What is the right penalty to enforce an individual mandate?
Give people breathing room
By Sen. Charles E. Schumer
USA Today
October 8, 2009
Sen. Olympia Snowe of Maine and I decided to give some breathing room to families faced with the uneasy choice of buying insurance they can’t afford or paying a stiff penalty that they also can’t afford. Our proposal, which passed the Senate Finance Committee 22-1, exempts Americans from the requirement to buy insurance if the cost of the available plans exceeds 8% of their income. We also reduced the amount of the penalty and phased it in over time, to make sure the reformed system works before we punish people for not participating.
http://blogs.usatoday.com/oped/2009/10/opposing-view-give-people-breathing-room.html#more
And…
CBO Understates Major Impact Of Weakened Individual Mandate
BlueCross BlueShield Association
October 7, 2009
It is difficult to understand why the Congressional Budget Office (CBO) estimate did not show a greater impact from the significant weakening of the mandate in the amended bill. Amendments approved during the Senate Finance Committee mark-up eviscerated the individual mandate — completely eliminating it in 2013, significantly lowering penalties to the point that it will only represent about 15 percent of the cost of a premium by 2017. Further, many individuals would be exempt from the penalties altogether. This is likely to result in millions of people foregoing coverage.
http://www.bcbs.com/news/bcbsa/cbo-understates-major-impact-of-weakened-individual-mandate.html
Comment:
By Don McCanne, MD
The current reform proposal before Congress would encourage more uninsured individuals to purchase health care coverage by assessing a financial penalty on those who fail to do so, thus enforcing an individual mandate to purchase insurance.
As Senator Schumer states, if that penalty is too high, those who can’t afford the insurance premium wouldn’t be able to afford the penalty either. Thus the Senate Finance Committee passed an amendment that offers these individuals and families “breathing room” by granting them the right to remain uninsured by paying a more modest penalty than previously proposed. That penalty might still be a hardship for many, but worse would be the hardship of having no health insurance al all.
BlueCross BlueShield Association points out that these lower penalties would likely result in millions of people foregoing coverage. That would risk adverse selection in which individuals who need health care would buy the plans, and the healthy would opt out as long as their health care needs were minimal. That would drive up premiums, making the plans even less affordable. Worse (strictly from the private insurers’ perspective) is that would knock out a significant portion of the market that they are attempting to capture.
So what is the proper balance to achieve optimal benefit from the penalty under the individual mandate? Students of George Lakoff will recognize that we have here a problem with framing. Members of Congress have decided that their preferred solution to the problems of coverage and affordability is that everyone not eligible for public programs must purchase private health plans. This framing eliminates more effective solutions and excessively limits the policy options. Seeking the proper balance for the mandate penalty leads to a dead end since there is no proper balance. The flaw is not in the penalty. The flaw is in the mandate to purchase unaffordable private plans.
We can help Congress with framing that will lead to the reform that we need, but will they ever be willing to listen?