News & Events

Mandatory insurance: Yes, it’s a tax

By Jeff Jacoby, Globe Columnist | September 23, 2009

IT WAS A PERFECTLY straightforward question. The answer was anything but.

President Obama vows not to raise taxes on any American family earning less than $250,000 a year. Yet he backs legislation that would force every American to carry health insurance or pay a hefty penalty to the IRS. Such an “individual mandate’’ is included in all the major health care bills making their way through Congress, including the legislation unveiled by Senate Finance Committee Chairman Max Baucus last week. So when ABC’s George Stephanopoulos interviewed the president on Sunday, he raised the obvious challenge:

“Under this mandate, the government is forcing people to spend money [to buy insurance], fining you if you don’t. How is that not a tax?’’

Obama replied that the individual mandate “is absolutely not a tax increase,’’ since, in his view, there is good reason to impose it. He stuck to that position even when confronted with Merriam-Webster’s definition of “tax’’ – “a charge, usually of money, imposed by authority on persons or property for public purposes.’’

“George,’’ chided Obama, “the fact that you looked up Merriam’s Dictionary . . . indicates to me that you’re stretching a little bit right now.’’

But the only one “stretching’’ was the president, whose position was at odds with the legislation itself. “The consequence for not maintaining insurance would be an excise tax,’’ notes the committee staff report on the Baucus bill. “The excise tax would be assessed through the tax code and applied as an additional amount of Federal tax owed.’’

Obama isn’t the first politician to maintain that a mandate to buy health insurance isn’t just another middle-class tax. Mitt Romney did so as governor of Massachusetts, boasting in 2006 that thanks to his signature health care law, “every uninsured citizen in Massachusetts will soon have affordable health insurance, and the costs of health care will be reduced. And we will need no new taxes . . . to make this happen.’’ But isn’t the penalty that law imposes on the uninsured – a penalty that this year will run as high as $1,068 per person – a tax? Gosh, no, enthused Romney: “It’s a personal responsibility principle.’’

Whatever it’s called, it hasn’t transformed Massachusetts into an Eden of universal coverage. According to the Department of Revenue, nearly 200,000 state taxpayers remained uninsured at the beginning of 2008. And the individual mandate hasn’t made insurance in the Bay State more affordable: Massachusetts has the highest health insurance premiums in the nation.

Far from holding insurance costs down, “reform’’ in Massachusetts seems to have had the opposite effect. “Insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year,’’ notes Michael Tanner of the Cato Institute. “By comparison, nationwide insurance costs rose by 6.1 percent in 2007, just 4.7 percent in 2008, and are projected to increase 6.4 percent this year.’’

However tempting it may seem, universal health coverage cannot be achieved by waving a legislative wand and ordering every citizen to buy insurance. Supporters of an individual health-insurance mandate like to compare it to the nearly universal requirement for auto insurance, but far from proving their point, it undermines it. True, auto insurance is mandatory almost everywhere. Yet nearly 15 percent of motorists remain uninsured.

Requiring that drivers be insured, Obama told Stephanopoulos, “is a fair way to make sure that if you hit my car . . . I’m not covering all the costs.’’ Auto insurance is required, however, only if you choose to own a car and drive it on public roads. Under ObamaCare (as with RomneyCare), health insurance would be compulsory no matter what you did or didn’t do.

It is a myth that those who don’t buy health insurance are basically free riders who unload their medical costs onto the backs of more responsible Americans. In truth, most of the uninsured are young, fit, and unlikely to need medical care. Why should they be forced to pay for expensive insurance they don’t need?

The right way to expand coverage is not to scourge the healthy with new taxes, but to win them over with lower premiums. Deregulation is a far better strategy than compulsion. If insurers were free to compete for business across state lines, for example, and if states would repeal the excessive benefit requirements that have driven up the cost of insurance, premiums would shrink and so would the ranks of the uninsured.

Coercive insurance mandates are a prescription for more misery, not less. Massachusetts is learning that lesson the hard way. The rest of America doesn’t have to.

Jeff Jacoby can be reached at