Don't Want Health Insurance? There's a Fine for That

Health-care reform hinges on a lot of things: liberals staying on board through a series of compromises, Joe Lieberman's vote, and the willingness of Senators to spend Christmas in session—all have gotten a lot of press lately as crucial factors in the debate.

But once (or if?) health-care reform passes through Congress, there's one factor that's even more important than all of these: how do you make people sign up for health insurance?

The individual mandate is crucial to health-care reform's success. In order for insurance companies to remain financially stable and accept patients with greater health risks, especially those with preexisting conditions, they need reassurance from the government that all the healthier, lower-cost individuals will sign up, too.

So how can the government give insurers that reassurance? By setting a fine. Just like a speeding ticket encourages safe driving, the Senate bill would enact a $750 fine for remaining uninsured. And chances are, as I learned writing my latest NEWSWEEK story, at least a few million Americans will be paying it:

Both the Senate and House bills would require Americans who remain uninsured to pay a fine. Health-policy experts say these insurance abstainers generally have no ethical or moral qualms with state-mandated coverage. Rather, they are healthy people, without a worrisome preexisting condition or medical history, making a simple financial calculation and gamble: barring any medical emergency, it is significantly cheaper to pay a fine than to purchase a plan.

Who would be penalized, and in what form,is different in the Senate and House versions of the health-care-reform bill. Under the Senate's rules, individuals who do not purchase health insurance would pay $750. The fee would be phased in over three years, beginning at $95 in 2014, $350 in 2015, and reach its final amount in 2016. There is also an important exemption: individuals who cannot find an insurance plan that costs less than 8 percent of their income would have the fine waived. In the House version, individuals would pay a fine equal to 2.5 percent of their income if they do not carry insurance. The bar for exemption is set higher, at 12 percent of an individual's income. In both cases, the Internal Revenue Service will enforce the health-care mandate and require individuals to submit proof of health insurance with their tax return. Health-care-policy analysts, who have followed the reform process closely, are unsure which fee system will prevail in the final bill.

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