Mandated health insurance? Should the Massachusetts health plan be the model for Indiana? Would it lower premiums?

• Author: McKimmie, Kathy
• Position: EMPLOYEE BENEFITS

MASSACHUSETTS HAS A new health insurance plan that it expects to cover nearly all its citizens and lower health insurance costs for all. And it's not a government takeover or a single-payer plan.

Massachusetts Gov. Mitt Romney, a Republican and potential candidate for president in 2008, got pretty much everything he wanted in his quest for universal health coverage from the overwhelmingly Democratic Massachusetts legislature. But by and large, the accord struck in April was a cooperative effort making the state the first to enact an individual mandate, requiring every individual in Massachusetts to purchase health insurance by July 1, 2007. Oh, there will be expanded state programs, subsidies and cheaper insurance policies developed--a variety of carrots, but in the end, you better be covered or the sticks kick in starting in 2008.

The individual mandate has received nationwide buzz, and is frequently compared to a state's requirement for car owners to have insurance. Interestingly, Massachusetts was the first to pass that mandate as well, in 1927.

The confluence of three factors pushed the plan forward. First, costs: double-digit annual increases had small-business owners questioning whether they could maintain their coverage, and uncompensated care expenditures were escalating. In addition, the state was about to lose $385 million a year in Medicaid monies unless it came up with some new ways to help the uninsured.

Lack of insurance doesn't mean health care isn't provided somewhere, somehow, such as through the emergency room. "People who don't have insurance nonetheless receive health care. And it's expensive," says Gov. Romney.

In Massachusetts, $1 billion a year was being spent by government on the uninsured--dubbed "free riders" by some. Shifting how that money is spent was an important part of the reform package.

How the plan works. The Massachusetts law divides the uninsured into three pots and handles them differently. First, some 20 percent of the state's uninsured are eligible for Medicaid. Then there are the 40 percent whose incomes are above 300 percent of the federal poverty level--$60,000 for a family of four. More affordable health insurance, rather than a government subsidy, is what this group needs. Those in between will receive subsidies on a sliding scale, much of it coming from the redistribution of dollars that previously went directly to hospitals for uncompensated care.

The individual and small group markets were...