The American Academy of Actuaries has recommended a number of policy options to strengthen and improve the Patient Protection and Affordable Care Act’s individual mandate clause, regardless of whether the landmark law’s controversial centerpiece is legally removed over time.

The options include assessing late-enrollment penalties, increasing the time between open-enrollment periods, implementing auto-enrollment features and limiting the ability to upgrade to more generous benefit plans during open enrollment.

In order to restrict rating variations and eliminate exclusions for pre-existing conditions under health care reform without triggering serious adverse selection, the group suggests that the health insurance market find a way to enroll enough lower-risk individuals and achieve a balanced cross-section of risks.

Two federal courts have ruled that the mandate is unconstitutional, while three others have upheld the clause – setting the stage for a U.S. Supreme Court showdown. The 11th Circuit Court of Appeals in Atlanta, meanwhile, will convene on June 8 to hear arguments in the government’s appeal of U.S. District Judge Roger Vinson’s decision to strike down the entire PPACA. 

Exploring alternatives

Regardless of whatever ends up happening in the courts, producers will want to keep a watchful eye on this issue. “Because the mandate is such an important part of the health reform law, all stakeholders should be paying attention to the mandate debate and the potential alternatives that are being explored,” says Cori Uccello, a senior health fellow for the American Academy of Actuaries.

Adds Dave Evans, senior vice president of the Independent Insurance Agents & Brokers of America: “Certainly agents and brokers should follow the issue of the constitutionality of the individual mandate, as the outcome of that issue may impact the viability of the health care reform legislation. It is interesting to note that the legitimate concern regarding adverse selection for a voluntary government program is the basis for the current design of the CLASS Act.”

One of the possible alternatives to an individual mandate, the auto-enrollment option, would automatically enroll individuals in health insurance, but allow them to opt out of coverage. The trouble with this approach, however, is that it would raise total employer spending and not significantly move the needle on the goal of expanding coverage in the absence of an individual mandate, warns Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology. He also believes that while the impact of late-enrollment penalties would vary with the severity of the fine, they’re not expected to do much, either.

“Any alternative imposes much higher costs on those buying insurance in the new health insurance exchanges as the healthiest opt out and the less healthy face increased premiums,” he wrote in a paper posted on the Center for American Progress website.

Uccello cites a new U.S. Government Accountability Office report that examines possible alternatives to the mandate in the event that is declared unconstitutional, as well as how the role of health insurance agents and brokers would change.

Acknowledging that new medical loss ratio requirements may significantly reduce compensation for agents and brokers, the GAO noted that their expertise could be used to facilitate coverage through the state-run health insurance exchanges slated to take effect in 2014.

Another possibility, according to the report, is that the MLR requirement “be amended to provide insurers with more flexibility to use premium revenue to compensate brokers for providing certain value-added services, such as identifying opportunities for explaining variations in plans through the exchanges for individuals as well as opportunities for premium tax credits and cost sharing reductions.” A third idea mentioned in the report is that producers could receive “a flat fee for enrolling previously uninsured individuals in qualifying coverage in the exchanges, reducing any incentive to sell more expensive coverage that might not be appropriate for the consumer.”

The public appears to have ambivalent feelings about the individual mandate. For example, a Harris Interactive/HealthDay poll found that half of the more than 3,000 U.S. adults polled in mid-February opposed the individual mandate, though 71% supported the notion that enough healthy people must be insured in order to help subsidize the sick. The mandate requires Americans who can afford health insurance to buy such coverage or pay a tax penalty.

— Shutan is a freelance writer based in Los Angeles.

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