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How does the individual mandate work?

So long as legal challenges to the individual mandate are in the news, we might as well be clear about what the mandate is, and how it works.

The individual mandate is a requirement that all individuals who can afford health-care insurance purchase some minimally comprehensive policy. For the purposes of the law, "individuals who can afford health-care insurance" is defined as people for whom the minimum policy will not cost more than 8 percent of their monthly income, and who make more than the poverty line. So if coverage would cost more than 8 percent of your monthly income, or you're making very little, you're not on the hook to buy insurance (and, because of other provisions in the law, you're getting subsidies that make insurance virtually costless anyway).

Most people will never notice the mandate, as they get insurance through their employer and that's good enough for the government. But of those who aren't exempt and aren't insured, the choice will be this: Purchase insurance or pay a small fine. In 2016, the first year the fine is fully in place, it will be $695 a year or 2.5 percent of income, whichever is higher. That makes the mandate progressive.

And what happens if you don't buy insurance and you don't pay the penalty? Well, not much. The law specifically says that no criminal action or liens can be imposed on people who don't pay the fine. If this actually leads to a world in which large numbers of people don't buy insurance and tell the IRS to stuff it, you could see that change. But for now, the penalties are low and the enforcement is non-existent.

The theory behind the mandate is simple: It's there to protect against an insurance death spiral. Now that insurers can't discriminate based on preexisting conditions, it would be entirely possible for people to forgo insurance until, well, they develop a medical condition. In that world, the bulk of the people buying insurance on the exchanges are sick, and that makes the average premiums terrifically expensive. The mandate is there to bring healthy people into the pool, which keeps average costs down and also ensures that people aren't riding free on the system by letting society pay when they get hit by a bus.

The irony of the mandate is that it's been presented as a terribly onerous tax on decent, hardworking people who don't want to purchase insurance. In reality, it's the best deal in the bill: A cynical consumer would be smart to pay the modest penalty rather than pay thousands of dollars a year for insurance. In the current system, that's a bad idea because insurers won't let them buy insurance if they get sick later. In the reformed system, there's no consequence for that behavior. You could pay the penalty for five years and then buy insurance the day you felt a lump.

Luckily, consumers aren't usually that cynical, and the experience of places such as Massachusetts suggests that individual mandates encourage people to buy insurance even when it might make sense for people to simply pay the penalty. But for all the furor over the individual mandate, the danger in the bill is much more that it is too weak and too good a deal than that it is too strong and too punitive a tax.

By Ezra Klein  |  March 25, 2010; 11:55 AM ET
Categories:  Explaining health-care reform  
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And we progressives don't really mind if the courts throw out the mandate and cause the private insurance industry to go bankrupt anyway. They don't contribute anything of value to the health care system and can easily be replaced by a public option or Medicare-for-all.

Posted by: redwards95 | March 25, 2010 12:00 PM | Report abuse

the key to this is twofold.

1-make sure as with anything else if you see the rule (mandate) being abused to adjust it, (ie increase the penalty as you go.)

2-and this is much more important-- enforce the rules of open enrollment.

people cannot be allowed to jump back on and off if there is no pre-existing conditions. Medicare does this so should the exchange as well as those outside of the exchange.

If you don't do it in the exchange you'll see rates spike in the exchange because the system's being abused and insurers when they're outside the exchange will absolutely take a hard line stand on this. Personally with the added concern that ERISA is exempt I don't think you'll see many large employers in the exchange. It'll be too costly. You may see some larger employers with lowly paid populations go to the exchange because of the subsidy issue but not highly compensated companies because they'll get minimal at best benefit out of it.

Posted by: visionbrkr | March 25, 2010 12:04 PM | Report abuse

"A cynical consumer would be smart to pay the modest penalty rather than pay thousands of dollars a year for insurance."

I have been thinking the exact same thing.

$695 a year is about $58 a month. Compare that to a typical COBRA payment of $1200 a month. Why wouldn't people choose to pay the occasional medical bill out of pocket, pay the fine, and then call up Blue Cross when they get sick and demand coverage. Ezra may characterize this behavior as "cynical", but people do react rationally to financial incentives, particularly ones worth 5 figures a year.

So, what would be the effects of this?

A) The healthy don't buy insurance, so the risk pool doesn't change - in fact, it probably gets worse.

b) Premiums rise as health insurance companies try and cover losses from this type of behavior.

Premiums are going up, folks.

Posted by: sold2u | March 25, 2010 12:07 PM | Report abuse

Ezra, why no mention of Ron Wyden's amendment allowing state's to opt-out of the individual mandate starting in 2017? Personally, I think Congress should make the provision kick in in 2014, but hey, it's in there.

Posted by: charlie14 | March 25, 2010 12:11 PM | Report abuse

Ezra, you are selling mandate politically and we have already bought that. No point in that sales pitch.

What is important going forward is legal challenges. Most of the challenges may not stand but as WaPo reporter Lane pointed, challenge to the mandate can be serious.

I have absolutely no doubt that Chief Justice Roberts and his buddies on Supreme Court will over turn it whenever they get a chance. GOP Legal Team / challengers will not be that stupid and will scramble to reach Supreme Court on this case as early as possible. President Obama has irreversibly irritated Roberts and seems it is beyond re-approach that he will not pull off a political revenge on President. Today all that seems inevitable.

Lane is right to say MA case you cannot compare because States do have rights for such individual mandates at State Level, it is the question of Fed.

Given that, questions:
- why the new law would not settle on something like if your State wants, it can have State level mandate (meaning exchanges will not be national) or State can opt out; or
- your other pointer where an individual can opt out of insurance but will not be able to get back into the coverage easily. Damage in 'emergency room' will be continued; but the deterrent will be solid and in all probability most will go for cover.

