WASHINGTON -- Should people pay penalties if they refuse to buy health insurance?
The answer had seemed simple to Senate Finance Committee Chairman Max Baucus, D-Mont., whose panel has spent months drafting legislation to overhaul health insurance: Refuse to participate in the new health care system that President Barack Obama wants to create and you'd pay a penalty of as much as $3,800 per family.
Baucus' colleagues recoiled at that, however, saying that such sums would add a new burden for struggling consumers.
"I don't think anybody likes this concept of penalties," said Sen. Charles Schumer, D-N.Y.
The committee dramatically changed its penalty provision, eliminating it in 2013, the new system's first year, then phasing it in over the next four years until it would reach $750 per adult in 2017.
That lower level raises a new, equally difficult question, however: Would a smaller penalty motivate enough people to buy coverage, or would it undermine the near-universal health care coverage system that Obama wants to create?
Members of Congress will wrestle with that question throughout the fall as they struggle to write a final version of the legislation.
On one side are skeptics who consider almost any penalty a problem.
"This isn't about punishing people," said Sen. Olympia Snowe, R-Maine. "It's about making sure that we can create an affordable health care system in this country, which is long overdue."
Others argue that achieving the goal of near-universal coverage will be harder without the threat of financial pain. Mass participation in the system is considered crucial to spreading the insurance risk enough to force rates down. Alternative legislation that's pending before the House of Representatives would impose penalties based on a complex formula that targets a percentage of income.
Without big penalties, "there's a powerful incentive for people to wait until they're on their way to the hospital before they buy coverage," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, which represents insurers.
The consensus among independent health experts is that big penalties, while preferred, aren't crucial. They say that requiring most people to obtain coverage should keep prices stable and ensure widespread compliance without the threat of large penalties.
"Consumers will focus on whether the policies are affordable and comprehensive," said Sara Collins, a vice president at the Commonwealth Fund, which studies health issues.
Added Linda Blumberg, an economist at the Urban Institute, a Washington-based center-left research center: "People will want to obey the law, and many will be able to get subsidies."
All pending Democratic versions of the legislation would provide significant help to people who can't afford coverage. The Finance Committee's bill would provide aid to people who earn up to 400 percent of the poverty level, or about $88,000 a year for a family of four.
Experts think there are two groups that might shy away from buying policies: healthy young people, and people of all ages who can't afford coverage. Last year, 29 percent of people aged 18 to 24 were uninsured.
Under the Finance Committee's plan, a family of four earning $88,000 a year would be billed $13,112 for annual coverage. The government would subsidize $2,528 of that, leaving the family to pay 81 percent of the premium, according to Kaiser Family Foundation figures.
Would those kinds of numbers discourage people from obtaining coverage? The nonpartisan Congressional Budget Office didn't see it as a huge problem, estimating that about 94 percent of eligible Americans would obtain coverage under the Finance Committee plan, up from the current 83 percent.
There are few models to study. Massachusetts has required most adults to obtain coverage since 2007, and this year it's imposing penalties of up to $1,068 for people who don't. Last year about 2.6 percent of state residents remained uninsured, the lowest rate in the nation.
Lawmakers in the nation's capital contend that Massachusetts is hardly a model for the nation, however, because its residents tend to be more sophisticated about health care coverage and unemployment is lower than the national average. It was 9.1 percent in August, while the U.S. rate was 9.7 percent.
Many lawmakers remain concerned that smaller penalties would be an incentive to avoid buying coverage. Others think that their reluctant colleagues would accept such penalties if they're convinced that coverage will be affordable.
"One of the key issues ...is making sure that the insurance that's required is affordable," Baucus said. "It gets to penalties, it gets to the basic point of whether people can afford the insurance that we're asking them to get."
Snowe fears that the answer won't come easily to consumers.
"If we're asking people to pay penalties on their inability to get health insurance, for whatever reason, we ought to certainly give a reasonable period to see whether or not we have achieved the objectives and goals of this legislation," she said.
Under the Finance Committee plan, the Government Accountability Office — Congress' investigative arm — will study its effectiveness. The GAO would report its findings to congressional committees by April 2014. Then, Snowe said, "we can revise the penalties if necessary."
Baucus conceded that the penalty debate is far from over. "Frankly," he said, "we probably do need more work on this down the road."
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