Klein on why young, healthy people just shouldn’t pay the mandate?

December 27th, 2013

Mandate? I thought it was a tax? Anyway, Ezra Klein offers advice to a 26-year-old who would rather pay the cheap penalty than expensive healthcare.

3. Gibson is latching onto something very real in the law: The mandate is great deal. He doesn’t even mention the best part: If he pays the mandate and then he does get sick, he can still buy insurance at the same price as when he was healthy when the next open enrollment period rolls around! Paying the mandate is basically purchasing an option to buy health insurance at a reasonable rate in the future, even if you get sick between now and then.

4. So why would anyone not pay the mandate? A few reasons. First, people actually want health insurance. After all, there’s no individual mandate right now, but lots of people pay lots of money to buy insurance, even when that insurance has high deductibles. Second, the mandate gets pretty steep, pretty quick. By 2016, it’s 2.5 percent of income over the tax filing threshold ($10,000 for an individual, $20,000 for a family). So if you’re making $40,000, that’s $750 you’re spending — and you’re paying it knowing that if you get sick, you have no protection. Third, people tend to follow the rules.

5. And then, of course, there’s the big reason: You might get sick! Gibson’s argument is that he’s young and healthy. The most he’s ever spent on health care is $6,000 for a back surgery in 2011. That’s great! But as they say, past performance is no guarantee of future results. Sometimes you get hit by a bus, or you find a lump, or your wife gets pregnant. And then what? You’ll wait 10 months for the next open enrollment period? Most people don’t buy insurance because they expect to need it. They buy insurance in case they need it.

6. We have some evidence on this. Paying mandate is also cheaper than buying insurance in Massachusetts, but almost no one pays it.