In both options mandate will not be needed legally, but practically that will be the result.

Question - are these provisions in the law or Congress will have to pass such changes?

Posted by: umesh409 | March 25, 2010 12:12 PM | Report abuse

A question: would it be possible under the legislation to buy crappy insurance (high deductibles, etc.) and then, if you develop a serious illness, switch to better insurance?

Posted by: ostap666 | March 25, 2010 12:13 PM | Report abuse

sold2U - HCR may well have died alltogether if that insurance company in CA hadn't announced a 40% premium increase.

You say premiums are going up, you are probably correct. But they were going up regardless, the question is will the go up faster or slower than they would have anyway.

Vision is, as usual, correct. We will have to adjust the penalties for those who try to game the system. That shouldn't surprise anyone.

Posted by: nisleib | March 25, 2010 12:15 PM | Report abuse

@umesh409: "I have absolutely no doubt that Chief Justice Roberts and his buddies on Supreme Court will over turn it whenever they get a chance"

I'm not sure they will. Especially because it's not just Roberts who votes. Are you positive Kennedy would go along with ruling the individual mandate unconstitutional? Because I'm not. I know Clarence Thomas will vote to overturn.

Posted by: Kevin_Willis | March 25, 2010 12:20 PM | Report abuse

Would individuals be obliged to cover their families as well as themselves? Say, if their employer offered a plan that covered only the employee, not the family--who would cover the family? How would subsidies work in such an instance?

Posted by: kttaylor1 | March 25, 2010 12:28 PM | Report abuse

...$695 a year or 2.5 percent of income, whichever is higher. That makes the mandate progressive.

It does? Seems to me that it means that anyone earning below $27,500 a year (me, for instance) would be paying more than 2.5% of their income for the mandate, while those with a higher income would pay less. Yes, more revenue would come from higher-income types, but this would certainly not be progressive in the sense of a progressive income tax; in fact it's less progressive than a flat tax.

Posted by: RobK_ | March 25, 2010 12:29 PM | Report abuse

Ezra (or anyone else),

I'm confused about a point. The subsidies are tied to the second lowest cost silver plan, right? Let's say that in 2016 that plan costs $5,000 on the exchanges. An individual making 200% of the FPL that year (~$26,000) can either buy insurance capped at 6.3% of his income - $1,638 - or pay the $695 penalty for nothing. However, suppose that the bronze plan cost $4,200. Does this mean that the individual's premium expense falls $800 to $838, only $143 more than the penalty, or does this individual still face the $1,638 cost? It other words, is the individual getting a $3,362 subsidy, or simply cap on total premiums paid?

If you can use the subsidy based on the silver plan to get bronze coverage, I'd imagine most people who would otherwise game the system would instead shift from the silver to bronze plans.

The people you'd have to worry about are single healthy individuals making $45,000 - $100,000 and who don't have health insurance - with no subsidies the mandate won't start to bite until it gets fairly high.

Posted by: justin84 | March 25, 2010 12:31 PM | Report abuse


the rules of open enrollment should not allow that to happen.

then again currently in my state you can game the system. You can buy a policy from Aetna that is a HDHP at a low premium and then if you get sick you can switch to another carrier. That shouldn't be allowed either. Like Medicare you should only be able to change once per year.

You'll always have people look to game the system, the point is being one step ahead of them when they do and know what they're doing. The problem is that government doesn't think ahead very well and doesn't adjust fast enough.

This is going to get ugly.


thanks. btw, they're going to go up faster. Anyone that thinks the 80% rule is going to be a factor isn't paying attention. insurers already spend 80 cents + on the dollar on medical care. We're going to see the taxes in the bill (that thankfully have been pushed back) affect costs.

Again they should have done this 10-15 years ago. imagine how much farther we would be.

Posted by: visionbrkr | March 25, 2010 12:33 PM | Report abuse

RobK brings up a good point. While $695 or 2.5% of AGI might be more progressive than $695 only, it is more regressive than a flat tax. Kind of a lump sum tax / flat tax combination.

Posted by: justin84 | March 25, 2010 12:34 PM | Report abuse

--"The mandate is there to bring healthy people into the pool, which keeps average costs down and also ensures that people aren't riding free on the system by letting society pay when they get hit by a bus."--

What are you talking about, Klein? The new system ENSHRINES a whole new class of free riders. It's like "Christmas" for the Democrats base.

Posted by: msoja | March 25, 2010 12:40 PM | Report abuse

Any Supreme Court ruling might come too late to have any practical effect. As a parallel, Medicaid was enacted in 1965, the program overran available funds 250% in its first four years, and the first real challenges were heard by the Supreme Court in 1974. If a similar ten-year period elapses, the latest health tax challenges will be heard in 2020: if current cost projections are as accurate as those for Medicaid, by 2010, the point will be somewhat moot, as the Federal government would at the time be bankrupt.

Posted by: rmgregory | March 25, 2010 12:44 PM | Report abuse

Of course, a 4% employer mandate with the money going to the employee's health insurance exchange account would BE MORE EFFECTIVE, so the way to get the individual mandate is to ignore the superior policy and pretend that the individual mandate is the best way to do the job.

Mainstream economics: the thinking that brought you the wonders of 2008 brings the same wit and wisdom to health insurance reform.

Posted by: BruceMcF | March 25, 2010 12:45 PM | Report abuse

I read other link Ezra pointed - Scott Lemieux at Tapped.

That has some good grounds and reasons why there may less 'upside' for Conservatives in Supreme Court rigged repeal of the mandate.

But again I am like Jon Chait, Conservative Supreme Court will tamper this law.

