Health Insurance Mandate/Penalty is Just Another Tax
I can’t resist pointing out that I reached the same conclusion as Chief Justice Roberts and the majority more than two years ago. The penalty you have to pay for not having health insurance is not coercion: it’s just a tax, and not different from dozens of other mandates in the tax law. Not being a lawyer, I had no idea how the court would rule, but as an economist, the question is really a no brainer. We do this stuff all the time. (The following is from CNNMoney. I wrote it before I was blogging regularly for Forbes.)
Critics argue that the new law’s requirement to purchase insurance or pay a fine is a radical departure and unconstitutional.
In fact, this is nothing new. Our tax returns are full of implicit mandates with huge penalties — in the form of lost credits and deductions — for noncompliance. The government wants us to donate to charity, own a home, save for retirement, adopt a child, buy a hybrid car … If we don’t, we pay more tax (a penalty).
There is a semantic difference between the health insurance mandate and these other tax nudges in that the government doesn’t require you to donate to charity or own a home. But the government doesn’t really require you to get health insurance either. You are free to ignore the “mandate” and pay the tax.
And some of the other mandates are much more onerous. If I chose to rent rather than own, I’d pay about $7,000 more in taxes — more than three times the maximum penalty for going uninsured.
The requirement to file a tax return is itself a pretty serious mandate, involving hefty penalties and sometimes imprisonment for those who opt out. The point is that the new health insurance mandate is different only in form, not in substance, from the plethora of existing mandates.
The new insurance mandate assesses an excise tax of up to $2,085 per family in 2016 (smaller penalties in 2014 and 2015) for those who do not have “minimum essential” health insurance coverage. Low-income families, Native Americans, undocumented immigrants and some religious groups are exempt.
As I noted in the earlier commentary, a lot of the existing mandates are dubious as a matter of policy, but the health insurance mandate is not. There’s no plausible way in a private health insurance system to get near universal coverage without a mandate. Absent a mandate, people would just wait until they got sick to buy health insurance, but that would send premiums through the roof. That obviously doesn’t work.
The future of the Affordable Care Act is far from certain. The next presidential election will now be as much about health care as the economy and that is as it should be. There is a constitutional remedy for government policies that people don’t want: an election.
I hope the president does a much better job than he has so far in explaining why people should support the law (and his reelection). We’ll find out if he did on November 6.