Health/Science
6:00 am
Tue June 19, 2012

Under Mandate, Why Buy Insurance When Penalty's Cheaper?

The U.S. Supreme Court will decide the future of the Patient Protection and Affordable Care Act this week.  It might not be that affordable for some.

Laurie Tirmenstein is a self-employed piano teacher, single mother of two, and among the 25 percent of Texans without health insurance.

“It would make a huge difference if we had affordable and good insurance. Right now the goal is just to not need to see a doctor.  And if something comes up, we’re straight to the ER at the county hospital.”

The federal health care law’s “individual mandate” is aimed to help people like Tirmenstein. The provision requires that most uninsured Americans buy coverage so they can see a family doctor, and avoid trips to the emergency room, which is more expensive. There are levels of federal subsidies to help people afford the new, state-regulated coverage that will become available in 2014. 

The rates have not been finalized. But the Kaiser Family Foundation looked at the likely average costs of a minimum insurance plan beginning in 2014. Using the foundation’s online subsidy calculator, Laurie Tirmenstein’s premium – with the federal subsidy – would be about $150 a month. She says that may not seem like a lot, but it’s a big number in her budget. Under the plan, she would also have to pay 40 percent of all health care costs after she meets a deductible likely to be more than $3,000.   

“Nobody saves up that kind of money just waiting to spend it on deductible.”

“Yes, there’s going to be some sticker shock, and no one knows how people are going to react to it.”

That’s Dr. John McCracken, professor of healthcare management at the University of Texas at Dallas. He predicts some people will refuse to buy the health insurance, especially if the economy remains sluggish. McCracken points to required auto liability insurance, and says more than 15 percent of licensed drivers knowingly break the law and just don’t buy it.   

“So, in one case automobile liability insurance is mandated and it’s got about the same percentage of uninsured people as the general healthcare population.  So, I’m not sure how much this is going to reduce the uninsured population.”

Those who decline to buy health insurance under the mandate will pay a penalty. In the first year it’s $95 or 1 percent of your income, whichever is greater. It goes up each subsequent year.   

Laurie Tirmenstein says she’s inclined to pay the penalty because it would be under $250.  With insurance, she would pay an estimated $1,800 in premiums for the year.   

“It sounds like I could much more easily afford a dad-gum penalty than to be saddled month after month after month with this kind of premium, and then come up with a huge deductible if I needed help,” she said.

Anne Dunkelberg, Associate Director of the Center for Public Policy Priorities in Austin admits the healthcare law is not perfect, but says it’s progress.  

“The individual mandate is one way that you make sure the healthy people aren’t the last ones to sign up for insurance, which makes the average cost of insurance affordable for everyone.”

Tirmenstein doesn’t exactly see it that way.

“I have never liked the idea of the government telling me I have to do anything, particularly when it comes to my income," she said.

Tirmenstein is hoping the U.S. Supreme Court strikes down the insurance mandate, even though she says having a comprehensive health insurance policy she could afford would be "magic."