To Kevin_Willis, I understand your point; but the way Supreme Court landed in the end in campaign finance case recently, I am under the impression that Liberal views of the Court do not hold in the end. I read that Kennedy is the fulcrum of the court, but then how come such a conservative ruling came from the same Kennedy? How can we 'depend' that such a court would hold the line there?

Posted by: umesh409 | March 25, 2010 12:46 PM | Report abuse

--"You'll always have people look to game the system, the point is being one step ahead of them when they do and know what they're doing."--

Or, you could just let people be responsible for their own health care, but then you couldn't busy yourself with everyone else's business, could you?

Posted by: msoja | March 25, 2010 12:51 PM | Report abuse

I thought that the bit about buying insurance from private companies (as opposed to the Federal Gov't) was a political move meant to appease Republicans and their supporters--not to draw their eternal enmity. Is it also good policy, or should we scrap it because the GOP doesn't want to agree? (Related: weren't some 200 Republican amendments included in the final law? What are those?)

Posted by: Bertilak | March 25, 2010 12:52 PM | Report abuse

If you want to sell the mandate and give it a little more teeth, instead of calling it a penalty tax and setting it a $695/2.5% AGI, call it a bill.

In 2007, ER expenses per uninsured visitor came to $986 per person - that might be somewhat higher for 2014, say $1,300. That's your 'mandate' - but we're not calling it a mandate. It's a bill for services rendered, although collectively paid. Have ERs tally up the services at Medicare prices and send the bill to the federal government, who then bills it to each uninsured adult on a pro-rata basis. Since pretty much anyone either poor or near poor is getting either free or heavily subsidized healthcare, it's not going to fall on the very poor. Also, give a dollar for dollar credit to anyone who paid for their ER care out of pocket, up to the total amount of the bill.

Yeah it's byzantine, but paying a bill sounds a lot fairer to most people than paying a tax - I don't see how its unconstitutional either.

Posted by: justin84 | March 25, 2010 12:55 PM | Report abuse

Hmmm, I've been concerned about the strength of the mandate too. If you are an individual 40 year old adult making $30k, according to the Kaiser calculator, your annual premium cost after subsidies would be $2650. You could pay that and get health insurance or pay $700 (2.5% of $30k = 700 > 695) and wait until you get sick. The benefit to paying the extra $1950 is of course regular tests, checkups, prevention, etc. and the concern that you could always get into an accident that you can't get insurance before large costs start immediately accruing. So other than that, you could see someone calculating that it's better to get nothing and pay the $700 tax/penalty than pay $2650 for the insurance, and then if tragedy strikes, just buy the insurance then. However, as Ezra said has been shown in the Massachusetts mandate, people hate taxes and will do whatever they have to to avoid them. I read a Post article a few weeks ago about how in DC, some people use up a gallon of gas so they can drive to Virginia to shop at the grocery store where they don't charge you 5 cents for a plastic bag. Psychology is sometimes more useful to understanding this sort of human behavior than economics.

Posted by: vvf2 | March 25, 2010 12:56 PM | Report abuse

From a legal standpoint, it might have been better if the mandate had been structured as an across-the-board 2.5% income tax increase, from which you would be exempted if you had proof of insurance, the same way you get to take off your mortgage payments, charitable contributions, and a whole host of other deductions. Put another way, I'm paying an income tax penalty for renting, right --kind of a house-purchase "mandate." The constitutionality of that kind of scheme is so clear that even Clarence Thomas couldn't complain about it. And functionally I can see no difference from the "mandate" structure (which is, of course, a good argument for the mandate's constitutionality).

Posted by: gedwards1 | March 25, 2010 12:59 PM | Report abuse

Seems the mandate at the state level is optional:

"... states that found the mandate objectionable could simply create and insert a new system in its place. All it would require is applying for a waiver from the Department of Health and Human Services, which has a 180-day window to confirm or deny such a waiver.

That language has been inserted, almost verbatim, into the bill Obama signed into law on Tuesday. And if there is any confusion about how much leverage it gives states to drop the mandate, Wyden cleared it up months ago during a hearing at the Senate Finance Committee.

"So let us review how the waiver language works now, because my reading of what we have in the bill now is, if a state can demonstrate that they can meet the criteria -- particularly on cost containment, improving the delivery system -- they can do it without an individual mandate," the senator said at the time. "And can I ask counsel, is that a correct reading of the Waiver Amendment that I offered the chairman has accepted at this point?"
Story continues below

The counsel replied: "Yes."

Posted by: HalHorvath | March 25, 2010 12:59 PM | Report abuse


its funny i'm on the phone with a company right now and this person's marternity costs were $45,000 for a 4 day stay for a c-section delivery.

How would you expect someone to pay for that in YOUR system? Say someone that makes $20,000 per year? Listen I'm all about personal responsibility but you've crossed a line into crazy.

Posted by: visionbrkr | March 25, 2010 1:02 PM | Report abuse

link for that quote:

Posted by: HalHorvath | March 25, 2010 1:10 PM | Report abuse

To get a clearer idea what this bill actually means for individuals and our health care system at large, I recommend that you and your readers carefully read the statement issued by Physicians for a National Health Program upon passage of this bill. It's entitled "False Promise of Reform" An exploration of their website is very illuminating...

I also urge that you listen to Dr. Maria Angell of Harvard and Editor Emeritus of the New England Journal of Medicine, as she discussed the bill with Bill Moyers recently.

I personally would trust their analysis. They know from inside experience of what they speak.

What they say certainly rings true from my personal experience of "junk insurance." I almost died under its "care." Only qualifying for "government run" insurance saved me. When people are mandated to buy this kind of insurance they will be very unhappy. Leaving the predators in the drivers seat, as they are in this bill, was a very bad idea. What I simply can't understand is the unwillingness of the president and congressional leadership to fight for an alternative public option for the American people. It certainly feels like a betrayal to me.

