3Center or American Progress | Health Care Reorm without the Individual Mandate
I we were o replace he mandae, hen here are wo common alernaives ha have been proposed. One is “auo-enrollmen,” whereby individuals would be auomaically enrolled in insurance as a deaul bu could “op ou” i hey decide hey don’ wan cov-erage. Tis has been called a “sof mandae” because i doesn’ orce individuals o buy insurance, bu i does orce hem o ake armaive acion o avoid coverage. I someo he lack o enrollmen in pensions (or healh insurance) is due o “inatenion,” hensuch a policy could grealy increase coverage.Tis alernaive is inspired by research by David Laibson and Brigite Madrian aHarvard Universiy along wih various collaboraors, which shows ha such deaulchanges in he conex o so-called dened-conribuion 401(k) pension plans cansignicanly increase paricipaion in such plans, reducing he number o nonenrolledemployees rom 50 percen o 10 percen.
Evidence rom a broader universe o rmsrom money manager Fideliy Invesmens suggess ha he eec is smaller, whichcould be due o a higher willingness o “op ou” a smaller rms. Fideliy nds haauo-enrollmen raises paricipaion rom 53 percen o 81 percen.
Ta is, o he47 percen o employee ha choose no o volunarily enroll in 401(k) plans, 19 percenchoose o op ou o auo-enrollmen. Applying his nding o he conex o healh insurance is dicul, bu several consid-eraions sugges ha we would see a larger op-ou rae or healh insurance han or401(k) plans. Firs o all, employers acively encourage a broad cross-secion o employ-ees o paricipae in 401(k) plans because i is criical o mee nondiscriminaion essha allow hem o ax deer he 401(k) conribuions o higher-income employees.Tere is no such need or employers o encourage paricipaion in healh insuranceplans, where nondiscriminaion rules appear o be nonbinding. Indeed, employersshould acively oppose auo-enrollmen or healh insurance: even i i encourageshealhier employees o join, oal employer spending rises.Second, healh insurance enrollmen is a decision o which employees, paricularly young employees, have already given much more consideraion han o 401(k) enroll-men. Te larges auo-enrollmen eecs are ound or young employees, or whomreiremen is disan and so who probably weren’ considering 401(k) accouns beore being auo-enrolled. Tese same young employees will have given much more consider-aion o he near-erm decision abou wheher or no o insure.Indeed, Fideliy daa show ha among 20- o 29-year-old employees, only 30 percensign up or a 401(k) wihou auo-enrollmen, ye only 23 percen op ou when auo-enrolled, a very large eec. Ye among workers 20 o 29 years old who are oered healhinsurance, 88 percen enroll oday.
Clearly, his is a decision ha young workers areaking more seriously—and as a resul he “inatenion” ha resuls in auo-enrollmen