Obamacare Penalties: Why?
October 30, 2013 7:22 AM Subscribe
What is the logic behind the financial penalties that individuals in the U.S. could face if they don't purchase health insurance?
The system works by insuring everyone, thereby diversifying the risk pool, and making it cheaper (and available) for people on the riskier end of the spectrum. Also, insurance companies can no longer exclude people due to pre-existing conditions - so one could wait until they receive a cancer diagnosis, then sign up for insurance. In order to balance out the risky/sick people, you need young healthy people to sign up. To get them to sign up, you need an incentive. The financial penalty is the incentive.
posted by melissasaurus at 7:27 AM on October 30, 2013 [9 favorites]
posted by melissasaurus at 7:27 AM on October 30, 2013 [9 favorites]
Insurance works based on the spreading of risk. In theory, in order for health insurance companies to be able to afford to cover the really sick (read: expensive) people with pre-existing conditions and the like, they need to have healthy (read: cheap) people paying the same rates for insurance.
But, if buying insurance is optional, the healthy (mostly young) people (that them media is calling "invincibles", sigh) will probably choose not to buy it because they believe that it's not a good deal for them.
So, the penalty is necessary to change the cost equation for the healthy folks so that they are more incentivized to join.
posted by sparklemotion at 7:28 AM on October 30, 2013
But, if buying insurance is optional, the healthy (mostly young) people (that them media is calling "invincibles", sigh) will probably choose not to buy it because they believe that it's not a good deal for them.
So, the penalty is necessary to change the cost equation for the healthy folks so that they are more incentivized to join.
posted by sparklemotion at 7:28 AM on October 30, 2013
Uninsured people cost the gov't money. They end up in the emergency room, and they are given medical care by the public hospital, and then that bill is paid for by the government.
The Emergency Medical Care Act, passed several generations ago when the Government actually worked, requires a public hospital to care for anyone who shows up in the emergency room, regardless of ability to pay.
However, emergency room care is the most expensive way to treat people. Thus, if you are not going to get insurance under the ACA, then you must pay to defray the costs in the emergency rooms.
posted by Flood at 7:28 AM on October 30, 2013 [4 favorites]
The Emergency Medical Care Act, passed several generations ago when the Government actually worked, requires a public hospital to care for anyone who shows up in the emergency room, regardless of ability to pay.
However, emergency room care is the most expensive way to treat people. Thus, if you are not going to get insurance under the ACA, then you must pay to defray the costs in the emergency rooms.
posted by Flood at 7:28 AM on October 30, 2013 [4 favorites]
OK, so we want to make insurance available to people with preexisting conditions. But if ONLY people with preexisting conditions sign up for insurance, it's not exactly insurance - insurance is, fundamentally, about spreading the risk among a large group of people.
The penalties make it less likely that people will wait until they are sick before signing up for health insurance, which means healthy people will be paying premiums and not using much healthcare, while sick people pay their premiums and use their healthcare, which is how insurance works.
This is part of the reason why dental insurance tends to be crappy and expensive - people only sign up for it when they know they are going to need work done. Also why individual coverage for pregnancy tends to be crazy expensive.
posted by mskyle at 7:28 AM on October 30, 2013
The penalties make it less likely that people will wait until they are sick before signing up for health insurance, which means healthy people will be paying premiums and not using much healthcare, while sick people pay their premiums and use their healthcare, which is how insurance works.
This is part of the reason why dental insurance tends to be crappy and expensive - people only sign up for it when they know they are going to need work done. Also why individual coverage for pregnancy tends to be crazy expensive.
posted by mskyle at 7:28 AM on October 30, 2013
This may be over-simplifying things but my understanding is that the idea is that the penalty will encourage as many people as possible to purchase insurance so that there is as large a pool as possible of insured people paying premiums to fund the claims of those who need to have their care covered. If only those who require healtcare seek insurance, premiums need to be higher; if insurance plans cannot exclude folks based on pre-existing conditions, this problem is exacerbated.
Paying a penalty and getting no insurance is worse than paying something and getting some insurance, so that should make those who wouldn't seek insurance more likely to get insurance.