Posted by: lachmund | March 25, 2010 1:12 PM | Report abuse

The mandate is simply make-believe. For upper and middle class, it's generally not an issue, since they hhave employer coverage. For uninsured low-income people, what do you think is going to happen when they don't pay their mandate?

Does anyone seriously think that the IRS is going to serve widespread $700 tax liens on poor people? Of course not. That would be politically disastrous and unlikely to generate any money anyway.

The mandate is simply a polite fiction, to allow guaranteed-issue to pass.

Posted by: tomtildrum | March 25, 2010 1:13 PM | Report abuse


the question is how would they validate it and how easily will the Secretary let them out of it?

And since MA hasn't even proven cost control in a state with a mandate I don't see any other way they can do it unless someone has the bright idea to tell docs what they can charge and then wait for the fallout from that.

Posted by: visionbrkr | March 25, 2010 1:20 PM | Report abuse


"junk insurance" as you call it didn't almost kill you. Doctors or the lack of care or your valid concern of your cost almost killed you.

I'm sorry but how would a public option help you? If a public option had the same bronze, silver, gold, platinum options available and ended up as many suspected cost MORE than private insurers due to numerous reasons I'm confused as to how that could have "saved" you.

It would be nice if people knew what they were talking about before they started blaming someone for "almost killing them".

Posted by: visionbrkr | March 25, 2010 1:25 PM | Report abuse

"I have absolutely no doubt that Chief Justice Roberts and his buddies on Supreme Court will over turn it whenever they get a chance."

If that were to happen, SCOTUS would have to agree that George Washington was in violation of the Constitution, since the Second Militia Act of 1792 mandated that American citizens purchase all sorts of military equipment.

The Congress that passed that act (and of course, GW) was largely composed of the very founders who had written and signed the US Constitution.

Perhaps the Roberts court will have a clearer understanding that the Constitution somehow forbids a mandated purchase than the very people who wrote the Constitution?

Posted by: Patrick_M | March 25, 2010 1:26 PM | Report abuse

OK my understanding on how the Mandate is written and enforced (from Lawrence O'Donnell on MSNBC) is that it's simply a tax of $695 or 2.5% of income levied on everyone who can afford insurance, enforced by the IRS. If you buy insurance you are given a tax credit that waives the tax.

That sounds pretty constitutional to me.

Posted by: Sayne | March 25, 2010 1:28 PM | Report abuse

"If you buy insurance you are given a tax credit that waives the tax. That sounds pretty constitutional to me."

Exactly. It is simply a minor tax imposed only upon the very few morons who are too pig-headed to carry health insurance when it becomes affordable for all, thanks to the subsidies.

Posted by: Patrick_M | March 25, 2010 1:35 PM | Report abuse

There will always be some people looking to game any system, but I wonder how widespread it really would be. Studies of 401(k) behavior have shown that an astonishing proportion of workers either (1) don't sign up even if their employer would make automatic contributions (i.e., pass up free money) or (2) fail to make any diversified allocation (leaving everything in low-yield bond funds, or, worse, in their own company's stock). So how concerned should we be that a substantial number of people would make a strategic decision to buy crap insurance and then switch to something better if they get sick? I just don't see it.

Posted by: Janine1 | March 25, 2010 1:39 PM | Report abuse

what an ideological war on words...Here is an unbiased review of the insurance requirement:

Posted by: KasualOberver | March 25, 2010 1:41 PM | Report abuse

How about this as a penalty? If you have opted out for a period of time, contract an expensive-to-treat illness, then opt back in, you are required to back pay all of the premiums you missed by opting out, at the current premium rate. If you're healthy when you opt back in this doesn't apply.

Would this:
a)Help the insurance company, a little, defray the cost of your treatment and to the approximate extent that your previous premiums would have helped had you not tried to game the system?

b) Discourage consumers from gaming the system by removing the incentive?

I just thought of it right now. I can't tell if it's a good idea or not.

Posted by: jonboinAR | March 25, 2010 1:43 PM | Report abuse

"...Or, you could just let people be responsible for their own health care, but then you couldn't busy yourself with everyone else's business, could you?"

Are you willing to turn people who don't have insurance away from the emergency room even if they're near death?

Posted by: jonboinAR | March 25, 2010 1:54 PM | Report abuse

In biology, animals that take advantage of social rules are called "cheaters."

For instance, an ant could be totally lazy and not ever go out and forage, and the other ants would still feed him. The lazy ant is called a "cheater," and evolutionary biologists spend a lot of time examining systems to see how much cheating they can tolerate without collapsing, and what mechanisms they use to prevent cheaters from taking advantage.

It's very interesting.

Posted by: theorajones1 | March 25, 2010 1:58 PM | Report abuse


That's not a bad plan. It seems a bit heads I win tails I break even, although continual rapid cost growth is likely to make paying back premiums at current rates a significant penalty, particularly if you've been uninsured for a long time.

One other option is forcing people to enroll at an enrollment period at the start of the year, (except of course for newly minted American citizen via naturalization or birth). Say you have from November 1 to Dec 31 to choose a plan that covers you from Jan 1 - Dec 31 of the following year (this might already be in the bill - who knows).

If you contract an expensive illness, you're just face ripped off uninsured. You can get a new plan for Jan 1 of the following year, but if you need treatment in April you're on your own. If you're illness occurs in December, well then lucky you, but you still have to wait a month for treatment. Maybe also adjust the bankruptcy laws so medical debt cannot be discharged if you willingly went without insurance - so if you need $150,000 for treatment in April, your bad decision basically created a second mortgage.

