The Wall Street Journal and the AP both have stories about insurers pushing back against the Senate Finance Committee's efforts to reduce the size and scope of the penalty for individuals who violate the proposed mandate to purchase health insurance. According to the Journal piece, the Finance Committee's reduction of this penalty would push 91 percent of Americans to purchase health insurance, rather than the 94 or 95 percent insurers and hospitals were expecting to see at the end of the process.
This is one of those issues that highlights the flaws in the mandate-plus-regulate approach that the Finance Committee is pursuing. At the higher level, the tax for not purchasing insurance seems overly punitive and, worse, cruel, especially in circumstances where individuals truly can't afford to purchase insurance. It has the potential to force elements of the lower middle class into a situation where they still lack health insurance but have to pay a huge penalty to boot. If, however, you lower the penalty, as the Finance Committee did last week, then more people will opt to pay it, and insurers will not add enough young healthy people who are currently choosing not to purchase insurance to their risk pools. The insurers, who are facing new regulations regarding acceptance of individuals with pre-existing conditions, fear they will be unable to afford the new obligations without forcing the so-called "young invincibles" into their pools.
For the Obama adminstration, the lower penalty presents a real danger in that we as a nation could be spending approximately a trillion dollars on health reform and still have 25 million people uninsured. But the issue puts insurers in a box as well. Given public opinion these days, perhaps the only way the insurers could make themselves less popular is for them to push higher penalties for those not buying their products.