Like the individual mandate, a continuous coverage requirement is intended to discourage individuals from waiting until they become sick to purchase insurance. Such a requirement has teeth because individuals who let their coverage lapse risk being denied coverage in the future. When they attempt to re-enter the market, insurers can charge higher prices, withhold coverage of specific health conditions, or deny coverage altogether.
Compared to the limited penalties imposed by the individual mandate, the financial penalties and loss of consumer protections for pre-existing conditions may provide a much stronger incentive to purchase insurance. Economic intuition suggests that an insurance market based on a continuous coverage requirement could perform well, but there is little direct evidence on how well it might work in practice. Designing a replacement for the ACA poses a number of challenges for policymakers.