CBO: Implications of Individual Mandate Depend on Competition

A mandate requiring all U.S. residents to purchase health coverage would not be considered a new form of federal taxation as long as people could choose from a wide variety of private plans and no government entity was responsible for collecting their premiums, according to a Congressional Budget Office report released Wednesday, the Washington Post reports.

In his blog, CBO Director Douglas Elmendorf wrote, "In CBO's view, the key consideration is whether a proposal would be making health insurance an essentially governmental program, tightly controlled by the federal government, ... or whether the system would provide significant flexibility in terms of the types, prices and number of private-sector sellers of insurance available to people." He continued, "The former -- a governmental program -- belongs in the federal budget (including all premiums paid by individuals and firms to private insurers), but the latter -- a largely private-sector system -- does not."

Elmendorf wrote, "Premium income -- for a public plan (or plans) and for insurance purchased through exchanges or in the private market -- should be classified as federal revenues if there is an individual mandate and tight government control of the insurance market."

However, income from premiums should not appear in the federal budget "if there is no mandate and no public plan, or there is an individual mandate and an active, loosely restricted private market, and if premiums are paid through nongovernmental exchanges or directly to insurers."