By Jacob Shmukler
Forcing every American to buy health insurance is a key component of both House and Senate health care legislation that will be merged into a single bill in the coming months. The logic behind the individual mandate is rather simple: To eliminate the problem of health insurance companies denying applicants based on pre-existing conditions, ban them from doing so. But to make sure that people do not wait until they are sick to purchase insurance, force everyone to do that now.
Aside from the obvious problem many Americans may have with banning private companies from behaving in their own self-interest – and earning outrageous 3 percent profit margins in the meantime – while forcing people to purchase a product they do not want, the individual mandate actually goes one step further. It tells a significant share of the population that they, and only they, do not even have to comply with this law at all.
On the Senate side, those who do not purchase health insurance that meets the minimum health benefits requirements would be fined $2,250 per person or 2 percent of their annual income, whichever is greater. The House simply deems noncompliance worthy of a straight fine of 2.5 percent of annual income. The message is clear: Failure to purchase adequate coverage is a crime that is punishable by an annual fee. The act of foregoing health insurance (apparently) constitutes a danger to fellow citizens – or at least is necessary to offset private insurance companies’ revenue distortions caused by other regulations such as community rating and guaranteed issue.
If that is the case, all is well and good. Failure to comply with many things – such as stopping at a stop sign – endangers others and likewise is punishable by a fine. But here’s the problem: Fines in both versions of the legislation only apply to people making over 100 percent of the federal poverty line ($10,830 for an individual) in the Senate and a yet-to-be-determined amount in the House. That this is low income is undeniable. But it implies that those making less than some arbitrary figure – one that can be arbitrarily adjusted, too – do not pose the same potential threat to their fellow Americans. According to the legislation, those people need not abide by the same laws that everyone else is forced to follow. The result is socio-economic discrimination, pure and simple.
There is a way to avoid this. Under current versions, if the cost of health coverage forces people to spend more than a pre-determined percentage of their income (8 percent in the Senate), they would be granted a hardship waiver and exempted from acquiring coverage. In principle, this is a very different policy than providing subsidies to poorer families, then forcing them to use that money to purchase coverage just like everyone else. The laws that would go into effect if the Senate rules were imposed today would be the equivalent of a law stating that those earning below, say, $10,830 do not need to pay traffic tickets and therefore will not be held accountable for their reckless driving habits – as opposed to the current system where those people are provided with generous welfare benefits and use that money to pay traffic fines instead.
Some may argue that driving is optional and therefore cannot be used as a fair comparison, but the analogy can be simplified further. An individual has committed an action – or in this case failed to complete an action – which the government feels is worthy of punishment by fine, but only for those earning above an arbitrary threshold. When viewed in this light, the individual mandate appears highly questionable at best and unconstitutional at worst.
This is not to say that providing hundreds of billions of dollars in subsidies to lower-income Americans and then enacting an individual mandate is the solution. Rather, the proposals highlight the hypocrisy inherent in the “reforms” politicians are trying to force on hard-working and higher-earning Americans.
The goal, instead, should be to work to free the health care market of government regulations that drive up the cost of health insurance. That way, responsible citizens would be able to purchase the highest quality health coverage available to them with the least government assistance and the greatest choice possible.
Jacob Shmukler, an Atlanta native and research assistant in Washington, D.C., wrote this commentary for the Georgia Public Policy Foundation. The Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (January 15, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.