Study: Premiums to rise 2.4% without mandate

WASHINGTON -- Striking down a mandate in the health-care law requiring most Americans to buy insurance won't raise the cost of individual coverage as much as government economists project, a private analysis finds.

The BGOV Barometer shows eliminating the mandate, which lawyers for 26 states will ask the U.S. Supreme Court to do next month, would raise premiums by about 2.4 percent, according to a study by the Rand Corp. in Santa Monica, Calif., a non-profit policy research institution.

The projected premium increase is less than a fourth of that foreseen in other estimates. It's based on a model assuming individuals and companies make choices by weighing available coverage options, not on past experience with premium changes, according to Rand. The nonpartisan Congressional Budget Office has said premiums may jump 15 to 20 percent without a mandate.

"We do not predict a 'death spiral' or an extreme increase in premiums as a result of eliminating the mandate," the Rand study concludes. Subsidies the health-care overhaul provides to low-income people who aren't poor enough to qualify for Medicaid would lead to "relative stability" for insurance markets, the study predicts.

The Supreme Court next month will hear arguments in a case challenging the constitutionality of the mandate, which the Obama administration says is needed to attract younger, healthier people to health plans. Striking the mandate while leaving the rest of the law intact would lead to "adverse selection," a phenomenon in which some healthy people decide to forgo coverage and the insurance pool ends up skewed toward sicker people whose medical costs are higher, the administration and its supporters argue.

The Rand study shows that eliminating the mandate would reduce the number of newly insured individuals by 12.5 million, undercutting the health-care law's goal of expanding coverage to the uninsured. Under the law, uninsured people starting in 2014 would be allowed to buy individual policies in government-run markets called exchanges. Because the government would pay for premiums above a fixed percentage of each enrollee's income, "many subsidized exchange enrollees would experience no change in out-of-pocket spending if the individual mandate were eliminated," the analysis found.