I've seen people leave jobs and then decide not to pick up Cobra. Then they have some major health expenses, they jump back into Cobra and pay the back premiums, get treated and on top of it get a million and one other things checkout, to 'get their money's worth'. Economically, perfectly rational, although I'd want to eliminate the ability to jump back in as soon as you need help.

Posted by: justin84 | March 25, 2010 2:06 PM | Report abuse

Does anybody know if ALL small businesses are subject to fines if they don't provide health insurance for their employees? I am co-owner of a small business (an S-corp) with 20-30 employees and have never been able (yet) to afford a small-group plan. Are we going to face fines or are we too small.

I haven't heard if there is a cut off for size

Thanks for all the great work

Posted by: crieser | March 25, 2010 2:07 PM | Report abuse


The cut off is 50 employees, You will have big tax credits if you do provide your employeees with insurance, but there will be no penalties if you don't, and most employees of the smallest businesses like yours will end up buying on the exchanges.

Posted by: Patrick_M | March 25, 2010 2:16 PM | Report abuse


sorry it is a bad plan (although better than the current/new one if its abused).

let me give an example.

Say your premium is $5000 per year and you opt for the penalty of $695. Two years from now you get cancer and then opt back in and get cover immediately and incur costs of $500,000. Get treated and then opt back out. Now i honestly can't see any cancer patients ever opting out but theoretically its possible.

Your idea of open enrollment requirement is better but it can't be set up only at one set time per year. For one, while most employers (especially larger ones) have their open enrollment January 1st (because of lining up deductibles based on calendar year basis) many employers don't. The renew their policies at different months during the year based upon when they set them up. No one will accept an "early" price increase to change that. Not only that but those that institute these plans and do all the backroom work would be so inundated that they'd need to hire tens of thousands of people for temporary work just to enroll everyone, make everyone's changes etc and then lay them off. You'd get people who don't have a clue as to what they're doing.

You need to lean heavy on the open enrollment rules but don't require it to be at a set point in the year.


you'd be exempt to the fine (under 50 employees) but your employees would be required to get coverage (likely thru the exchange). You would face some stiff taxes as an S-corp on income but we don't use the "T" word around here. sssh.

Posted by: visionbrkr | March 25, 2010 2:24 PM | Report abuse

vb, I think some already-proven techniques such as bundling would qualify for any Sec. of Health as "cost control".

Posted by: HalHorvath | March 25, 2010 2:26 PM | Report abuse

--"its funny i'm on the phone with a company right now and this person's marternity costs were $45,000 for a 4 day stay for a c-section delivery."--

That's what your seven decades of government meddling in the health care sector has gotten you. That's what's ridiculous. And it's only going to get worse. It can't go otherwise.

Posted by: msoja | March 25, 2010 2:28 PM | Report abuse


nice selling ;-) Don't forget to tell him about all the nice new taxes he gets to pay.

35-50% of the cost of the premium in tax credits. Maybe that puts some employers over the top to offer health insurance prior to the requirements maybe it doesn't.

to that end Ezra I'd love to hear stats (or maybe even a nice graph) that shows how many employers in that 2-50 market will now offer healthcare due to the credit.

Posted by: visionbrkr | March 25, 2010 2:31 PM | Report abuse


insurers already bundle. Have for years. Hasn't helped providers NOT game the system.

To that end ever notice that ER docs and anesthesiologists don't participate in any insurance? The reason? Because they don't need to accept less when someone's HAS to use their services anyway. That's why whenever you go to the ER AND you have insurance you often times get balance billed from the doctor. Most insurers pay those charges at 100% of usual and customary rates and it still isn't enough for some providers. Same rule goes for anesthesiologists, pathologists when you're in the hospital etc.

Posted by: visionbrkr | March 25, 2010 2:35 PM | Report abuse

I've been telling "Libertarians" that the Mandate is the Public Insurance Option for them. All these "Libertarians" are going to cover their own health care costs of their "Libertarian" lifestyle of choice.

People who are responsible and bought expensive insurance for themselves should not be asked to cover the a$$eS of free-loading and free-riding "Libertarians" as well. They can cover their own through the Mandate.

Posted by: wimprange | March 25, 2010 2:43 PM | Report abuse


"nice selling ;-) Don't forget to tell him about all the nice new taxes he gets to pay."

nice scaring ;-) I am not an accountant, so I will leave it to a CPA who is familiar with the revenues and current tax situation of any particular small business to assess whether there will be any negative impact as a result of HCR.

"35-50% of the cost of the premium in tax credits. Maybe that puts some employers over the top to offer health insurance prior to the requirements maybe it doesn't."

As a small employer who already provides health insurance, this credit will help me in two ways.

It will be a little easier for me to enlarge my staff more quickly as the business grows, and it will create a little more "headroom" for me to absorb the annual increases in premiums, and to provide a little more compensation in the form of salary increases.

I have a hunch that will be the major benefit of the credits for the smallest employers, not that employeres who do not insure employees will begin to do so, but that those of us who already do will have an easier time preserving and improving employee benefits and compensation.

Posted by: Patrick_M | March 25, 2010 2:52 PM | Report abuse


no scaring. Just the facts. I agree, he or she should check with their accountant. But the fact is that income of a subchapter s corp is treated as an indivdual and he would be subject to the new Medicare tax if he makes over $250k which many small businesses do.

no one seems to mention that side of things around here.

sorry if i like to give the entire story.

Posted by: visionbrkr | March 25, 2010 3:27 PM | Report abuse

lachmund, thanks for that link to Dr. Angell.

I had seen her earlier Moyer's appearence but not this one. We have a problem though...


Dr. Angell's comments on March 5 had an unusual (for Angell), large error, that wasn't addressed, and there is no comment area.

