Authors of the House and Senate healthcare bills claim that their insurance reforms would achieve near-universal coverage and make it significantly more affordable. In reality, the proposed reforms would likely increase health insurance costs, and could produce a radical shift towards expanded government control of health insurance and medical care.

The bills would significantly expand health insurance coverage beginning in 2013 (in the House version of the bill) or 2014 (in the Senate bill) through a mandate for individuals to have health insurance, Medicaid expansion, and premium subsidies to persons with incomes up to 400 percent of the federal poverty level for coverage purchased through a new insurance exchange (or exchanges). The bills would substantially restrict health insurance underwriting and rating and create a government-run health insurer to compete with private plans.

As I elaborate in a new American Enterprise Institute working paper, an individual mandate would have four important consequences.

First, it would reduce the amount of premium subsidies needed to expand coverage. The greater the penalties for non-compliance, the lower would be the cost. A “weak mandate” would either require larger subsidies, result in more uninsured than a “strong mandate,” or both.

Second, the mandate’s terms would affect the ability of proposed insurance market restrictions to provide implicit premium subsidies to older and/or less healthy purchasers of individual and small group coverage, which would be financed by higher premiums for younger and/or healthier buyers. The bills’ restrictions on preexisting condition exclusions and risk-based premiums would cause some younger and healthier people to delay buying coverage until they needed expensive care, increasing its average cost. The effects could be large without a strong mandate. The Senate bill in particular proposes weak penalties, increasing the likelihood of significantly higher premiums for everyone.

Third, an individual mandate would put upward pressure on health expenditures and premiums. People who obtain mandated coverage would use more healthcare. A mandate also requires prescribing the types and amounts of care that must be insured. The bills’ proposed minimums would require broader benefits and permit less cost sharing than plans many people currently choose. Increased coverage levels would produce some increase in people excessively using healthcare. Costs also could increase from higher prices for medical services until the supply of healthcare providers expands to meet increased demand for care.

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