COVERAGE: Myths About the Individual Mandate: Stifling Competition

Myth: An individual mandate will stifle market competition.

Fact: An individual mandate, coupled with insurance market reforms and subsidies, would make markets work more effectively and efficiently. By reducing the risk of adverse selection, an individual mandate would force insurers to compete based on price and quality, not underwriting and marketing.

• More than half of the uninsured population is under age 34, a generally low-risk, low-cost population to insure.
• However, as Mark Pauly and Len Nichols noted in a 2002 Health Affairs article, the individual market where the uninsured might look to find coverage does a poor job of identifying low risks and reflecting those risks in premiums.
• Bringing everyone into the insurance marketplace will make the risk pool healthier, creating incentives for insurers to focus on high-value care as opposed to risk selection and underwriting. The recent California health reform initiative included a provision that required health plans to spend 85% of premiums on patient care.

To see all posts on the myths about the individual mandate or for more in-depth discussion of this issue, please read the New America Foundation's recent issue brief