While I’m definitely not for the GOP ironically using the courts to reverse Obama’s signature accomplishment, I’ve never been a believer in the morality or necessity of the health insurance mandate.

First, I’m skeptical because the industry demanded it.  Obviously anyone in the business of selling a product would love to have the government declare that everyone must buy it.  I’m sure Burger King would say yes to a whopper mandate.

Health insurers argue that if everyone isn’t required to buy at once and they’re required to sell to anyone who wants in, that nobody will buy insurance until they get sick or injured.  It’d be like selling life insurance to a dead man.  This is known as the free rider problem and it does show up in lots of nifty academic studies.  But in real life, so far as we know, it’s a myth.

In Massachusetts insurers are required to sign up anyone who wants coverage.  The state has a mandate but it’s considered a weak one because the penalties of not complying are far less than the cost of insurance.  Basically, a rational person in an economic model would suck it up and pay the fine while refusing to purchase insurance until they got ill.  This is exactly what insurer Harvard Pilgrim claimed happened to them.  Between March 2008 and April 2009, claims its former CEO, 40% of the people who purchased Harvard Pilgrim insurance kept it for only 5 months and used $2,400 worth of services.  They were six times more expensive than the actuaries thought they’d be.  This data became the basis for a big Oliver Wyman study that was very influential in getting the mandate accepted into the health care debate.

But it turns out that the Harvard Pilgrim data isn’t as revealing as it seems.  This 40% number seems high, right?  But 40% of what?  It turns out that Harvard Pilgrim sold, at maximum, 5,000 plans in that period.  40% of that is 2,000 people.  Harvard Pilgrim covers 1 million people.  So even if these people were all gaming the system the way Harvard Pilgrim suspect they are 0.2% of the customer base.  It turns out that people want the security of owning health insurance and they are willing to pay reasonable prices for it.  It certainly beats trying to find an insurance provider while you’re in an ambulance after being hit by a bus.  It beats trying to buy coverage after you find out you’ve come down with a disease.  Sure, the insurer has to cover you if you ask but they can also charge you a lot more.  People know this and the vast majority of them act accordingly.

I believe that people will purchase health insurance voluntarily if they believe that the premiums are reasonable compared to the services offered.  It’s not rocket science.  If you need a law to make people buy your product, you’re either charging too much or your product stinks.

Another argument that the industry has made is that under the pre-reform system free riders were already a problem.  This is because hospitals are forced to treat people whether or not they can pay.  We hear tales of wasteful emergency room visits to deal with common afflictions and point to it as proof of people gaming the system.  Not so fast, though.  People without insurance are far more likely to forego medical treatment than to try to free ride the system.  That’s not a good thing, but it’s a true thing.  The uninsured spend 38% less on medical services than insured people.  They pay out of pocket and they tend to pay their bills.  In 2008, the last full year before the reform debate, the uninsured had only stuck the system with $7 billion in unpaid bills.  That’s nothing in a $1.1 trillion industry.

Then we get to the moral aspect.  I think I could swallow the morality of the mandate if and only if the government offered a robust public option available to anyone who wants it.  The addition of a publicly run insurance company, accountable to voters, would at least give people the option of not supporting large corporations that have in the past behaved quite badly.  It would also bring much needed competition into the space.  I suppose there’s still some sort of right to go without health insurance that would be violated even if a public option existed, but I find it hard to get excited about that particular right.  But a mandate without a public option, a law saying that you must buy something from these companies whether you like them or not, isn’t something I can get behind.

The health reform law tries to mask this by presenting it as a tax that’s actually charged to everyone but that you get credited for when you show proof of insurance.  That’s clever and it will probably see the act through its final court challenges.  But it really was a mistake not to tie the mandate, which the insurance companies wanted desperately, to a public option, which they desperately didn’t want.