It would make more sense to simply force everyone to particpate and contribute to the "pool" according to their means through income tax as most other coutnries do, IMHO, but to each country its own I suppose.
posted by onshi at 7:29 AM on October 30, 2013 [1 favorite]
Paying a penalty and getting no insurance is worse than paying something and getting some insurance, so that should make those who wouldn't seek insurance more likely to get insurance.
It would make more sense to simply force everyone to particpate and contribute to the "pool" according to their means through income tax as most other coutnries do, IMHO, but to each country its own I suppose.
posted by onshi at 7:29 AM on October 30, 2013 [1 favorite]
It's similar to herd immunity. Healthcare works best when EVERYONE is insured. That way, when a 20 year old is in a motorcycle accident and spends 8 weeks in the ICU, the rest of us aren't paying for it.
posted by roomthreeseventeen at 7:34 AM on October 30, 2013
posted by roomthreeseventeen at 7:34 AM on October 30, 2013
Simply Younger people have no incentive on buying insurance because they get sick less often; Evidence: as of March 2010, 28 percent of Americans aged 18-25 did not have health insurance.
If younger people do not pay into the insurance program, insurance program/ social programs goes bust since the only people buying insurance will be the higher risk older population.
posted by radsqd at 7:35 AM on October 30, 2013
If younger people do not pay into the insurance program, insurance program/ social programs goes bust since the only people buying insurance will be the higher risk older population.
posted by radsqd at 7:35 AM on October 30, 2013
It's to prevent the adverse selection death spiral. New York has had guaranteed issue (no exclusion for pre-existing conditions) and community rating (price is based on broad demographics, not your individual medical conditions) for years, but without a mandate, only the sickest would buy individual insurance, causing costs to spiral upwards year after year. With the mandate, it 1) prevents you front only getting insurance once you're already sick and 2) induces enough young, healthy people into the plans to spread the risk (and hence, the cost) around.
posted by Oktober at 7:37 AM on October 30, 2013 [1 favorite]
posted by Oktober at 7:37 AM on October 30, 2013 [1 favorite]
To answer your literal question, it's so everyone gets health insurance. More broadly, it's the only workable way to force insurance companies to accept everyone regardless of pre-existing conditions.
If you made companies accept everyone who had pre-existing conditions but didn't have a mandate, no one would get insurance until they got sick. In otherwords, every single transaction would be a loss for the insurance company, and they would soon go out of business. With the mandate, they have to accept sure profit losers, but that is made up for it by all the healthy people who have sign up or pay a penalty. This is how insurance works; you spread the risk as much as possible. If you have fire insurance and your house burns down, you're going to get paid out from the premiums of everyone whose house didn't burn down.
posted by spaltavian at 7:53 AM on October 30, 2013 [1 favorite]
If you made companies accept everyone who had pre-existing conditions but didn't have a mandate, no one would get insurance until they got sick. In otherwords, every single transaction would be a loss for the insurance company, and they would soon go out of business. With the mandate, they have to accept sure profit losers, but that is made up for it by all the healthy people who have sign up or pay a penalty. This is how insurance works; you spread the risk as much as possible. If you have fire insurance and your house burns down, you're going to get paid out from the premiums of everyone whose house didn't burn down.
posted by spaltavian at 7:53 AM on October 30, 2013 [1 favorite]
The logic, as people have said, is that without the added pool of low-risk customers, insurance companies wouldn't be able to stay in business while still insuring everyone, including sick people. In other countries, it's also the case that everyone pays into the insurance system, but the payments are called "taxes" rather than "penalties." Indeed, the fact that the payment we're discussing is, for all intents and purposes, actually a tax was the critical point in John Roberts' opinion upholding the ACA.
posted by escabeche at 7:58 AM on October 30, 2013
posted by escabeche at 7:58 AM on October 30, 2013
Mod note: Answer the question. Don't turn this into a MeFi thread.
posted by jessamyn (staff) at 8:20 AM on October 30, 2013
posted by jessamyn (staff) at 8:20 AM on October 30, 2013
I agree that the majority of the reasoning is that healthcare insurance is not financially sustainable for the insurance companies if only sick people buy it. Everyone above has explained that beautifully.
