Insurance requirement key to Mass. law's success, researchers say

A new analysis from a team of Massachusetts economists concludes that the Massachusetts 2006 health law's requirement, that most residents buy coverage or pay a tax penalty, has been pivotal to the law's success.

The findings, published today in the New England Journal of Medicine, showed that there was a greater increase in the number of healthy people who signed up for coverage in the state's subsidized health insurance program in 2007 -- the first full year of the "individual mandate" -- than chronically ill people, compared with the months before.

The results also showed that the greatest spike in signups by newly insured healthy consumers in 2007 occurred just before the tax penalty kicked in for failing to get coverage.

The researchers said that showed that the provision, known as the "individual mandate" was the reason healthy consumers ultimately purchased insurance. Without that requirement, they said, the only people who would likely buy insurance are the ones who were sick and more expensive to cover.

The national health insurance overhaul is largely modeled on the Massachusetts' law, and the individual mandate has been one of the most contentious sections. Several states have filed lawsuits challenging the federal law, and the individual mandate in particular, and a federal judge in Virginia ruled last month that the insurance requirement was unconstitutional. The matter is expected to be decided by the US Supreme Court.

"I hope what this piece does, regardless of one's politics, is it lays out the importance of the individual mandate in getting people to sign up for health insurance," said co-author Amitabh Chandra, an economics professor at the Harvard Kennedy School.

Healthy people "sit out of the insurance pool and it drives premiums up so the only ones left out of the pool are the healthy ones," Chandra said.

He also said that the analysis showed that just offering subsidies to help people afford coverage was not enough because the largest numbers of healthy ones finally sought coverage when they were just about to face a tax penalty.

The researchers did not analyze how long the newly-insured held on to their coverage, and whether some bought insurance and then dropped it shortly after receiving needed medical care.

A Globe story last year highlighted the trend of some consumers who buy insurance when they need pricey care, then swiftly drop the coverage, a practice that insurance industry leaders and other analysts have said drives up costs for other consumers. A report from the Massachusetts Division of Insurance later documented this phenomenon, and concluded the practice increased prices for other insured consumers. The law has since been changed to try to reduce this practice.

One of Chandra's co-authors, MIT economist Jonathan Gruber, was a paid consultant to the Obama administration during the debate over the national health overhaul, and he assisted state lawmakers during the drafting of the Massachusetts law.