This week among the flurry of SCOTUS arguments was the topic of the individual mandate and it's constitutionality. Arguments have been made for and against it. Lost, once again, in the shuffle is the actual mandate and its cost. Lost in the debate are the number of people that will be affected by the mandate slated to go into effect in 2014. This is all making the assumption that the Supreme Court declares the Mandate portion of the Affordable Care Act Constitutional.
I would like to reclarify what the mandate
is. Basically, if you or your family do not have insurance by a set time you will be required to buy an insurance plan or pay a penalty.
Q. I don't have health insurance. Will I have to get it, and what happens if I don't?
A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is the individual limit; families have a limit of $2,085 or 2.5 percent of household income, whichever is greater. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.
This leads to another question, how many people will be affected by the Individual mandate? Let's start by looking at who is not required
to purchase insurance. Among the exemptions are
These include individuals who will be exempt for religious reasons -- for example, Christian Scientists; incarcerated individuals; undocumented aliens; individuals who can't afford coverage (i.e., their required contribution would exceed 8 percent of their household income); individuals who will be without coverage for less than three months; other individuals deemed to be in a "hardship situation," as will be defined eventually by the Secretary of Health and Human Services; individuals with incomes below the federal tax-filing threshold; and members of Indian tribes.
After that, take away people who are covered by employee sponsored health insurance and those that will have been deemed to have the basic minimum insurance such as those on Medicaid, Medicare and Veterans. Let's see approximately how many people will be required to purchase the basic essential coverage -- the Mandate.
In the final analysis, the Urban Institute researchers concluded, 18.2 million Americans -- 6 percent of the total population -- will be required to newly purchase coverage or face a penalty. Of that number, 10.9 million will be eligible to receive federal subsidies to help pay for coverage. Just 7.3 million people -- 2 percent of the total population -- will have to newly buy coverage under the ACA and won't receive any federal assistance to pay for it.
2% -- that's it. 2% of people would be required to purchase insurance. Of that 2%, the poorest and most vulnerable are not included. Religious objectors are not included. Prisoners are not included. Small businesses with less than 50 employees will not face penalties. 2% of the population would have to face this penalty should they choose not to purchase insurance. Statistically, they can afford it. When you think about it, the penalty is a pretty sweet deal compared to the cost of purchasing health insurance. According to Kaiser Health:
The average cost of a single health insurance premium in 2009 was $4,824. Patients with health insurance provided by their employers typically don't pay the entire cost themselves. For family insurance plans in 2009, workers paid an average of $3,515 of the cost. For single plans, employees paid an average of $779. People who buy their own insurance see lower premiums---though they typically don't have an employer contributing---and higher out-of-pocket costs, according to second survey by the Kaiser Family Foundation of 1,038 people conducted in 2010. According to the survey, the average cost for a single-coverage insurance premium was $3,606. For family premiums, the average cost was $7,102.
The idea of getting everyone insured is meant to help spread the risk, thus reducing insurance premiums over the long term. This is important. Compare the mandate and its penalty to the other option being proposed by Congress, the Ryan Plan
and suddenly the "Mandate" looks like the best deal ever.
Interestingly, Ryanís plan imposes, if anything, a harsher penalty on those who donít purchase health insurance. Ryanís tax credit is far larger than the individual mandateís penalty, and much easier to enforce. Under Ryanís plan, if you donít purchase insurance, you donít get the credit. End of story. Conversely, the Affordable Care Act doesnít include an actual enforcement mechanism for the individual mandate. If you refuse to pay it, the IRS canít throw you in jail, dock your wages or really do anything at all. This leads to one of the secrets of Obamacare: Perhaps the best deal in the bill is to pay the mandate penalty year after year and only purchase insurance once you get sick. To knowingly free ride, in other words. In that world, the mandate acts as an option to purchase insurance at a low price when you need it. For that reason, when health-policy experts worry about the mandate, they donít worry that it is too coercive. They worry it isnít coercive enough.
I'm not here to debate whether or not the Mandate is constitutional. I'm not even here to defend it. I just wanted to point out that what is being debated is actually less than 2%
of the population that may be required to purchase insurance fully out of pocket. 6% total including subsidization, as mentioned above. This all seems like a lot of hoopla to protect the 2%. Technically, the Supreme Court is debating a technicality. The mandate can help to lower costs but if declared unconstitutional, the ACA has many other very good provisions in it that really help Americans.
The real danger lies in Congress right now.