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Study questions savings from health insurance mandate

By Maryalene LaPonsie on February 23rd, 2012

Dropping a requirement that all Americans purchase health insurance would not cause policy premiums to rise substantially, but would result in fewer Americans having health insurance, according to a new study published by the RAND Corporation.

The finding contradicts a central tenet of health care reform -- that mandating all U.S. citizens to purchase health insurance will drive down rates. A provision requiring virtually every U.S. resident to maintain health insurance coverage by 2014 is a cornerstone of the Patient Protection and Affordable Care Act.

RAND, an independent health policy research firm, used a microsimulation model to determine how prices would fluctuate in health insurance exchanges should the mandate be lifted. Without a mandate, individuals would see their policy premiums increase by only 2.4 percent, according to RAND findings.

Age and health insurance rates

Previous studies found that eliminating the mandate would have a greater impact on health insurance rates. However, the RAND study took into account the age of potential policyholders when making its calculations.

While health reform prohibits insurers from setting higher rates based upon pre-existing conditions or gender, it does allow companies to charge up to three times more based upon age. RAND researchers determined that if the individual mandate was eliminated, those most likely to opt out of health insurance would be younger.

Since health insurers can already charge higher health insurance rates for older individuals, the loss of younger people from an insurance pool would have a minimal impact on the price of individual policies.

Number of insured would drop dramatically

However, RAND researchers found that the elimination of the individual mandate would have a dramatic effect on the number of people insured. The Patient Protection and Affordable Care Act was initially expected to lead to 27 million Americans getting health insurance coverage in 2016. Without the mandate, that number drops to 15 million, RAND says.

"Our analysis suggests eliminating the individual mandate would sharply decrease coverage, but it would not send premiums into a 'death spiral' that would make health insurance unaffordable to those who do not qualify for government subsidies," says Christine Eibner, the study's lead author, in a statement announcing the findings.

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