Dr. Angell said:
"Either the 55-year-olds cough up three times the premiums, and that's good. Or else they can't, and that's probably the more likely situation. They can't, and then they're fined. And the insurance companies don't have to take care of people who might actually get sick. They're left with all of the thirty-year-olds, who are less likely to get sick, but who are required to buy their products.
"So this sets up a situation which probably all plans, for 55-year-olds, are high priced. So they can't afford to buy it, or if they do buy it, they have to pay an excise tax on it. This is a real poison pill for these older people"

But in fact people of any age, and especially those with expensive premiums (such as 55-yr-olds), which can't they cannot easily afford, get federal subsidies.

They get affordable insurance due to the subsidies.


While I generally agree with Angell, she hasn't a good sense of the possible I think.

There is a fundamental fallacy widespread in America that first must be disproved before more Americans will be able to contemplate the best overall balance of government vs. private decision making.

It's more than can be said in a sentence. I've written some on this at my blog =

Posted by: HalHorvath | March 25, 2010 3:33 PM | Report abuse

Thanks y'all, I feel neither "sold" nor "scared". I am interested in how really small employers have responded in other situations. The 35%-50% tax rebates actually MIGHT just be enough to push us into a situation to be able to afford insurance as it has always been just out of our reach.

Posted by: crieser | March 25, 2010 3:34 PM | Report abuse

vb, when you wrote: "To that end ever notice that ER docs and anesthesiologists don't participate in any insurance? The reason? Because they don't need to accept less when someone's HAS to use their services anyway. That's why whenever you go to the ER AND you have insurance you often times get balance billed from the doctor. Most insurers pay those charges at 100% of usual and customary rates and it still isn't enough for some providers. Same rule goes for anesthesiologists, pathologists when you're in the hospital etc."

You have offered a great example of rapacious behavior.

It seems like a variety of fraud in practice (in effect). The patient presumes, reasonably, that their insurance has negotiated contracts, thus protecting the patient financially.

It's quite a racket on the part of those particular practitioners.

There is even a notice, essentially meaningless to I bet 90% of people that get the notice, in a policy document in Texas to the effect that this kind of billing can occur (I've stated this plainly, but the notice is ineffective in informing policy holders as to its implication in the real world).

Posted by: HalHorvath | March 25, 2010 3:40 PM | Report abuse

vb, another way of saying all of that is simply the example would be impossible under genuine bundling ("bundling": for specific conditions, such as a broken leg, etc. e.g. a broken leg of x type of and number of fractures/etc. results a defined total payment from a table of variety of conditions (of the broken limb), a precise total payment, to the hospital and all physicians).

But to the other question: what could constitute "cost controls" for the HHS sec. to sign off on. Simply to have a bundling system would be adequate to get the sign-off. Then, over time, the state can refine its rules as needed, etc.

So, the mandate question may be moot.

Posted by: HalHorvath | March 25, 2010 3:47 PM | Report abuse


yes it is quite a racket. I wouldn't have a problem with it IF providers let the patients know ahead of time that this occured. Most times people are unaware it happens until they get a bill later and they naturally blame their insurer for not covering them.

how much is too much for an ER doctor to bill?

$500, $1000, $10,000

I'm not saying they shouldn't be paid and paid very well but at some point reason has to come into play too.

I know a client whose wife was under the care of a maternal fetal medicine doctor in Northern NJ. He was pre-set to handle this hospital and thus purposefully did not join any network because he was getting called in anyway so why should he accept less. he would see the entire wing and my client said he spent about 5-10 minutes per day come in, introduce himself, check her chart, adjust medications etc and he billed the insurance $3000 per visit. He would see about 10 patients per day. So he billed $30,000 per day for at most 100 MINUTES work. Now the insurance only paid $600 per day for his visit (who knows what from other insurances).

I always wondered WHY he did bill so much over what he got. We convinced him to never bill our client but did he bill the other patients? Who knows. Was he just trying to inflate the UCR levels? Maybe.

Problem is that people don't see this end of the system ever.

As far as your bundling question you're basically saying that they can put forth bogus bundling that never controls costs? I'm sorry but they should actually see costs controlled before the waive the mandate otherwise it'll make the death spiral in CA look like a reduction in cost.

Posted by: visionbrkr | March 25, 2010 4:10 PM | Report abuse


I stand corrected.

Maybe the answer then is just 'heads I win, tails I lose' - you can opt back in for insurance on everything except your pre-existing condition. If your cancer costs 500,000 bucks, then you pay it - and you are actually forced to pay it, the debt doesn't get wiped out in bankrutpcy. Although it would probably be bad politics to bring back pre-existing conditions, the only people who would be faced with it are those who voluntarily had a break in their coverage and so its hard to feel sorry for them.

Oy. Makes me wish we had set aside a fixed percent of GDP (4%,5%,6% - I'm not too picky as long as it is fixed and low) for either universal catastrophic insurance combined with forced savings (and supplementary private plans), or a network of public providers managed by the states that people could use if they wanted/needed to (with many choosing private providers).

Posted by: justin84 | March 25, 2010 4:15 PM | Report abuse


once you close the door on pre-ex it has to stay closed forever. Insurers won't want it. The public surely wouldn't want it.

I think strong rules on open enrollment will get us as close to fair as we can get.

Posted by: visionbrkr | March 25, 2010 5:12 PM | Report abuse

Constitutionally, it is functionally identical to a tax with exemption. At best, people are quibbling over phrasing. If the court throws it out, congress can add it back in by phrasing it as follows:

A. Taxpayers are required to pay a tax equal to the maximum of $695 or 2.5% of income.
B. Tax exemptions are available to:
#1 the insured.
#2 taxpayers with incomes less than the Federal poverty line.
#3 residents in markets where insurance costs more than 8% of their income.

