Health reform—as I’ve said over and over—simply cannot work unless everyone has to buy health insurance. In 2014, according to the law, insurers will have to cover everyone, including those with preexisting conditions. The only way they can do that without making premiums ridiculously high is if their coverage pool includes the young and the healthy.
That’s the point of the individual mandate: to require everyone, even the young and the healthy, to buy health insurance, under threat of financial penalty.
Many people are wondering: Is that constitutional? And the Supreme Court is gearing up to answer that very question this spring.
But I’m wondering: Will it even work? You see, the mandate is just too weak. The penalty for not buying health insurance is simply too low. In the first year, it’s only $95 or 1 percent of an adult’s income, whichever’s greater. Far, far less than health insurance costs. Even in 2016, when fully phased in, the penalty is only $695, or 2.5 percent of income.
David Nather at Politico has done the math: “A family making $55,125 a year . . . would face a $1,378 fine if it didn’t have health insurance . . . But it could pay up to $4,438 in premiums if it bought health insurance. And that’s after the tax credits the law would give it to make the insurance cheaper.”
For a family making $55,000 a year, that $3,000 difference could be a pretty convincing argument against buying into the system.
But the law and its math are complicated—and human beings are even more complicated—and you can certainly find arguments that conclude the penalties are strong enough and the mandate will work. The Congressional Budget Office estimates that as a result of health care reform, 94 percent of Americans will end up with health insurance, compared to 83 percent now (although that takes into account the expansion of Medicaid).
Still, to me the individual mandate seems woefully weak. If the Supreme Court rules that it is constitutional, the question remains: Will all Americans jump in the pool in 2014 or will a crippling number decide the water isn’t to their liking and choose to pay a small fine in order to stay out?
Health Care Perspectives 
I think when doing the numbers we need to remember the 100’s if not 1000’s of people who simply pay their premium for emergency situations only. In my instance I have paid my premiums for 4 years, but cannot afford to see a specialist or get the mental health medicine I need because of the high copayment amounts required. If I saw my doctor (specialist) and received the medicine my doctor has prescribed me I would need to shell out $100 a month ($50 for the doctor & $50 for the “non-formulary meds” which might I mention the copay changed mid-cycle! The solution: don’t do either because after paying the premiums I have no money for medicine, so no need to see the specialist any more. Those premiums should be able to make up for some of the short coming don’t you think??
Even if 94 % of americans are covered. What will that coverage be like? Affordable premiums, but high copays! I have a family of 4 and we make about 11000 less than your example. One trip to the emergency room, with er charges and a 150 copay just about bankrupts us. Do you think we can afford not to be covered.
Instead of focusing on the fine if you don’t get insurance, focus on how to make it more affordable as that is within your control. Affordability starts with the base business model or for those in the business – Actuary Science. Accepting that actuary science is an age old branch of math that was created in a time with computers couldn’t handle regression analysis on a large volume and now it does is paramount, let the dinosaur die and move on with better models and data. Actuarial science is like this – playing craps (rolling two dice) to get a 12, the odds are 36 to 1 – that’s math, but in a casino, insurance company etc. in betting, the payout is only 30 to 1 so that the house wins some even when it loses and with a really long and complicated formula to give that edge. By making the math simpler and transparent you’re already ahead of the game.
When you have a system where everyone is involved the highs balance the lows – sure anyone with a pre-existing condition will be in the mix but so will the healthy and wealthy that currently either has no insurance or an HSA. Small groups that buy insurance, or should I say are sold insurance by the sales teams are what hit hardest – there isn’t enough “mix” to balance them out and the premium to cover the group comfortably from an actuarial standpoint would be counter-productive. So companies take them as a loss, make up the difference with other large groups that can handle a little more expense and then count the members as “covered lives” to put on their companies homepage etc.
My point is that instead of focusing on what the fine will be without the insurance industry needs to step up, use the math, predictive modeling and statistical models to determine how as an industry they will make insurance affordable to everyone. Make it simple, uniform (how many different contracts and groups does MVP have and additionally how many different contracts are there for hospitals and covered services) and finally transparent – not just how my doc does on a flu vaccination rate per thousand but hard dollar values for contracted and non-contracted costs paid for services, pharmaceuticals, and add-ons so we can all be aware and versed on the subject.
The idea of the for profit HMO turned 40 years old this year that started with Edgar Kaiser of Permanente in 1971 and signed into the HMO act of 1973 by Richard Nixon – good to know that at least medical science has progressed since then – let’s bring the math and informational technology into this century as well.
Hi Dave,
My opinion? While I do not believe the government should have the power to mandate coverage, I’ve had the same position as you since the beginning of HCR; the penalties are too weak to drive the healthier less chronic population to enroll in coverage. As you correctly point out, that and the “no pre-existing conditions” mandate will drive costs through the roof. But then again, that exact result may be what the government is purposely trying to create so that a total take-over one-payer government owned healthcare system can get past the American voters.
Dan Elliott
I am sitting her thinking and wondering – why is the Supreme Court reviewing an individual mandate to see if it is legal. Don’t we already do this – Medicare it is called. It is required to sign up once meeting the age requirement, or you incur a penalty. Is this not the same??
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