Reconciling the Massachusetts and Federal Individual Mandates for Health Insurance: a Comparison of Policy Options

The 2006 Massachusetts health reform law successfully increased insurance coverage and improved access to care and self-reported health status among state residents. This success was derived in part from the law's well-designed individual mandate, which requires that most residents enroll in health insurance coverage meeting minimum standards or pay a fine if affordable coverage is available to them and they do not enroll. An individual mandate is also a component of the federal Patient Protection and Affordable Care Act (ACA), though it differs from the Mas-sachusetts mandate in many design components. The federal individual mandate will become effective in January 2014, raising complex questions related to the potential interaction of the two coverage requirements and their effects on Massachusetts residents. This report analyzes the state's three basic policy options with regard to its individual mandate: the state can eliminate its mandate, maintain the mandate in its current form, or maintain but modify its mandate to increase consistency with the ACA. We analyze these options through their ability to satisfy a set of core objectives. These objectives include minimizing complexity for residents, maximizing political acceptability, limiting the administrative burden on the state, minimizing impacts on state revenue, and minimizing disruption to the state's current system, which has effectively increased insurance coverage and ensured a minimum level of benefits across all insurance markets since 2006. Comparing the options requires a detailed understanding of similarities and differences in the four main policy components of both the state and federal mandates. These components are the specific benefit requirements both for coverage that satisfies the mandate and for which parts of the insurance market these rules apply to, affordability standards applying to the coverage requirement, exemptions to the requirement, and the level of penalties imposed for noncompliance with the coverage requirement. • Eliminate the state mandate. The first option, repealing the state requirement once the federal mandate is in effect, would be the least complex policy option for residents, since there would be only one set of rules—the federal rules—for them to follow. This approach would also eliminate the possibility of duplicative penalties, making it politically attractive. The option would decrease the administrative burden on the state relative to today, but it would eliminate all state revenues from the individual mandate penalties (currently about $22 million per year). Repealing the state mandate would nullify the state's own minimum creditable coverage (MCC) benefit standard that currently …