Making A Case for Employer-Enforced Individual Mandates

Prologue: The Clinton administrations approach to ensuring universal health insurance coverage has triggered a chorus of complaints from a variety of quarters. Among those critics who take exception to the administration's approach are economists such as Mark Pauly, who argue that there is a better way to deal with financing coverage for currently uninsured workers. In this paper Pauly argues that a special form of an individual mandate for insurance coverage will achieve the same policy objective but raise fewer employer hackles, be less unfair and distortive, help voters know what they are selecting, and assure an equal level of coverage with no more administrative hassle. As President Clinton articulated in a speech before the National Governors' Association in the summer of 1993, Americans need to realize that “health care is not something paid for by the tooth fairy, that we should all be acutely aware of the cost each of us imposes on it.” Pauly's proposal for an employer-enforced individual mandate ensures that “the best way to make people aware of the cost of the care they receive is to have them pay for it individually.” Pauly holds a doctorate in economics from the University of Virginia. Among his peers, he is considered one of the nation's finest technical economists. Pauly is the Bendheim Professor of Economics at the University of Pennsylvania and chair of its Health Care Systems Department. He is also director of research at the Leonard Davis Institute at Penn. Pauly is a member of the National Academy of Sciences' Institute of Medicine and is the lead author of a widely discussed paper published in the Spring 1991 issue of Health Affairs, entitled “A Plan for “Responsible National Health Insurance’.” Abstract: An employer-enforced individual mandate has some substantial advantages over the mixed employer and individual mandate embodied in the Clinton administration's proposed health plan. Economic reasoning strongly suggests that almost all of the cost of an employer mandate will fall on workers and that in any case the incidence of an individual mandate is the same as that of an employer mandate. However, an individual mandate is easier for voters to understand, avoids administrative complexities and inequities, and eliminates the chance of adverse employment effects of mandated employer coverage.