Why Is the ObamaCare Tax/Penalty Needed at All?

When you have to force people to buy something as obviously valuable as protection against becoming uninsurable or paying astronomical premiums, it means you have some serious design flaws in your product.

Whether it is dubbed a penalty or, as the Supreme Court decided, a “tax,” an important question remains about the levy assessed on the uninsured in the 2010 Patient Protection and Affordable Care Act (a.k.a. ACA or “ObamaCare”): Why was either a penalty or tax necessary?
There are two stories about the necessity of a penalty/tax. The first is that without sufficient government incentives to buy health insurance, people will wait until they get sick to buy it. The primary purpose of health insurance, like all insurance, is to provide protection against the risk of uncertain events like illness, death, fire, or flood. If people waited until they were sick to buy insurance, then there would be no risk, and thus no possibility of true insurance. For example, if all consumers waited until they got cancer to buy health insurance, then the actuarially fair “premium” for that “insurance” simply would be the cost of cancer care. The ability of true insurance to protect consumers from the risk of needing cancer care would disappear. Prior to ObamaCare, preexisting condition clauses prevented people from waiting until they were sick to buy insurance. Since ACA prohibits preexisting condition clauses, so the story goes, some other incentive like a penalty or tax is required to force people to buy health insurance before they get sick.
The second story is that if people are allowed to go without insurance, then they will show up at the hospital or emergency room unable to pay their bills, and insured people will have to pay for that care through higher insurance premiums.
On the face of it, these two stories are logically inconsistent. If people without insurance are able to get care anyway (that insured people then pay for) then why are preexisting conditions a barrier to sick people receiving care? Conversely, if people without insurance are denied access to care, then why isn’t the threat of being denied care sufficient to frighten people into purchasing health insurance prior to getting sick? Perhaps the real problem is the sheer cost of health insurance; perhaps the majority of healthy people who don’t buy health insurance simply can’t afford it.

Read more: http://www.american.com/archive/2012/september/why-is-the-obamacare-tax-penalty-needed-at-all