What Health Insurers Want: Tougher Penalties For Those Who Don't Buy Insurance


The insurance industry group AHIP is circulating a new study arguing that key elements of the proposed health-care overhaul will significantly raise premium prices for the insured. Democrats on the Hill, naturally, aren't happy. The reaction from the spokesman for Democrats on the Senate Finance Committee was typical: He called the report "untrue, disingenuous and bought and paid for by the same health insurance companies that have been gouging too many consumers for too long."

Two points on this.

The first is that the report does seem, at first glance, to be somewhat selective in what it chooses to report. It doesn't actually look at the bill as a whole; instead, it looks at four provisions likely to raise premium prices. It also makes some odd assumptions about how consumers will react to new regulations. That doesn't mean the report is wrong that premium prices will rise. State-level experience with insurance-market regulations like guaranteed issue and community rating suggests they will. But it's worth remembering that the report doesn't provide a complete overview of any of the bills now making their way through Congress.

The second point, and the more important one, is that, judging by the AHIP spokesman's comments on Fox News this morning, the insurance industry's intention here isn't necessarily to oppose reform. Instead, I suspect AHIP is hoping to push legislators to make the individual mandate—the requirement that everyone purchase health insurance—even stronger.

It's obvious why insurers would favor such a rule: What industry wouldn't want a law requiring just about everyone to buy its product? Thing is, health insurance mandates are only as powerful as their penalties, and, in the most recent Senate Finance Committee bill, the penalty for not buying insurance is relatively low. As NPR explained last week, "there would be no penalty for going without insurance in 2013. And the fines imposed starting in 2014 would amount to $200 for an adult, rising a few hundred bucks each year to $750 in 2017. Insurance would costs thousands of dollars a year, so the math isn't very pretty for the risk pool."

A weak mandate means insurers would be stuck with all sorts of expensive new requirements, but with fewer new individuals purchasing their product—meaning less money coming in to offset the cost of those pricey regulations.

Now, I'm not in favor of a mandate, and the experience of Massachusetts—which now has both a mandate and the highest insurance premiums in the country—indicates that mandates won't necessarily bring premium prices down.

But, as far as I can tell, the insurance industry mainly just wants to bring people into the system and is willing to play ball with other regulations if it can do so. Seems likely that its real gripe here isn't so much that industry regulations are too onerous—it's that the requirement for the rest of us isn't strong enough.

NEXT: The Libertarian Veteran and His Translator

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  1. For those who care, Jennifer addresses Mandatory Insurance The Guardian.


    1. The comments are a fine example of Stockholm Syndrome.

      “Sure, my mom waited for a hip replacement for a full year while in horrible pain, but she’s very happy now!”

      1. Thank you! That is the phrase I’ve been looking for to describe my Canadian family’s pathetic attempts to defend socialized medicine.

        Perhaps I should casually drop this in when I call to wish them a happy (fake) Thanksgiving.

        1. Seriously, Thanksgiving in October? And on a Monday? Where’s the the four-day weekend love, Canada?

          What do they even eat for Thanksgiving, anyway? Do they even have the miracle of turkey and sausage stuffing? Don’t they know it’s Thanksgiving time at all?

          1. Sug, I don’t mean to alarm you, but many of my Canadian relatives are vegetarians. Some kind of international aid effort/celebrity singalong is definitely in order.

            1. Tofurky is an abomination.

              And I recently saw Tofurky Jerky at Whole Foods [shudder]

              1. One feels the need to make a duck stuffed inside a chicken stuffed inside a goose stuffed inside Steve Smith to compensate.

                1. A ducoosesmithen?


                    1. Steve Smith doesn’t play duck-duck-goose. He plays duck-duck-rape.

            2. Vegetarian? Sounds to me like you need to do an “intervention.” 😉

    2. The problem with American health insurance is that the second you come down with anything more expensive than a head cold, your insurer will squirm through any loophole it can find to deny paying for your coverage.

      This is an oftmade assertion which never seems to be supported by any credible evidence.

      There seem to be an awful lot of cancer survivors and accident victims out there who have received full and complete treatment paid for in full, to the tune of many thousands of dollars, by their evil old corporationy insurance companies.

  2. The Nobel Prize Committee announced today that it is awarding the Prize in Medicine to Jimmy Duncan, a senior at Horace Greeley High School in Chappaqua, New York, for getting a 97 on his bio-chem final.

    “The Committee felt that Master Duncan has shown great promise with his outstanding grades,” said Dr. Leif Quisling, chairperson of the Nobel Prize Committee. “It is our fervent hope that this award encourages him to do great things in the future, such as find a cure for cancer.”

    The committee was first alerted to Jimmy Duncan when they came across a YouTube clip of Duncan’s class presentation on his career goals.

    “We were particularly struck by his unbridled optimism,” said Dr. Quisling. “Duncan closed his passionate talk with these inspiring words: ‘And we can end cancer in our lifetimes if we all work together really, really hard!’ It is exactly those kind of empty platitudes that impress this committee. Far more so than anything so gauche as actual achievement.”

