Academic studies indicate that people respond differently to tax penalties than they do the legal mandates. “When the imperative to buy insurance,” notes Yuval Levin, “is instead presented as a choice between two options, more people will likely choose the cheaper option (which, for almost everyone, will be paying the tax rather than buying the coverage).”
To the extent that this is a problem — and I won’t deny that it is — my sense is that the Supreme Court ruling won’t make it significantly worse. Opponents of Obamacare have been pulling out their hair over this all along. They’ve routinely pointed out, for instance, that businesses that employ 50 or more people may conclude it’s cheaper to pay the law’s penalties than to sponsor health coverage for their employees — and, per Levin, this is under the tougher-sounding “legal mandate” scheme.
Opponents have voiced the same concerns about the individual mandate.
Here’s blogger Ann Althouse (freely mingling the terms “penalty” and “tax,” I might add):
The Obamacare penalty is an attractive option. It’s a way of life. It’s pretty much just a little tax to swallow. The option of actually buying insurance will be forgone. It would make more sense to say you’re forced to pay a new tax than you’re forced to buy insurance. And what a tiny little tax! …
So Obamacare doesn’t work to get the uninsured insured, it just gives the federal government a new source of revenue. Meanwhile, these uninsured folks can buy insurance at whatever point they want, right? Whenever they acquire a condition that makes them want to have insurance, they can take advantage of private insurance companies that never got the benefit of the “penalty” these people were paying to the federal government all these years.
And here’s Robert Wenzel of the Economic Policy Journal:
It will be cheaper for almost everyone to pay the penalty rather than buy insurance. And since, Obamacare requires that insurers take on those who already have pre-existing conditions, there is no risk for those who simply pay the penalty.
This scenario — that the mandate will be ignored because it’s basically toothless, thereby opening up a truckwide gap through which individuals will game the new system — has been at or near the top of opponents’ minds from the very beginning.
Gerson, Levin et al. are not crazy to worry about this. But it seems to me that it’s one of the lamer reasons not to like Roberts’s decision.