John Roberts Weakened The Individual Mandate

Chief Justice John Roberts pleased many of his detractors by ruling that the Affordable Care Act is constitutional because it is a tax. However, the goal of the ACA – better health for more Americans – will not be reached for exactly the reason the Robert’s said the individual mandate is constitutional.

Roberts’ reasoning hinges on the fact that the mandate is not punitive, but rather suggestive – that is, not having insurance is not illegal, but simply taxable.

In his opinion, Roberts says there are no “negative legal consequences” for not buying insurance other than paying the tax.

“The Government agrees with that reading, confirming that if someone chooses to pay rather than obtain health insurance, they have fully complied with the law,” he writes.

Roberts cites a Congressional Budget Office estimate that four million people will pay the penalty instead of buying insurance.

“We would expect Congress to be troubled by that prospect if such conduct were unlawful,” he writes. “That Congress apparently regards such extensive failure to comply with the mandate as tolerable suggests that Congress did not think it was creating four million outlaws.”

The mandate is a constitutional tax instead of an unconstitutional regulation because “for most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.”

But this is exactly why the mandate won’t work. Congress is telling the American people to buy something expensive or pay a less expensive fine.

Imagine a parking meter that threatens tickets for less than the cost of an hour of parking. Who would pay?

In a footnote, Roberts points out individuals earning $35,000 a year would pay a tax of about $60 a month, while someone earning $100,000 would pay $200. Contrast these payments with an insurance policy expected to cost $400 a month.

“It may often be a reasonable financial decision to make the payment rather than purchase insurance,” he says, as columnist George Will and University of Missouri Law School Prof. Thomas Lambert recently observed.

An individual earning as little as $22,000 could save up to $1,000 by paying the tax and someone making just $31,000 could save up to twice that amount.

Similarly, a family of four earning $45,000 could save up to $1,500 by paying the tax. If they earn $70,000 they could save up to $4,500 by paying the tax.

In other words, an uninsured family of four earning $70,000 could need up to $4,500 in disposable income to buy health insurance. For some families it might be worthwhile, but some may judge that $4,500 better spent elsewhere.

Some families will follow the incentives created by the Affordable Care Act, but since the incentives are weak many will not. As the Chief Justice points out, that number is expected to be as many as 4 million Americans.

Keith Hennessey, a research fellow at the Hoover Institution, points out an additional 17 million Americans will remain uninsured, but will be exempt from the tax according to CBO.

And there is the possibility that CBO is overestimating the persuasiveness of the tax. Will more Americans choose to pay the tax because it isn’t a penalty with stigma attached to it?

The ACA will no doubt help some people, but it will also have negative side effects that hurt others. These symptoms are already starting to show.

Premium increases in the individual market are expected to average 50 percent. Some rates may even triple. Aetna CEO Mark Bertolini recently warned of “rate shock.”

In particular, people under 30 will face new challenges because of the law. Four out of five twentysomethings will see their rates go up.

Instead of mandating – isn’t it really more of a suggestion? – that Americans buy health insurance, we need to sever the link between a job and health insurance.

The best way to do this is to tax health insurance as income. It makes no sense that cash income is taxed, but payments in health insurance are untaxed.

All Americans – employed, unemployed or self-employed – should be able to buy insurance on an equal footing. If we decide there should be a tax advantage for buying health insurance, it should apply equally regardless of employment.

The current system disadvantages the unemployed and self-employed, while helping those who already have a great advantage: a job.

Once the link between a job and health insurance is broken, imagine the innovations that could emerge. Long-term health insurance contracts – say five years – could empower consumers to get paid to lose weight, quit smoking or take up other healthy habits. No mandate required.

Zachary Janowski is an investigative reporter for the Yankee Institute for Public Policy and a 2012 Phillips Foundation Robert Novak Journalism Fellow. He blogs at Raising Hale. Image of the Supreme Court courtesy of Big Stock Photo.