Off to the Big House: Penalizing Non-Buyers of Health Insurance
“Democrats health bills depend on forcing individuals to buy insurance or face severe fines or imprisonment.”
George Will, Nov, 19, 2009
Before we spin off into a Thanksgiving reprise of last summer’s death panel lunacy, let’s be clear. Nothing in Will’s statement is true.
This is what is true: Both the House health bill and the measure now being debated in the Senate include a “play or pay” fee on those who don’t buy insurance. Some call it a tax, but whichever word you prefer, if you don’t get coverage, you pay. But “severe fines,” as Will claims? Hardly. Under the Senate bill, someone who refuses to buy would pay an initial annual penalty of $95. Will probably spends more than that for one of his bow ties.
And imprisonment? Give me a break. There is no such penalty in either bill. The argument, as I understand it, is that those who don’t buy insurance and refuse to pay the fine could be charged with criminal violation of the tax laws and, if convicted, could be sentenced to prison. Some of the tax cheats recently caught up in the UBS scandal got a few months for failing to pay millions of dollars in back taxes, but I have never heard of anyone being sent up the river for failing to pay $95 in taxes. More likely, the IRS would garnish their wages for the 95 bucks. Not exactly hard time in the big house.
In truth, the problem is not that the penalty is too harsh. It is that it is much too weak. Here’s why: Serious health insurance reform is built on four pillars: insurance companies must not deny coverage or boost premiums because someone is sick, everyone (even the young and healthy) must have insurance, a mechanism must exist for people to buy in the individual insurance market at reasonable prices, and the government must provide subsidies to make insurance affordable for the working poor.
Unless coverage is both guaranteed and mandated, reform falls apart. Government should not require people to buy insurance while allowing carriers to pick and choose their customers. But neither should it require insurers to sell to all comers, but allow the healthiest to opt out. If only the sick buy, insurers must raise rates or go bust. And the higher they raise rates, the more likely only the sickest will purchase. In the insurance biz, they call this the death spiral.
The fine for non-buyers eventually rises to $750 in the Senate bill. The House penalty is much stiffer for many– 2.5 percent of income. If insurance reform is going to work, it needs to combine the carrot of both subsides and (hoped-for) market-driven lower prices with the stick of non-buyer penalties. While they don’t say so publicly, this low tax on going bare is a big reason why insurance companies now oppose the health bills.
Will not only has his facts wrong, but his ideas would doom insurance reform to failure. But that, I suppose, is the idea.