Fines Are Not The Same Thing As Taxes
There’s been some debate lately about whether the proposed penalties for going without health insurance amount to a tax or not. Since Obama promised to not raise taxes on families earning less than $250k, some are saying that he’s going back on his word if a monetary penalty for avoiding health insurance becomes law. And they’re throwing out the fact that the IRS would be responsible for collecting the fine as proof that it is indeed a tax. But from a practical standpoint, what other organization has as much access to our money and financial records as the IRS? Do we really want to create a whole new government entity in order to enforce a health insurance mandate? Doesn’t it seem more fiscally responsible to delegate the task to an already well-established organization that works specifically with collecting money from the public? I can’t think of a more efficient way of collecting the fines.
Most people who don’t have health insurance aren’t uninsured by choice, and don’t need the threat of a fine to motivate them to try to get coverage. Usually they can’t afford the premiums or can’t qualify for health insurance because of pre-existing conditions. For the former, all of the health care reform proposals I’ve seen include subsidies to help pay the premiums. For the latter, the idea of doing away with medical underwriting on individual policies has widespread support among lawmakers. The fines are to motivate the people who can afford health insurance but would otherwise choose to go without (potentially transferring the cost of a significant emergency room bill onto the rest of the population that does pay for health insurance).
If we create a law that says that everyone has to have health insurance, we have to have some way of enforcing it. The speed limit on I25 is 75 miles an hour. If I choose to drive 85, I can expect to be pulled over and ticketed. I don’t think of that ticket as a tax (although I know that the money helps to fund the state budget, just as our taxes do). Rather, it’s a monetary penalty charged for breaking the law – a common practice in our justice system. I could have avoided it if I had obeyed the speed limit. I suppose we could go with 40 lashes instead, but I doubt that would be well received.
Agreed but I dont think this must be this way. Forcing people to go insured. There may be some better options.
“Most people who don’t have health insurance aren’t uninsured by choice”
Every study I have read says the exact opposite. Most of the poor already qualify for free insurance and choose not to sign up, and those making over 55K can afford insurance but choose not to buy it. Out of 47 million uninsured only 5-8 million are uninsured by something other then choice.
“For the latter, the idea of doing away with medical underwriting on individual policies has widespread support among lawmakers.”
Of course it doesn, most of them aren’t smart enough to realize if you eliminate pre-ex and don’t have a meaningful mandate with a tax equal to the cost of insurance people will pay the penalty until they need care, then buy a policy they can’t be turned down for, then drop the policy once the bill is paid and go back to the penalty. This is already happening in MA, they have the data that shows people taking policies for 6 months then dropping them and those people have loss ratios considerably higher then the populaiton that stays insured. Individual private insurance will be forced out of business under the current law being proposed. Most politicians would be ok with that.
Nate,
Thanks for your comments. I’d be very interested to see links to some of the studies you referenced. Qualifying for free insurance because of income is actually harder than it sounds. Medicaid is available for people who are low income and also part of a specific population (children, pregnant women, some parents, the disabled, and elderly who need long term care and have no assets). The guidelines vary from one state to another, so eligibility for Medicaid depends heavily on where people live.
More than half of the uninsured fall below 200% of the federal poverty level:
http://aspe.hhs.gov/health/Reports/05/uninsured-cps/index.htm#income
Poverty level is currently just over $22,000 for a family of four:
http://aspe.hhs.gov/poverty/09poverty.shtml
I agree that there are some people who can afford coverage and choose to go without, I talk to them every day. But I haven’t seen any independent studies with data that indicates they are anywhere near the majority of the uninsured.
forgot to answer the math and lost the full post, summary;
http://covertheuninsured.org/content/quick-facts-uninsured
20.2% make over 50K
http://www.kff.org/uninsured/7613.cfm
This brief analyzes health coverage data and determines that 25% of the nation’s uninsured population is eligible for either Medicaid or SCHIP.
I know signing up for any goverment program is hard but if my taxes are going to provide them free coverage I expect them to put in the effort to get it. I had to labor hard to earn the money to pay those taxes they can labor to benefit from them
Nate,
Thank you for the links. Both of those have a lot of really good data. I tried to put together where you came up with the 5-8 million number though, and I still only come up with over 25 million. You still make very good points. Would you mind sharing your opinion of what should be done?
Remove goverment mandates like massage therapy and chiro, these should not even be insured care let alone mandatory.
High deductible, $250 deductible is not insurance it is financing. Paying a 20% surcharge is very inefficient.
Break up Medicare and have payors compete for members, we can’t continue to lose 10% of every dollar to fraud and waste
Stop the mergers and break up BUCA, no insurer should control more then 20-30% of a market, competition will bread innovation in delivery and cost containment.
Set up a federal clearing house like the banking fed to clear EDI transactions both claim and financial. This will allow government to collect data for public health and reduce cost.
Providers must bill electronically by law, and no they aren’t getting a handout to do it, the payors came up with the money to accept them the providers save money by doing it.
That is the first 10%
I like those a lot, thanks Nate.
The massage therapy mandate was news to me. So out of curiosity, I looked it up and it turns out it is only a mandate in 4 states (Colorado is not one of them). And that would be just on group health insurance, not individual/family – for both the chiro and massage therapy mandates.
Also, the low deductibles are typically on group health insurance policies because the incentive for employers is attracting employees with a benefit more than getting a smart plan. Of all the individual plans our clients get, I would say that about 1 of every 25 even has a deductible below $1500.
So would you also be in favor of getting rid of employer sponsored health insurance? That would fix those problems with the system, and a few more.
I don’t think we have employer based insurance we have employer based financing. For many reasons we went from American’s paying 50% of their health care out of pocket in 1965 to only 18% today.
Employers shouldn’t be able to deduct any expenses under a couple thousand deductible. If employers gave catostrophic insurance then a raise to make up the difference we would be better off.
In any given year over 50% of Americans would have no dealings with an insurance company, that is the way it should be.
Good point Nate. I think the main point about employer sponsored insurance is that employers make different decisions about the type of policies getting purchased than an individual. Corporations will make buying decisions on anything (company cars, office furniture, vacation perks, health insurance, etc) with the extra decision making variables of:
- attracting employees from competing employers
- the expense can be written off
Employers shouldn’t have anything to do with the insurance at all.