Society also has an interest in encouraging people to do things that promote stability. 22-year-olds aren't going to be paying for insurance just to finance care for old, sick people. They will be getting coverage for the possibility that they themselves might become young, sick people. Someone in their 20s who develops leukemia, or MS, or gets in a terrible car accident, or develops a staph infection from unclean gym equipment, or comes down with a C. diff infection after a course of antibiotics, is going to require a lot of really expensive care. All of these things occur at least as often in young, generally healthy people as in elderly folks.
Having health insurance when the unexpected occurs to a person in their 20s can completely change the course of that person's life. From a health perspective, it means they are more likely to seek treatment before the problem gets completely out of hand, which really can be the difference between living and dying, or full recovery vs. permanent disability. From a financial perspective, it means that they are less likely to be financially ruined by their illness and its treatment. The media is throwing around that phrase "the invincibles" because a lot of young people tend to think that the worst wouldn't happen to them. But it can and does happen to people just like them. Having the government encourage them to get health insurance makes it more likely that they can avoid the consequences of this hubris, and less likely that society will have to support people whose lives have been irreparably damaged by disability, bankruptcy, death of a spouse/parent, etc.
posted by vytae at 8:39 AM on October 30, 2013 [2 favorites]
Society also has an interest in encouraging people to do things that promote stability. 22-year-olds aren't going to be paying for insurance just to finance care for old, sick people. They will be getting coverage for the possibility that they themselves might become young, sick people. Someone in their 20s who develops leukemia, or MS, or gets in a terrible car accident, or develops a staph infection from unclean gym equipment, or comes down with a C. diff infection after a course of antibiotics, is going to require a lot of really expensive care. All of these things occur at least as often in young, generally healthy people as in elderly folks.
Having health insurance when the unexpected occurs to a person in their 20s can completely change the course of that person's life. From a health perspective, it means they are more likely to seek treatment before the problem gets completely out of hand, which really can be the difference between living and dying, or full recovery vs. permanent disability. From a financial perspective, it means that they are less likely to be financially ruined by their illness and its treatment. The media is throwing around that phrase "the invincibles" because a lot of young people tend to think that the worst wouldn't happen to them. But it can and does happen to people just like them. Having the government encourage them to get health insurance makes it more likely that they can avoid the consequences of this hubris, and less likely that society will have to support people whose lives have been irreparably damaged by disability, bankruptcy, death of a spouse/parent, etc.
posted by vytae at 8:39 AM on October 30, 2013 [2 favorites]
It's exactly the same logic as penalizing those who drive without insurance except instead of driving it is living that includes you in the risk pool.
posted by srboisvert at 9:18 AM on October 30, 2013 [7 favorites]
posted by srboisvert at 9:18 AM on October 30, 2013 [7 favorites]
If only sick people get insurance, then they're treating it like a source of free money. That's not going to work. Where does the money come from?
Insurance isn't supposed to be just "money when I'm sick". It's controlling expense over time: "constant, predictable expense" instead of "no expense followed by sudden, catastrophic expense".
posted by amtho at 9:48 AM on October 30, 2013
Insurance isn't supposed to be just "money when I'm sick". It's controlling expense over time: "constant, predictable expense" instead of "no expense followed by sudden, catastrophic expense".
posted by amtho at 9:48 AM on October 30, 2013
What is the logic behind the financial penalties that individuals in the U.S. could face if they don't purchase health insurance?
The ACA essentially mandates everyone will pay for healthcare. You can do this by either purchasing health insurance or paying a fine that will defray the increased risk to the pool of you remaining uninsured. While you are not technically forced to have insurance you will pay either way. That was the actuarial bone thrown to the industry to end cherry-picking, unwarranted cancellations, a promise that at least 80% of premiums will be paid as benefits and the covering of pre-existing conditions...
posted by jim in austin at 9:50 AM on October 30, 2013
The ACA essentially mandates everyone will pay for healthcare. You can do this by either purchasing health insurance or paying a fine that will defray the increased risk to the pool of you remaining uninsured. While you are not technically forced to have insurance you will pay either way. That was the actuarial bone thrown to the industry to end cherry-picking, unwarranted cancellations, a promise that at least 80% of premiums will be paid as benefits and the covering of pre-existing conditions...
posted by jim in austin at 9:50 AM on October 30, 2013
Best answer: Read about the insurance death spiral.
