Effective in 2014, the new health care reform law will implement an individual health insurance mandate, requiring most Americans to carry health insurance. Once the mandate goes into effect, most Americans will be required to purchase health insurance or face paying a fine.
Why is there an individual mandate?
The mandate was created as a necessary means to not only ensure that the new health reform would actually work, but to keep it affordable. Starting in 2014, insurance companies won’t be able to deny health insurance coverage to people with pre-existing conditions. So as people with medical conditions begin to enroll in much needed health coverage, the mandate will also will require healthy individuals to enroll at the same time.
The idea behind the strategy is to help keep health insurance costs from substantially increasing because the number of healthy and unhealthy people applying for coverage would balance out. The idea is that without the individual mandate, people would wait to obtain health insurance until they became sick, driving up the cost for everyone else.
What happens if you decline health insurance under the individual mandate?
Starting in 2014 if you don’t have health insurance the fine will be $95 or 1 percent of a person’s taxable income, whichever is greater. In 2015, the fine increases to $325 or 2 percent of your income, and in 2016, the fine will be $695 or 2.5 percent of income. Each year after that, the government will refigure the fine based on the cost-of-living adjustment.
There are a few exceptions.
Americans won’t be required to purchase coverage if their income is below the Federal Poverty Line and health insurance premiums would cost more than 8 percent of their monthly income. In this case, most would be eligible for Medicaid or federal subsidies to help pay for health insurance. There are other additional exceptions to the rule that should also be reviewed.
Why the debate over the individual mandate?
There are many who oppose the upcoming individual mandate, believing that requiring individuals to purchase health insurance is unconstitutional. Those who support the individual mandate believe that without it, health care reform will not work because only those who really need coverage (AKA the old and sick) will voluntarily enroll.
And according to a January 13 article in Politico, some insurance carriers believe that the mandate is not hefty enough to produce the desired result. These carriers advocate for additional incentives, such late enrollment fees to encourage young healthy people to enroll for health care early, along with all the unhealthy people clamoring for coverage.
Only time will tell if mandating coverage and offering affordable health care options through exchanges will prove to be an effective model, equally enticing the young, old, healthy and sick. However, if the model fails, and the majority of the insured population is old and sick, it could mean higher rates for all.
Want more great information? Subscribe to our blog by entering your email address in the top right corner of this page. Also, check out our continuing education courses for HR and insurance professionals.
Is it time to break up with your COBRA administrator? Our free report helps you assess your potential transition.
