Health Insurance Mandate – One of the assumptions of the recently passed healthcare reform law is that younger, healthier people will end up subsidizing sicker people. The latter group will have greater access to health insurance due to a ban on insurers from denying coverage to people with pre-existing conditions. Ideally, the average insurance premium will not rise significantly, because the cost of medical claims will be split among a larger pool of consumers.
The controversial individual mandate goes towards those ends. Those who are deemed able to buy a policy – with or without subsidies – will be required to either purchase one or pay a fine. The intention is to discourage people from being uninsured by choice when they are in good health, and taking advantage of the system by buying a policy when they become ill.
However, some experts predict that the mandate will not have the expected impact. They believe that many individuals will choose to pay the penalty for going without coverage instead. That annual penalty is limited to the greater of $695 or 2.5% of the person’s annual income, if they are above the poverty level.
Why wouldn’t they just buy coverage? Many of the currently uninsured earn under 200% of the poverty level. For an individual, that is $21,660 per year. A significant portion of that group would probably like to purchase a health insurance plan, and are more likely to do so with the subsidized portion. (In the case of families earning between one and two times the federal poverty level – $44,100 for a household of four – they would probably have an even greater chance of buying coverage.) Still, there are those, who for whatever reason – perceived invincibility or just strapped incomes – would choose to remain uninsured and pay the penalty.
Some individuals in Massachusetts, where there is a similar health insurance mandate, have done the calculations and decided that the penalties they will have to pay to the IRS are less expensive than the cost of a policy they may or may not end up using, subsidies notwithstanding. Although that state now has 98% of its residents insured, there will always be some holdouts.
Finding affordable health insurance has been difficult on the open market. The regulated exchange markets created by the healthcare reform law should lower rates somewhat, but some may continue to refuse it, especially if they remained uninsured due to cost, as opposed to medical conditions that got them rejected by insurance company underwriters.
As a result of the recession, people continue to worry about their job stability. They may not want to sign a contract to buy health coverage if they are unsure they will be able to pay for it several months from now. What the federal government does for the economy may do more to help people become insured than any health insurance reform legislation.