Take four guys: Paul, John, Ringo, and George.
Paul has a horrible genetic disease that results in a lot of health care costs. He is in and out of the doctor every other week. He has tried to maintain health insurance ever since he was a kid in order to pay for everything.
John is in his sixties with a few maintenance medications--maybe he's got diabetes and high blood pressure, and he's taking something for his arthritis. He is also worried about the risk of major health events like a stroke or a fall, and wants insurance in case these things happen.
Ringo is in his thirties. He has no major problems but he just got married, so insurance seems like a good idea. It also helps cover yearly check-ups and screens.
George is a 20-year-old superman who has never been sick a day in his life. He has insurance because his parents are paying for it.
All of these guys belong to the same insurance company. They pay into the same "risk pool." George barely consumes any healthcare, Paul consumes the most. The money that George spends on premiums is essentially going to help pay for Paul. The same for Ringo and John--Ringo might consume a little, but more of his premiums go to help pay for John and George than his own healthcare costs.
Well, George's parents say it's time he made his own way. George looks at this health insurance premium and says "Screw it! I never get sick, I would rather spend this money on otter-wrestling and extreme chess!" So he drops insurance. This is the beginning of the death spiral. The insurance company is now taking in less money but still has to cover the costs of George and John, and Ringo's yearly check-ups. So they hike up premiums.
Paul and John aren't happy about the higher bill, but they still need their meds and doctor visits so it's not worth it to drop insurance. Ringo starts reconsidering his decision. Those yearly check-ups never turn anything up and he's not that old, so maybe that money would be better spent on a retirement fund or the mortgage. He drops insurance.
Insurance company gets the news and says "Shit." Now they just have a moderately-high and a high healthcare consumer in their risk pool. Time to hike premiums again, and they're going to have to get pretty high. The costly premium is too much for John, so he's next to drop. He can't afford his medications on his own, but he hopes if he eats a little better and goes on walks more often that will help. He'll deal with the arthritis, and as for strokes and falls? Hopefully it won't happen.
That leaves Paul as the only healthcare consumer in the risk pool. His healthcare usage is astronomical. His insurance company has only high-risk, high-consumption members of its risk pool now--unless they directly bill Paul all of his healthcare costs, they're hemorrhaging money. So they go bankrupt, Paul no longer has insurance, and is left to fend for himself. That's the death spiral.
Note the end result: nobody has insurance, the sickest people are screwed, and the least-sick people are left unprotected if something terrible happens. Because in truth, everybody needs insurance. George isn't invincible--those otter bites can get infected, and when you're playing chess mid-air while base-jumping off the Grand Canyon a lot of things can go wrong. Ringo's wife might get pregnant or he could develop brain cancer. It's only a matter of time before John encounters a major health crisis. This doesn't even count the rising costs due to healthcare consumption by the uninsured, the pressure on ERs to deal with conditions that could have been managed with preventative care, lost labor to the workforce from people who are too sick to work because they can't afford to see a doctor, lost investment from bankrupticies caused by overwhelming hospital bills. And on and on.
The only way to avoid the death spiral is to keep out people you deem high-risk--like John and Paul--or keep the low-risk people like George and Ringo in your pool somehow. Up until now insurance companies have been free to set premiums wherever and keep out anyone they want--i.e., those deemed to have "pre-existing conditions". Obviously, that hasn't been working out too well for keeping down healthcare costs and the well-being of the general population.