The 16th amendment of the constitution allows the congress to tax the incomes of whomever they want. Taxes don't have to apply to everyone, congress has wide lee-way to decide what criterion they want to use to apportion them.

Making the mandate unconstitutional would entail making most of the federal government unconstitutional. I know many conservatives would like this but it ain't gonna happen.

Posted by: zosima | March 25, 2010 5:17 PM | Report abuse


i'm confused over what plans will count as "insurance." If someone has a high deductible health insurance plan now, will they be able to keep it without paying the penalty (assuming it doesn't meet the minimum standards set forth in the bill)?

Posted by: Levijohn | March 25, 2010 5:22 PM | Report abuse


That seems fair. Ultimately we're concerned about people monkeying around with coverage because some will probably see a financial benefit of not being covered under the current plan. I suppose then another option is to make the penalty equal to the cost of the lowest cost plan, and so no financial incentive exists to game the system.

Would there be a problem with that other than the large price tag of the penalty?

Posted by: justin84 | March 25, 2010 5:29 PM | Report abuse

vb, re bundling and individual states doing their own system: I read that language as saying an individual state can do an entire health care system (rules) on its own (not simply removed the federal mandate but remain in the federal system). So the option is for a state to create its own a to z health care reform, independent of the federal system. Presumably in this case it would be remitted its share of the federally collected taxes in the federal reform.

Posted by: HalHorvath | March 25, 2010 5:42 PM | Report abuse

Look at you people. It's like twenty three people trying to all drive the same race car. There is NO WAY you're going to get half way around the track. That's the failure of your stupid Socialism.

Posted by: msoja | March 25, 2010 7:36 PM | Report abuse

To visionbrk

I hope you read the statement from PNHP and listened to Marcia Angell.

A really meaningful, strong public option or Medicare buy-in, where our premium dollars actually went for our health care, not investor profits, CEO salaries and bonuses, marketing etc, would give insurance companies the competition vitally needed to keep their rapacious greed under control...It would give those of us who do not trust them and feel abused by them an alternative. With the bill as is, we are a captive market for them.

The whole idea of making profits off our sickness and misery and now with tax payer funding is on its face appalling to me. I have watched the stock prices of these predatory companies soar as single payer was off the table and the public option was abandoned by our weak kneed representatives and by the administration. It's all about money with these companies, not about caring for people in their need.

I am speaking from my experience with a for profit company's defective product, their "junk insurance" as Wendell Potter describes it, which I couldn't afford to use. Between escalating premiums, deductible and co-pays, I could never afford to get the expensive tests I needed, and I only lived because I finally qualified for "government run" insurance and got the tests that told me I would be dead in a month without major surgery. I made it, but 45,000 per year have not been making it. I believe that this bill and this approach is bound to fail. 23 million people will not even be covered...that's 23,000 more unnecessary deaths a year. That's a national emergency! Can you imagine if that many Americans died from Islamist terrorism! We would mobilize all our resources to meet the threat. Many more people of modest means will suffer what I suffered...or lose their homes, go bankrupt or live stretched to the breaking point trying to pay for rent, food, utilities and now a mandate to buy a defective product...While there are good things in the bill, there are too many loopholes and too few cost controls and too much power left in the hands of those don't care one bit about us, except for the money they can make from us.

Posted by: lachmund | March 25, 2010 8:06 PM | Report abuse


you see that's what I don't get. do you know what Medicare (even with its lesser payments to doctors) costs?

Part A is free but only if you paid into the system so let's say if you want to buy into Part A hospitalization it'll cost you $200 per month. Part B is currently based on income and again for those that paid into the system and it ranges from free to $300+ a month. So let's say that's around $250 per month.

Then to get "adequate" coverage that's not considered JUNK as you call it you'd need a supplement to the medicare plan (unless you want a $1000+ deductible for hospitalization and many gaps. Cost of supplement $150 per month.

Then you need prescription coverage Part D cost ($50 per month).

All told you can have your Medicare for all for $650 a month for a single person.


I love it that people that think Medicare is free with a buy in.


i'd be fine with making the penalty the cost of the lowest plan but when people want back in they have to take that plan and can upgrade if they want at a set time per year, once per year. that's fair.


so basically like MA style? That's fine by me but what's the sense? You lose economies of scale. That's why a national exchange makes much more sense.

Posted by: visionbrkr | March 25, 2010 8:49 PM | Report abuse

"But for now, the penalties are low and the enforcement is non-existent." Don't be credulous and say penalties are low (trivial). "In that world, the bulk of the people buying insurance on the exchanges are sick, and that makes the average premiums terrifically expensive." In this case then the 8% above income will apply so who cares if it gets expensive. Didn't think that through did you? You correctly augur that premiums will be subsidized. "Luckily, consumers aren't usually that cynical..." Really! I'm dubious about your optimism as always!

Posted by: ajguru | March 25, 2010 8:51 PM | Report abuse


still you don't get it. The junk insurance as you call it becomes junk insurance because you can't afford it. Years before it was very good insurance I suspect. WHy can't you afford it? Because the premiums go up. Why do the premiums go up? Because the cost of care goes up. WHy does the cost of care go up? Because doctors, hospitals, pharma etc increases their costs. Yet you blame because you can't feel you can blame those that "care" for you the one entity that has no personal stake in it, insurers. Sure that's fine but its important if you truly want to reform the system to KNOW what the cost drivers are and you don't.

The sad thing is that costs STILL aren't addressed here. Not really. But now we have subsidies to help the individual at the harm of the taxpayer.

