The IRS recently published its
final rule for the individual mandate stipulating
that everyone in the continental United States who can acquire health insurance
must purchase it or be fined. This provision does not apply in Puerto Rico even
though the Treasury Department states that the “individual responsibility
provision is integral to delivering the Afforable Care Act’s consumer
protections at an affordable cost”. The fact
sheet released by the Department of Treasury last week also indicated that the individual
mandate makes the ACA’s consumer protections possible “by ensuring that
individuals do not just wait to purchase insurance when they are sick and drop
coverage when they are well – driving up premiums for everyone.”
The lack of an individual mandate
for Puerto Rico opens the door to a potential increase in health insurance
premiums for individuals and small businesses on the Island. According to the
Congressional Budget Office, the implementation of the ACA without the
individual mandate is estimated to produce an increase of 15 to 20 percent in
the cost of premiums in the Unites States. A similar analysis has not been
published for Puerto Rico, but our understanding is that the result would be
similar, which dictates an imperative for local action to prevent an increase
in the price of local premiums.
The imperative for the
implementation of an individual mandate is based on the experiences of the four
states that implemented the ACA’s consumer protections without an individual
mandate: Kentucky, New York, Vermont, and New Jersey. Each of these states
experienced an increase in premium prices and/or a reduction in enrollment
which is the opposite effect of what the ACA intends. The most striking case is
New Jersey which adopted policies similar to those that will apply to Puerto
Rico with disastrous results.
Specifically, New Jersey
developed a health coverage program to guarantee coverage for its residents regardless
of their health condition. These plans initially enrolled approximately 186,000
individuals, but within five years this number dropped dramatically, by 54%, to
only 85,000 members. In the same period, the price of premiums increased between
48% and 155% depending on the plan. These increases were due to the fact that
people enrolling in the plans had greater medical needs, supporting the theory
that, even with guaranteed access to coverage, many healthy people wait to
become sick before enrolling in a plan. Ten years later, only 49,000 people
remain in the health coverage program, and the state of New Jersey reacted by
developing “Basic and Essential” insurance alternatives, which do not cover essentials
such as prenatal care, in order to lower premium costs.
The ACA also stipulates essential
health benefits which in many cases are more robust that the current offerings in
Puerto Rico and therefore, if the market on the Island reacts like the States
that have already established these reforms without an individual mandate, we
will have few possibilities for lowering the costs of health insurance. In
addition, given the lack of a Puerto Rican Health Insurance Exchange certified
by the federal government, the Puerto Rican government will be obligated to allocate
the $925 million to its Medicaid program which funds MiSalud, instead of
offering subsidies or tax credits to help moderate or low income citizens
acquire health insurance.
There are a strategies the local
government could employ to attend to this developing situation. These could include local legislation for an individual
mandate similar to the compulsory car insurance program, defined inscription
periods like those for Medicare Advantage, penalties for late inscription
modeled after those for Medicare Part B, incentives and tax credits similar to
those awarded by the ACA, and other, more complex, systematic reforms. However,
these decisions cannot take place in a vacuum. Puerto Rico needs to establish
mechanisms to study, model, and analyze the consequences of the implementation
of the ACA in light of the realities of the local health system in order to leverage
the knowledge developed through the course of various local health reforms and
the federal funds available for health system reform. The health of our people
depends on it.
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