So, for political reasons, the mandate was made very weak. For this year, it costs $695 or 2.5 percent of income for individuals and $2,085 or 2.5 percent of income for families to ignore. But it’s actually weaker than that. The penalty can’t be assessed like a criminal penalty, it can only be taken from your tax refund. So even if your income was $1 million a year, and your penalty therefore $25,000, set yourself up with minimal withholding and end the year owing the government money. Then your actual penalty is zero.
The math doesn’t have to be that severe to make people avoid the individual mandate. For a 30-year-old not making a huge income, $695 is only about two months of the average premiums for a bronze plan and less than two months premium for a silver plan. So if you are a young individual not likely to get sick, and don’t game the tax system on withholding, you can buy a bronze plan for about $3,700 a year that has, on average, a $6,000 deductible, meaning you spend $10,000 before seeing any return on your insurance investment. Or you can pay a one-time $695 penalty then cash-pay for any medical needs, where just about anything short of hospitalization will make this the much better financial option.
So the key to getting people like that insured is simple: raise the mandate. Bring it much closer to the total premiums plus deductible someone would have to pay for not insuring. Make it so people can’t game the tax code to avoid it, and just like that, we’ve stabilized the pools. Here the Democrats, with the help of Republicans’ favorite Supreme Court justice, John Roberts, have backed themselves into a corner. In addition to being horribly unpopular, likely causing electoral backlash, this would also cause significant legal backlash.