Insurer Complains That Penalty For Failing To Obtain Health Care Coverage Isn’t High Enough

Politico’s Pulse flagged this story, from the Indianapolis Business Journal, of WellPoint chief financial officer Wayne DeVeydt complaining that the penalty for not obtaining health care coverage may be set too low in the Affordable Care Act. (Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount — $2,085 — per family or 2.5% of household income ):

Until fines get a lot closer to the price of health insurance, DeVeydt said, many people won’t buy coverage—especially the young and healthy, whose unused premiums offset the high cost of care for older patients. “Would you ever feed the meter if feeding the meter costs more than the [parking] ticket?” DeVeydt said in another analogy. “People say that’s not going happen. It is going to happen.”

Still, DeVeydt said the individual mandate is necessary to achieve a goal of universal health insurance.

Only time will tell if people would rather pay the penalty or buy the insurance, but the experience in Massachusetts (where the overwhelming majority of residents are now insured even though the maximum penalty in actually substantially below the federal amount!) and economic research suggests that most are likely to opt for the coverage. In fact, a recent survey of the uninsured found that an overwhelming majority — 76 percent of the uninsured — would rather comply with the individual mandate than pay the penalty for forgoing it.

In fact, instead of complaining about insufficient penalties, health insurers have a critical role to play in partnering with the government and nonprofits to educate the public about the mandate and the new choices of coverage, and I suspect that the extent of that outreach will have a much greater affect on coverage rates than any level of mandate penalty.