 Personal Finance PowerPoint Presentation, Health Insurance Requirements. Prepare to get financially fit by practicing personal finance. Remember that insurance is part of our long-term risk mitigation strategy where we use the adage of measure twice cut once. We're gonna be putting in a formal plan which will look something like this. We're gonna set the goals. We're gonna develop a plan to reach the goals. We're gonna put the plan in action. We're gonna review the results and then we'll go through that process again periodically. We're looking into the health insurance at this time. Most of this information can be found at Investopedia. Is health insurance mandatory? You can find that online. Take a look at the references, resources, continue your research from there. This is by Rebecca Lake, updated March 12th, 2021. Is health insurance mandatory? The Affordable Care Act, the ACA signed into law in 2010, was designed to make health insurance coverage more affordable for Americans through the creation of tax subsidies while also opening up Medicaid eligibility to more low-income individuals and families. So when we're thinking about this question of is health insurance mandatory, it kind of ties into some of the discussions we've had in prior presentations and some of the more complexities we see in the health insurance as compared to other kinds of insurance. For example, if we looked at property insurance, we're usually insuring against some type of catastrophe happening to the property because the property has a significant value to us. We could result in a significant financial loss. We want to safeguard against, such as for example, our home burning down in a fire. We hope that that doesn't happen, but we want to be insured against the risk that it could because it would be a significant financial event. You have a similar situation with one component of the health insurance in that you want to be safeguarding against some big catastrophe in terms of a medical event, which would have a significant financial component to it. But you also have this kind of pressure, especially from like government pressure where they're trying to make it so that the insurance also covers the preemptive kind of things such as visiting the doctor and that kind of stuff, which makes it a little bit more complex possibly in that way than other types of insurance. And you've got this debate over how much of the insurance or healthcare in general should be private kind of thing that's going to be market-based and how much of it should be a government run or should it be government controlled in some way and or what kind of requirements might the government put in place to try to achieve the results we're looking to achieve with regards to the healthcare. So when we're looking at whether or not healthcare is mandatory, we've had this debate recently has been going on for some time in that if we were required to make healthcare mandatory, then we would kind of eliminate what's called the free rider problem from an economic perspective. So there's been debate about that because if for example, you don't opt to purchase insurance then you still have some minimal level of medical coverage or medical help available to you because if you go to the doctor and there's an emergency, you're gonna get some kind of coverage generally and that coverage because there's no one paying for it or possibly no one paying for it and that event is covered by the people that are paying for the insurance or paying for medical coverage typically in the form of insurance and possibly higher prices. So those people are still kind of in the market in that instance. So the thought would be, well, if you can force everybody to be paying insurance in some way, you can kind of eliminate the free rider effect, how could you do that? Well, maybe you make a law saying that someone has to buy insurance and you can possibly enforce that through something like taxes. The problem with that is that there's been debates about whether it's allowed, whether you can do that in terms of the federal government requiring you to buy something, is that constitutional and what about the tax implications in terms of penalizing someone on a tax side of things when taxes are usually there to generate revenue not to try to manipulate people's behavior in general, although you see that kind of being done in other places as well, trying to use the tax code to change behavior. So these are some of the debates and then other debates are just about whether or not that will work. Will that increase or decrease market conditions? What will be the impact on the quality of the healthcare overall? So we've been seeing this kind of play out over the last few years. So the ACA over a long time actually. So the ACA, the Affordable Care Act, effectively made having health insurance mandatory not having it meant that you would incur tax penalty. So again, they say we're gonna eliminate the free rider effect. We're gonna make everybody force everybody to have some level of health insurance and that hopefully could reduce the cost because everybody would be covered eliminating the free rider effect and we could force it through possibly taxing people that don't have the coverage to force them to get covered. But what about now? What is the penalty for not having health insurance? So we're gonna go through the history a bit here. So the Affordable Care Act's coverage mandate under the ACA also called Obamacare, Americans who were not otherwise eligible for an exemption were required to have health insurance coverage for themselves and their families. So that's the goal. Try to get everybody on the health insurance, eliminate the free rider and then lower the premiums because everyone's gonna be covered. Failure to have minimum health insurance triggered a tax penalty. How do you enforce that tax penalty? Can you do that? Is it constitutional? You know, that's the debate. Can you require someone to buy something that's debatable? And then will that have the impact that you think it will, those are the debates? At the same time, the ACA allowed for the creation of a premium tax credit to help Americans offset some of the cost of getting health insurance through the health insurance marketplace. So as they put up the marketplace, they also had this credit because as you're forcing people to buy health insurance, they also wanna make sure that the people that couldn't afford the health insurance, they're taking care of them in some way as well because there's probably a reason that people didn't buy the health insurance because they couldn't afford the health insurance. So then now you've got the credit which makes kind of sense from a financial standpoint but also it gets somewhat complex when you're talking about the paying