a health insurance law in 1994 that mandates comprehensive auditing of insurance status and strict penalties for those who do not purchase health insurance within three months of birth or after moving to Switzerland. While this law has improved coverage somewhat, even prior to the law, Switzerland had high rates of insurance coverage (98-100 percent). The Netherlands also recently redesigned its health care system to move the population from a predominantly public system to a private system. With this change, the government mandated that individuals must purchase health insurance or face a penalty of 130 percent of premiums. Early reports from the first year of implementation suggest that only 1.1 percent of residents failed to enroll in health insurance (Glied, Hartz, Giorgi, 2007).