How will health penalties work?

Health insurance

TEXT OF STORY

Kai Ryssdal: Once all of its line items go into effect a couple of years from now, the health care bill that President Obama signed yesterday will force almost everybody to have health insurance or a face a series of penalties. More than a dozen states have already filed suit to stop that from happening. They say the federal government just can't force people to buy insurance.

While the courts chew on that, we asked Marketplace's Nancy Marshall Genzer how those penalties might work, and whether they'll be effective at all.


NANCY MARSHALL GENZER: Starting in 2014, most Americans will have to pay a penalty of $95 if they decide not to buy health insurance. Considering the average premium is about $4,000 a year, the penalty isn't a bad deal. At least, that's what Matthew Cool thinks.

MATTHEW COOL: I'd probably pay the fine.

Cool is a healthy 25 year old. He owns a small landscaping company in Oakland, Calif., and doesn't have insurance.

COOL: I probably could afford health insurance. But right now, in my mind, I'm a young, healthy, active person, so it doesn't seem like it's worth it right now.

Matthew Cool is the insurance industry's nightmare. Insurers need people who pay their premiums, but use very little care. They balance out the cost of covering the sicker people, like the millions with pre-existing conditions that insurers will soon have to cover.

But, here's the thing. The penalties for not having insurance go up over time. Under the bill President Obama signed yesterday, by 2016 someone who opted out would pay $750, or 2 percent of their income, whichever was greater.

That gets Matthew Cool's attention.

COOL: When the fees go up, I'd probably be forced to jump on board.

Until then, Cool will live the uninsured lifestyle. No more motorcycle. No skateboard. And no overseas travel. Cool knows if he ends up in the emergency room, he'll be stuck with the bill.

Barak Richman is a health law expert at Duke University. He says people who choose to be uninsured may not know what they're getting into.

BARAK RICHMAN: Individuals without lots of data do not make smart calculations about small risks.

Richman says huge bills for emergency room care can lead to financial ruin. And there's another thing. Uninsured people often don't see a doctor until they're really sick.

Karen Davis is president of the Commonwealth Fund. She says chronic conditions like high blood pressure and diabetes aren't discovered and treated early on. That ends up costing all of us.

KAREN DAVIS: These chronic conditions account for over 60 percent of all health care costs. So to find those chronic conditions or risk factors very early on does have long-run savings.

Even though it's hard to think of the long run when you're 25, and invincible.

In Washington, I'm Nancy Marshall Genzer for Marketplace.

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

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