  3. Obviously I hate the idea of a mandate or government-run health care. Still, I could imagine a simple Swiss-style insurance system, with community rating, to be somewhat compatible with free-market principles. The insurance companies in Switzerland are incredibly competitive, because there are actually very few regulations they have to work with. The main requirement is that they offer the same price to all comers in the same age group. I’m not even sure they are required to have certain age bands. So there’s still plenty of room for competition with that simple rule of the game. I believe there’s still an individual mandate in Switzerland, and that sucks. But it’s not a single-payer plan, it’s not a government-run healthcare system. And that means it’s more free than other systems. Correct me if I’m wrong.

  4. As NPR explained last week, “there would be no penalty for going without insurance in 2013. And the fines imposed starting in 2014 would amount to $200 for an adult, rising a few hundred bucks each year to $750 in 2017.

    I’ll bet NPR wishes they could have people mandated to pay for their product.

    1. Yeah. I’m sure they envision it in the form of a tax, so people don’t know they’re funding it.

      1. I sure would be mad if I found out that my taxes were supporting NPR. Yessirree.

    2. But you get a free “All Things Considered” fanny pack ($50 value) with your mandatory donation!

  5. Lie down with dogs, you’re going to eventually get your ox gored.

  6. If the fine is less than the premium, and the insurance companies have to cover pre-existing conditions, then the sensible thing to do is to not carry coverage and pay the fine, and if you get sick then walk in and buy insurance that day, and laugh.

    If everyone does that, the entire system will collapse and we got all go shit on Max Baucus’ face and laugh.

    1. This is certainly not the narrative that would be peddled by the MSM, and I have very little faith in the general public thinking critically enough to construct the chain of events you describe on their own.

      Heck, most Americans still think the current recession was caused by “deregulation”.

      1. Remembering name, email, and website is so much more a psychotic activity than forgetting.

    2. Of course that is what is going to happen. And then the “public option” will kick in, or Midicare will be expanded to cover all the people who can no longer buy health insurance, because it no longer exists (or the premiums are $20,000 a year).

    3. And what happens if one can not even aford to pay the fine? Then the IRS comes to get your home, bank account and anything else you own? Or maybe they just wait until it’s time to put in for your Social Security and deduct the penalties from your check. That’s what all this health care insurance crisis is really about – revenue enhancement. The government can’t meet all it’s upcoming entitlement obligations.

  7. Postponing the fines and weakening mandatory enrollment serves two purposes:

    (1) It keeps our Congresscritters from getting beat up for fining people and making them buy shit they don’t want.

    (2) It ensures that the private system will collapse.

    Both are features, not bugs, inside the Beltway.

  8. In fairness, Massachusetts had the highest premiums even before they had a mandate. I paid a small fortune for insurance when I lived there.

  9. So easy, even a Congressman can do it!

  10. GEICO|10.12.09 @ 5:25PM|#

    So easy, even a Congressman can do it!

    .. what he/she (GEIGO) said!

  11. Instead, I suspect AHIP is hoping to push legislators to make the individual mandate?the requirement that everyone purchase health insurance?even stronger.

    You suspect that, do you?
    Isn’t it blindingly fuckin’ obvious?

    The insurance companies agreed to go along with the provision on pre-existing conditions, precisely because they have been salivating at the thought of an insurance mandate.

    Obviously, they are not going to go along with any plan that doesn’t make that mandate strictly enforced.

  12. I can’t afford insurance, so I’ll just sit and wait until the FBI busts down my door and off to prison because I can’t afford insurance.

    If I know they’re coming, I’ll alert the news media. That’ll be sweeeeet footage.

  13. F – U – C

    K – E – D


    Grab your ankles,
    bend your knees,

    You’re gonna be fucked again.

  14. This is fascism, of the standard corporatist style. Democrats love fascism.

  15. Has this old reason nugget been mentioned since the debate on Obama-care started?

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  17. Actually you just need file the “Religious Conscience Exemption” of H.R. 3200.

    Part VII, Subpart A, Sec. 59B(c)(5) (on pages 170-171 of the House Draft)

    “Subsection (a) shall not apply to any individual (and any qualifying child residing with such individual) for any period if such individual has in effect an exemption which certifies that such individual is a member of a recognized religious sect or division thereof described in section 1402(g)(1) and an adherent of established tenets or teachings of such sect or division as described in such section.”

    When you actually get hurt or become ill, just renounce your religion and go to the emergency room.

  18. With respect to “Anonymous'” contention that “Democrats love Fascism”, just remember that Republicans are no strangers to corporate patronage. Have you forgotten the billions in no-bid, cost-plus contracts to Halliburton, Parsons, CH2MHill, KBR,Blackwater, etc? This is in no way a de faco defense of democrats. I’m just searching for arguments that stay above the partisan fray (to whatever extent that is possible), and hoping against hope to find it here at Reason.

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