How Much Do Mandates Matter for Obamacare?

The U.S. Court of Appeals in Washington recently heard arguments in the latest legal skirmish over President Obama’s sweeping healthcare reform. A central issue was the constitutionality of the law’s “individual mandate”: its requirement that citizens buy health insurance.

The constitutionality of the individual mandate has dominated coverage of the implementation of healthcare reform, so it is fair to ask, how important is the mandate to Obamacare?

The conventional wisdom is that the mandate is a linchpin for the law: pull it out and reform falls apart. After all, Obamacare seeks to make health insurance markets more efficient by bringing millions of Americans into the system. This should allow health insurance companies to pool risks as broadly as possible. Take away the mandate, the argument goes, and you undermine this central goal as well as politically alienate insurance companies that favor the mandate (which ensures them millions of new customers).

I’m not so sure. It is true that bigger insurance markets are better. But the mandate is not the law’s only mechanism for expanding insurance markets. Indeed, there are serious doubts whether it can be enforced as a practical matter. Far more important—to my mind—are the law’s subsidies for purchasing insurance and its elimination of standard barriers to coverage. Why? My guess is that many people want health insurance but either can’t afford it or are denied it. Subsidize the cost of insurance and eliminate the barriers to coverage and I think insurance markets will expand considerably.

Politically, it is argued that the elimination of the mandate will ensure that insurance companies will fight to repeal Obamacare. That may be true but health care reform has at least two political aces up its sleeve. One is that it is the law of the land. To end it, opponents of the bill will have to win the White House, House and Senate in the next election and muster 60 votes in the Senate. Alternatively, they must rely on the Roberts Court to rule that the entire bill is unconstitutional. Put differently, in an age of divided government, it’s always nice to have the status quo on your side.

The other (ironically) is that liberals lost on a key issue during the passage of Obamacare. Liberals wanted a national exchange for insurance policies, but were rebuffed. Instead, exchanges are run at the state level. This has resulted is an amoeba-like implementation structure that will be hard to reverse, especially as some states, who can flex their own muscles on Capitol Hill, become invested in Obamacare.

In the end, no one knows how this story will end. Maybe the Roberts Court will pull the plug on Obamacare; maybe the Republicans will trounce the Democrats in the next election and get the needed votes to repeal it. But it could be that the real issue isn’t the one we’re talking about. The real issue will come down to money (in the form of the insurance subsidy) and the degree to which the states have already taken significant steps towards making Obamacare a reality, not the constitutionality of the mandates.

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