So, you want everybody to have healthcare, and you don't want it to cost too much. This requires a nice big risk pool. There are two ways to do this. First, provide everyone with basic healthcare through a government-run, single payer system. The insurance companies providing extra perks on top of that aren't handling catastrophes left and right, and the government-run system has a lot of members by default. Second, tell insurance companies they have to give insurance to everyone, and avoid the death spiral by imposing penalties on the Georges who don't think they need insurance.
The Republicans have deemed the first option communism, so we're using the second. The subsidies, expanded Medicare, and whatnot are there to make this option more doable for the lower-income end of the population (who are more likely to be uninsured anyway and thus end up costing the system due the aforementioned inevitability of health issues).
(Of course there is a lot more that goes into the rise and fall of healthcare costs, but this is a part of it)
posted by Anonymous at 9:54 AM on October 30, 2013 [1 favorite]
Take four guys: Paul, John, Ringo, and George.
Paul has a horrible genetic disease that results in a lot of health care costs. He is in and out of the doctor every other week. He has tried to maintain health insurance ever since he was a kid in order to pay for everything.
John is in his sixties with a few maintenance medications--maybe he's got diabetes and high blood pressure, and he's taking something for his arthritis. He is also worried about the risk of major health events like a stroke or a fall, and wants insurance in case these things happen.
Ringo is in his thirties. He has no major problems but he just got married, so insurance seems like a good idea. It also helps cover yearly check-ups and screens.
George is a 20-year-old superman who has never been sick a day in his life. He has insurance because his parents are paying for it.
All of these guys belong to the same insurance company. They pay into the same "risk pool." George barely consumes any healthcare, Paul consumes the most. The money that George spends on premiums is essentially going to help pay for Paul. The same for Ringo and John--Ringo might consume a little, but more of his premiums go to help pay for John and George than his own healthcare costs.
Well, George's parents say it's time he made his own way. George looks at this health insurance premium and says "Screw it! I never get sick, I would rather spend this money on otter-wrestling and extreme chess!" So he drops insurance. This is the beginning of the death spiral. The insurance company is now taking in less money but still has to cover the costs of George and John, and Ringo's yearly check-ups. So they hike up premiums.
Paul and John aren't happy about the higher bill, but they still need their meds and doctor visits so it's not worth it to drop insurance. Ringo starts reconsidering his decision. Those yearly check-ups never turn anything up and he's not that old, so maybe that money would be better spent on a retirement fund or the mortgage. He drops insurance.
Insurance company gets the news and says "Shit." Now they just have a moderately-high and a high healthcare consumer in their risk pool. Time to hike premiums again, and they're going to have to get pretty high. The costly premium is too much for John, so he's next to drop. He can't afford his medications on his own, but he hopes if he eats a little better and goes on walks more often that will help. He'll deal with the arthritis, and as for strokes and falls? Hopefully it won't happen.
That leaves Paul as the only healthcare consumer in the risk pool. His healthcare usage is astronomical. His insurance company has only high-risk, high-consumption members of its risk pool now--unless they directly bill Paul all of his healthcare costs, they're hemorrhaging money. So they go bankrupt, Paul no longer has insurance, and is left to fend for himself. That's the death spiral.
Note the end result: nobody has insurance, the sickest people are screwed, and the least-sick people are left unprotected if something terrible happens. Because in truth, everybody needs insurance. George isn't invincible--those otter bites can get infected, and when you're playing chess mid-air while base-jumping off the Grand Canyon a lot of things can go wrong. Ringo's wife might get pregnant or he could develop brain cancer. It's only a matter of time before John encounters a major health crisis. This doesn't even count the rising costs due to healthcare consumption by the uninsured, the pressure on ERs to deal with conditions that could have been managed with preventative care, lost labor to the workforce from people who are too sick to work because they can't afford to see a doctor, lost investment from bankrupticies caused by overwhelming hospital bills. And on and on.
The only way to avoid the death spiral is to keep out people you deem high-risk--like John and Paul--or keep the low-risk people like George and Ringo in your pool somehow. Up until now insurance companies have been free to set premiums wherever and keep out anyone they want--i.e., those deemed to have "pre-existing conditions". Obviously, that hasn't been working out too well for keeping down healthcare costs and the well-being of the general population.