Posted by: visionbrkr | March 25, 2010 9:51 PM | Report abuse

Please explain how there is a difference between paying more for your medical care to to make up for uninsured NO ASSET OWNING people visiting emergency rooms and paying more for you insurance to provide free insurance to no low income people. Sound like wash to me. Anyone with any assets is pursued to the end of the earth for medical care payment. The only people who do not pay are those with nothing to give. This line of argument is without any merit. On the other hand, it is fact that those who are paying for their insurance (not at all limited to "wealthy" individuals) will pay more now. I pay my way and currently pay 2.5% of my income for basic health, dental, disability, and life insurance combined. And no, that is not because I'm rich. And no, that is not because my employer is paying vast amounts that I am unaware of and could be coming to be in salary form. It just is not that expensive. At least it hasn't been to date.

Posted by: davidring | March 25, 2010 10:00 PM | Report abuse

I agree with you that there are other cost drivers. Everyone in the system...hospitals, pharma, doctors, device makers... sees big profits in our sickness. And it's true that health insurance, when it was non-profit, was much better. Most of the premiums went toward care.
The whole system needs to be retooled, but the ruthlessness of the blatantly for profit insurers, as they squeeze as much out of people as they can while trying to avoid paying for care and lavishly lining their own and investors' pockets is particularly hurtful. And now our tax dollars will directly subsidize their profits.
Don't you think we could learn from systems that actually work for people in the rest of the western world? It's baffling why we don't try. The analysis of the doctors at PNHP is pretty compelling to me.
In any case, thank you for sharing your thoughts.

Posted by: lachmund | March 26, 2010 12:57 AM | Report abuse

In response to Patrick_M's post yesterday afternoon about the Second Militia Act of 1792 in regards to precedent of law for the gov't mandate of a purchase of goods and or services, I say to him:

In the context of the times, it would only make sense to have those brought into the Militias by mandate to arm themselves with a minimal standard of equipment, such as to provide for the "National Defence," as stated in the target document. I do not know if at that time that current governemnt would have been able to afford to subsidize the purchase of equipment that would have been required, so it would only make sense to have them purchase such equipment themselves.

This newest Bill has very little to do with any of the stated powers of the United States government, underlined by our constitution in Article 1, section 8.
Only since the early 1900s have we seen such strong Federal intervention into what was originally the prerogative of the States, much of it under FDR and a Supreme Court packed with activist(or progressive, liberal, etc.)judges. This practice of Federal intervention obviously continues today, and continues to undermine the States and their Constitutional authority on such issues.

Posted by: OfConservativeMind | March 26, 2010 4:52 AM | Report abuse

To be honest this is the first time that I heard that the individual mandate would be $695 or 2.5% of income. That makes me feel a ton better about it. I thought that the individual mandate was trivially small and it had doomed the bill to failure. Making it 2.5% of income is much more substantial than I had thought it was going to be.

Posted by: spotatl | March 26, 2010 9:02 AM | Report abuse

"The sad thing is that costs STILL aren't addressed here. Not really."

Okay, I'm convinced. My head's spinning. I don't have this all sorted out, at all. I just know we've got nearly everyone in now (by around 2014). Next step: How do we begin controlling costs? Answers? (I've gotten as far as much of it has to be done by pressuring providers somehow.)

Posted by: jonboinAR | March 26, 2010 10:07 AM | Report abuse

Here is what I am going to do:


As Klein points out, "for now, the penalties are low and the enforcement is non-existent."

And even if the government should decide to enforce the law, I'll still be better off financially if I stop paying health insurance premiums until I actually need someone else to pay for my health care.

Posted by: outinforce2004 | March 26, 2010 4:56 PM | Report abuse

@ sayne, 1:28 pm.:

You wrote, "OK my understanding on how the Mandate is written and enforced (from Lawrence O'Donnell on MSNBC) is that it's simply a tax of $695 or 2.5% of income levied on everyone who can afford insurance, enforced by the IRS. If you buy insurance you are given a tax credit that waives the tax."

But that CANNOT be true.

It simply cannot be true that there would be a tax levied on people making less than $250,00 (or is it $200,00?) a year.

Because it that were true, then President Obama would be breaking a promise he made during the campaign.

Posted by: outinforce2004 | March 26, 2010 5:02 PM | Report abuse

The individual mandate has received a lot of attention from Republicans (criticizing it), but not much from Democrats (defending it) or pundits (analyzing it). Thankfully, more positive attention seems to be starting up now given the attempts to challenge its constitutionality.

I've written several pieces about the individual mandate on my own blog that I'd appreciate comments on, including some points in its defense that I haven't seen made anywhere else (or at least not in the way I've made them).

Please check out and and let me know what you think(the latter is a description of the individual mandate in verse).

Posted by: RayinDC | March 26, 2010 5:21 PM | Report abuse

"A cynical consumer would be smart to pay the modest penalty rather than pay thousands of dollars a year for insurance"

You mean a "rational consumer".

Posted by: FatTriplet3 | March 26, 2010 6:35 PM | Report abuse

I like my right to privacy. How is this individual mandate not a violation of the right to privacy? Does a state "opt out" clause make an unconstitutional law less unconstitutional? Would that state "opt out" clause in this law containing the individual mandate make that mandate constitutional? If this is held up as legal, then what's to keep some future government dominated with religious conservatives - modern Republicans - from mandating that everyone buy and use explicit content filters in their TV sets and computers (to save the children) or face an IRS fine? Suppose they were to try to outlaw abortion or outlaw women crossing state lines to get abortions by giving the states an "opt out clause" for these laws? ----- There is no end to this very slippery slope of violating our right to privacy using the federal power to tax or regulate interstate commerce as subterfuge. ------ Where is the ACLU? Where are the true civil libertarians?

Posted by: Keefanda | March 27, 2010 6:26 PM | Report abuse

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