Many health experts agreed that while it’s hard to anticipate the full effect of the individual mandate, the fee serves as an incentive enroll in health coverage and a disincentive to leave the marketplace. But this part of the law is more complex than that. While a higher penalty has a larger impact, it’s still not a “panacea,” according to Dan Mendelson, CEO of Avalere Health, an independent consulting firm. That’s because the range of reasons why consumers don’t purchase a health plan vary from the belief that they can’t afford it to outright hostility to the law—and then there are those who don’t know or understand enough about the exchanges.
A Kaiser Family Foundation poll released last week showed that only 15 percent of uninsured Americans knew when open enrollment was, compared to just 17 percent of the general public. This points to the other big challenge: ensuring people know when they should be signing up for coverage and fully understand the Affordable Care Act’s intricacies.
Whether or not a penalty drastically bigger than in 2015 will drive Americans to purchase health insurance partly depends on how knowledgeable they are about the law, according to Jon Gabel, a senior fellow with NORC at the University of Chicago, because the individual mandate is a “strong incentive” if Americans understand both Obamacare and its fee for going uninsured. In an effort to spread the word about open enrollment, the Health and Human Services Department is partnering with local health care providers, businesses, and nonprofits.
The individual mandate first came to life for those who didn’t have health coverage in 2014. It was a comparatively meager price—$95 per adult and $47.50 per child, or 1 percent of a household’s income (again, the higher of the two).
In mid-July, IRS Commissioner John Koskinen sent a letter to members of Congress detailing the preliminary results of the first tax season with the individual mandate: About 7.5 million taxpayers paid a total of $1.5 billion for not having health coverage. This was higher than the Treasury Department estimate that 3 to 6 million taxpayers would pay the fee. (12 million Americans without insurance were exempted due to certain hardships, financial status, and life events).
The inaugural fee “was just kind of a tap on the shoulder to say, ‘Hey, pay attention here,’” said Timothy Jost, a Washington and Lee University professor emeritus who has written book chapters and articles on health care regulation. “The $695 is a pretty big tap on the shoulder—it’s shouting in somebody’s ear.”
When it comes down to merely looking at the numbers, for some it still might be cheaper to pay the fee, even for 2016, said Karen Pollitz, a Kaiser Family Foundation senior fellow. But that would mean paying to play with fire. Because if a medical emergency occurred, the uninsured individual would be on the hook to pay the cost in addition to the individual-mandate penalty. “How people will weigh this is anybody’s guess,” Pollitz said, “but the expectation is that this penalty will get people’s attention.”