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The Financial Professional's Guide to Healthcare Reform by Gregory Anderson, Mark Dietrich

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Chapter 6

Mandates, Subsidies, Penalties . . . and Taxes

The Individual Mandate

Perhaps the most contentious of all of the provisions from a constitutional standpoint, the individual mandate purports to be at the heart of the legislation. The subsidies described later in the chapter flow from the requirement that virtually all legal residents of the country—excluding religious objectors, members of American Indian tribes, and those in prison—be covered by insurance, and if they cannot afford insurance, the taxpayers will pay for it. If an individual does not qualify for a subsidy and does not purchase insurance they are subject to a penalty that is administered through the income tax system.

The argument at the heart of the individual mandate is that healthy individuals with the financial ability to pay for insurance often do not purchase coverage. Then, when they become ill, they may be unable to afford the actual costs of their care and go into so-called uncompensated care pools or other government programs. According to the Kaiser Family Foundation, young adults had the highest uninsured rate (32 percent) before reform. And, of course, young adults tend to be the healthiest class of individuals. Thus, from a standpoint of the actuarial risk factors described in Chapter 3, forcing young adults into the health insurance system is critical to both obtaining money and actuarial stability.

Amount of the Penalty

The penalty amount phases in over a period of three years, commencing ...

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