So, you want everybody to have healthcare, and you don't want it to cost too much. This requires a nice big risk pool. There are two ways to do this. First, provide everyone with basic healthcare through a government-run, single payer system. The insurance companies providing extra perks on top of that aren't handling catastrophes left and right, and the government-run system has a lot of members by default. Second, tell insurance companies they have to give insurance to everyone, and avoid the death spiral by imposing penalties on the Georges who don't think they need insurance.
The Republicans have deemed the first option communism, so we're using the second. The subsidies, expanded Medicare, and whatnot are there to make this option more doable for the lower-income end of the population (who are more likely to be uninsured anyway and thus end up costing the system due the aforementioned inevitability of health issues).
(Of course there is a lot more that goes into the rise and fall of healthcare costs, but this is a part of it)
posted by Anonymous at 9:54 AM on October 30, 2013 [1 favorite]
Best answer: From a comment on the Blue from 18 months or so ago:
Bob: Hi, insurance company. I'd like to buy some health insurance.
Insurance company: No. You had cancer when you were 3 years old, and the cancer could come back. We're not selling health insurance to you.
Bob: It's not my fault I got cancer when I was three! Besides, that was years ago!
Insurance company: If we sell insurance to you, we'll probably lose money, and we're not doing it.
Bob: But I need insurance more than anyone! My cancer might come back!
Insurance company: We don't care. We're not selling you insurance.
Obama: Hey, that's totally not fair. Bob is right, he does need insurance! Sell Bob some insurance.
Insurance company: If we have to, I guess.
Mary: This is cool. Obama said the insurance company has to sell insurance to anyone who needs it.
Sam: Hey, I have an idea. I'm going to stop paying for health insurance. If I get sick, I can always go buy some insurance then. The insurance company won't be able to say no, because Obama's told them they have to sell it to anyone who needs it!
Dave: that's a great idea! I'm not paying for health insurance either, at least not until I get sick.
Insurance company: Hey! If everyone stops paying for insurance, we'll go bankrupt!
Obama: Oh come on Sam and Dave, that's not fair either.
Dave: I don't care. It saves me money.
Obama: Oh for god's sake. Sam, Dave, you have to keep paying for health insurance, and not wait until you're sick. You too, Mary and Bob.
Mary: But I'm broke! I can't buy insurance! I just don't have any money.
Obama: Mary, show me your piggy bank. Oh, wow, you really are broke. Ok, tell you what. You still have to buy insurance, but I'll help you pay 95% of the cost.
Mary: thank you.
Obama: I need an aspirin.
Insurance company: We're not paying for that aspirin.
(Originally on Reddit, of all places.)
The financial penalty, if it's not clear, is what compels Sam and Dave to buy insurance.
posted by Homeboy Trouble at 9:56 AM on October 30, 2013 [15 favorites]
Bob: Hi, insurance company. I'd like to buy some health insurance.
Insurance company: No. You had cancer when you were 3 years old, and the cancer could come back. We're not selling health insurance to you.
Bob: It's not my fault I got cancer when I was three! Besides, that was years ago!
Insurance company: If we sell insurance to you, we'll probably lose money, and we're not doing it.
Bob: But I need insurance more than anyone! My cancer might come back!
Insurance company: We don't care. We're not selling you insurance.
Obama: Hey, that's totally not fair. Bob is right, he does need insurance! Sell Bob some insurance.
Insurance company: If we have to, I guess.
Mary: This is cool. Obama said the insurance company has to sell insurance to anyone who needs it.
Sam: Hey, I have an idea. I'm going to stop paying for health insurance. If I get sick, I can always go buy some insurance then. The insurance company won't be able to say no, because Obama's told them they have to sell it to anyone who needs it!
Dave: that's a great idea! I'm not paying for health insurance either, at least not until I get sick.
Insurance company: Hey! If everyone stops paying for insurance, we'll go bankrupt!
Obama: Oh come on Sam and Dave, that's not fair either.
Dave: I don't care. It saves me money.
Obama: Oh for god's sake. Sam, Dave, you have to keep paying for health insurance, and not wait until you're sick. You too, Mary and Bob.
