The Ironman at Political Calculations hosted the Cavalcade of Risk this week, and there are links to several great risk-related articles. In addition to hosting, he also included some commentary on health care reform, discussing the likelihood of people opting to pay the penalty for being uninsured rather than paying premiums for health insurance once it becomes guaranteed issue in 2014. I find this topic fascinating; my own opinion is that the penalties for not having health insurance are not high enough, and that there will indeed be people who elect to pay the penalties rather than the more expensive premiums for health insurance.
The Ironman has taken it a step further and set up a calculator where a person can enter several variables (chance of being hospitalized, income, cost of insurance, etc.) to see what a person’s chances are of “winning” by opting to not have health insurance while healthy. I agree that the penalty is too low and that people might indeed decide to pay the penalty and play the odds, but it’s important to keep in mind that for most people, the actual price paid for health insurance is far lower than the average total premium costs. The premium costs that are often used in examples like this represent group premiums, which are partially (sometime completely) paid by employers. Individual health insurance is less expensive, although the insured is responsible for the total cost. If a person uses lower values for the premium portion of Ironman’s calculator, it will make paying the penalty seem less attractive. Once individual health insurance becomes guaranteed issue in 2014, the premiums will likely rise to cover the cost of paying for pre-existing conditions. The only way to offset this rate hike is for more healthy people to join the insurance pool. That’s where the mandate comes in, and hopefully it will work.
