Mandates and Pre-Existing Conditions Muddle Health Care Reform Debate
Mandates and Pre-Existing Conditions Muddle Health Care Reform Debate
Oct. 12, 2008 – As various versions of the highly charged and much-debated national health care reform come to light, it appears a near certainty of any bills being passed is the inclusion of penalties for people refusing to obtain health insurance coverage and requiring health insurance companies to accept all people into their plans – including those with pre-existing health conditions.
Somewhat modeled after a Massachusetts’ law levying an about $900 tax penalty on individuals incapable of proving they have health insurance coverage, federal officials are considering levying a $750 tax fee on individuals who cannot prove they have health insurance coverage. At the same time, health insurers would be banned from excluding pre-existing medical conditions from coverage.
While a $750 tax on the surface would appear to encourage participation in the nation’s health care system, when compared to a worker paying what the non-profit Kaiser Family Foundation says was an annual average cost of about $3,500 for employer-sponsored health insurance in 2008, skipping out on paying for a health insurance plan makes sound fiscal sense – especially when health insurers are required to cover pre-existing conditions.
If approved and signed into law, when insurers no longer can exclude pre-existing conditions, Americans won’t have an incentive to maintain their health insurance coverage. It would be far less expensive to forego health insurance altogether and simply purchase it as needed.
When individuals refuse to obtain insurance coverage until absolutely necessary, the insurance industry refers to it as “free-riding.” Instead of receiving an earned benefit, “free-riders” obtain the benefits of what others have paid into the system.
Allowing individuals to opt for a $750 annual tax instead of paying about $3,000 more per year to maintain health insurance coverage would be akin to allowing individuals to drive without auto insurance coverage until they have an accident and then requiring auto insurance companies to cover the damages. Most Americans recognize the inherent problem with allowing people to drive without auto insurance while requiring auto insurers to cover damages if those without insurance get into an accident. For insurers to stay in business, they would have to charge even more to those who pay into the system as designed by purchasing auto insurance in advance instead of waiting until they need it.
But the highly publicized “Baucus Bill” being debated in the U.S. Senate promotes a health care version of driving without insurance until absolutely necessary. Regardless of what happens, an individual could refuse health insurance coverage for years, become seriously ill and then demand health insurance coverage to cover medical costs. And health insurers would have to pay the costs for treatment – leaving them with the unenviable options of passing on the additional costs to existing policyholders or go out of business.
Lobbyists working on behalf of health insurance companies have said people with pre-existing conditions could be covered easily if everyone bought health insurance coverage, but the Baucus Bill and similar proposals unwittingly make it far more affordable to pay a modest tax penalty instead of buying health insurance in advance.
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