Why Are Americans Being Forced to Buy Health Insurance?

Q: Are some people likely to pay the penalty rather than purchase insurance?

A: In the first year that people in Massachusetts were required to have health insurance, 118,000 people—just under 3% of tax filers—did not obtain health coverage even though it was considered affordable for them. After exemptions for people without tax liability [who couldn’t afford insurance], approximately 66,000 were subject to the penalty.

The fines in Massachusetts—just over $1,000—are higher than what is being proposed at the national level. National penalties will be phased in beginning in 2014: $95 (or 1% of taxable income, whichever is greater) in 2014, $325 (or 2% of taxable income) in 2015, and $695 (or 2.5% of taxable income) in 2016. Time will tell if these numbers provide the proper incentives. The new law does include exemptions for hardship, and it will be important to see how exactly that is defined and implemented.

Q. What are some of the potential pitfalls of the insurance mandate at the federal level?

A: What we experienced in Massachusetts is that many of the people who were newly eligible for Medicaid were previously eligible [but never signed up]. These people need to think about housing and food and things like that, so they didn’t enroll, for some reason; it might have even been pride—you know, "We don’t want to go on government assistance."

Another lesson we can learn from Massachusetts is that there will need to be a big outreach campaign. In Massachusetts, they used the Red Sox in ads on TV, because the uninsured are disproportionately younger males. Another thing that really worked well here were small grants to consumer advocacy organizations to do grassroots outreach.

Q. For Americans who are uninsured or unhappy with their current health insurance, is health reform a net positive or negative?

A: Right now, if you’re in the individual market, you’re paying the highest rates of anyone. The insurance mandate is going to require healthy people to buy health insurance, so in the individual market, it’s going to be a lot cheaper.

It’s a net positive, but people are going to have to wait, since many of the protections and many of the subsidies don’t kick in until 2014.