Mary: But I'm broke! I can't buy insurance! I just don't have any money.
Obama: Mary, show me your piggy bank. Oh, wow, you really are broke. Ok, tell you what. You still have to buy insurance, but I'll help you pay 95% of the cost.
Mary: thank you.
Obama: I need an aspirin.
Insurance company: We're not paying for that aspirin.
(Originally on Reddit, of all places.)
The financial penalty, if it's not clear, is what compels Sam and Dave to buy insurance.
posted by Homeboy Trouble at 9:56 AM on October 30, 2013 [15 favorites]
The other thing to remember, as an addition to schroedinger's hypothetical would be this situation:
George, having never been sick, has no insurance. He's young, he's low risk, and he's conscientious in his daily life. One winter day, he is passing someone on the sidewalk and steps a little too far to the side and slips off the icy curb. He ends up twisting and breaking his ankle.
Regardless of whether he has insurance, the emergency room treats George. Having no insurance, he's suddenly faced with a large cost -- which he can't pay. As he's underemployed (as many people who lack insurance are) it's highly unlikely he'll ever be able to pay for his treatment, and if he does, it will take a payment plan and a long period of time. Who is paying for his treatment? Everyone else in the system, as prices rise to absorb the costs of treating the uninsured.
posted by mikeh at 11:07 AM on October 30, 2013
George, having never been sick, has no insurance. He's young, he's low risk, and he's conscientious in his daily life. One winter day, he is passing someone on the sidewalk and steps a little too far to the side and slips off the icy curb. He ends up twisting and breaking his ankle.
Regardless of whether he has insurance, the emergency room treats George. Having no insurance, he's suddenly faced with a large cost -- which he can't pay. As he's underemployed (as many people who lack insurance are) it's highly unlikely he'll ever be able to pay for his treatment, and if he does, it will take a payment plan and a long period of time. Who is paying for his treatment? Everyone else in the system, as prices rise to absorb the costs of treating the uninsured.
posted by mikeh at 11:07 AM on October 30, 2013
A small side note to all this: if everyone will be covered and so everybody must be in the pool, sick or not, the financial penalty approach isn't the only solution. You could accomplish the same thing by simply taxing all citizens for their healthcare. However, our current political climate would make a tax-based approach a non-starter.
So, the financial penalty approach is a mechanism for accomplishing the same thing a health care tax would, but as an opt-in tax (that is, if you don't participate, you're opting-in for paying the penalty, versus if you pay the tax but have corporate-sponsored health care, you'd have to opt-out for paying the tax on a yearly basis.)
The end result (to citizens, not to health care companies) is the same, though: people will pay a certain amount of money to obtain healthcare*, with a subsidy for those who cannot afford it. There's a logic in that; we've accomplished what a tax would have, without having to fight the "taxes bad grr" obstacle (although there were/are plenty of others to fight.)
*directly, by contributing to their employer's plan or through an ACA plan, or indirectly, by paying penalties used to offset just-in-time signups and just-when-needed emergency room care.
posted by davejay at 1:30 PM on October 30, 2013 [1 favorite]
So, the financial penalty approach is a mechanism for accomplishing the same thing a health care tax would, but as an opt-in tax (that is, if you don't participate, you're opting-in for paying the penalty, versus if you pay the tax but have corporate-sponsored health care, you'd have to opt-out for paying the tax on a yearly basis.)
The end result (to citizens, not to health care companies) is the same, though: people will pay a certain amount of money to obtain healthcare*, with a subsidy for those who cannot afford it. There's a logic in that; we've accomplished what a tax would have, without having to fight the "taxes bad grr" obstacle (although there were/are plenty of others to fight.)
*directly, by contributing to their employer's plan or through an ACA plan, or indirectly, by paying penalties used to offset just-in-time signups and just-when-needed emergency room care.
posted by davejay at 1:30 PM on October 30, 2013 [1 favorite]
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It's not as good as completely subsidized universal coverage, but this America.
posted by dirtdirt at 7:26 AM on October 30, 2013 [11 favorites]