for the premium, the penalty and then this credit from the marketplace. So this rule changed in January 2019 when the tax penalty mandate for health insurance was eliminated. So then the idea was that now it's kind of an abusive use of the tax code was the argument. You shouldn't be using the tax code to penalize people in that way. You should be using the tax code really to generate taxes so that you could pay for the military and the other vital kind of things there. So while the ACA technically still exists, Americans who choose not to maintain health insurance for themselves or their family members in 2019 and beyond won't be penalized at tax time, it's estimated that as many as four million Americans will choose not to have health insurance coverage this year as a result of the penalty being eliminated. So state imposed rules on health care insurance. So this is on the federal side of things. So by eliminating the penalty, you basically kind of eliminated the mandate because you can't obviously, you can't have a rule saying don't do this unless there's an or else. So if you take away the penalty, then you've basically eliminated, you've kind of eliminated that component which kind of disassembles some of the idea around trying to get everyone on to one health insurance because the point would be that you try to get everyone on the health insurance so that you eliminate the free rider. That's what's supposed to lower the cost of the insurance. But that's at the federal level then. Now you got the state imposed rules on health insurance coverage. So the states could do their own thing on the state side of things. While the federal government no longer requires you to have health insurance, a handful of states have mandates on the books regarding coverage or are trying to pass laws to make health insurance mandatory. So on a state level, you can do a similar, you could choose to do a similar kind of thing for a similar kind of reason. So the states that require coverage include California, Massachusetts, New Jersey, Rhode Island and Vermont. So Washington DC also requires residents to purchase health insurance. Other states including Connecticut, Hawaii, Maryland, Minnesota and Washington have also attempted to pass legislation that would make health insurance mandatory for their residents. In states where health insurance is mandatory, the rules for getting the maintaining coverage are similar to those under the ACA. So in other words, this federal law that tried to kind of put this in on the federal level kind of got deconstructed in a bit because they took the teeth out of it with the tax, the penalty for taxes being taken out but then some of the states are in essence trying to mirror on a state level what they were kind of doing on the federal level. So with coverage available through the state run to health insurance marketplace. So no mandatory health, so no mandatory health insurance advantages. So the primary upside to health insurance no longer being mandatory at the federal level is the money you don't have to spend on the premiums that remains in your pocket. So that could be helpful if you're trying to pay off student loans or save money towards a down payment on a home. Of course, if your employer offers some type of health insurance coverage as part of your benefits package, you may be able to get affordable coverage without having to shop around for it. So in other words, if it's not mandatory, then you choose whether or not you want the health insurance. The other kind of debate about this is that if you make the health insurance mandatory and you try to do that by basically standardizing the health insurance, you might lessen the variety of the health insurance meaning certain health insurance companies might be more beneficial or be able to find a niche in the market by offering health insurance that is specific towards specific things and not having to ensure other, have other kind of things that would be included in it. If you try to say we're gonna have one side to fit all health insurance over the whole country or something like that of the whole state and you eliminate some of that variety, then again, you may not be able to purchase exactly what you need, especially since health insurance, as we said, is a lot more complex than other types of insurances these days because they try to put in all these other things into the health insurance. It's not just insurance against some catastrophe that could happen in terms of a big illness that could happen. You also have got the insurance covering those other kind of things that we talked about like preventative care, seeing the doctor and that kind of stuff. So if you get the option to choose, the more options you have to choose the coverage, you might choose something like you want a high deductible coverage or something like that and then pay for your other costs out of pocket so that you're covered in a normal insurance way or you might want a more inclusive insurance policy and that kind of thing. So, flows and cons. No mandatory health insurance disadvantages. It takes a very savvy healthcare consumer to score discounts from providers, not all of whom will necessarily go along with such requests. Normally insurance companies, not individuals, are the ones negotiating with hospitals and doctors to lower prices for large member groups. However, the main drawback when health insurance isn't mandatory is the risk that you assume when choosing the self-pay route. The downside of going without health insurance could be substantial if you end up needing expensive medical care and you don't have the money to pay for it from saving or your own monthly income. So clearly, just like any other kind of insurance, if you don't have access to the insurance, if you choose not to insure, then you can have a problem. It's harder to self-insure for something like medical care because if you got a big illness, then clearly the cost would be way outside what most people could pay for, even if you try to save up or have a self-insurance. But if you have the capacity, there's also this question of how much flexibility should insurance be provided? How could we set up the marketplace so different companies might offer different types of insurances for different people who have different risk factors that would be available to them? If you could broaden that spectrum, younger people, for example, might opt for a higher deductible kind of situation and they might be not as doing as much preventative stuff because they might feel that they don't need as much of it at that point in time, for example, or you could pay out of pocket for that kind of thing. So the flexibility and what are the options are there is another kind of component. Even though a minor health issue could result in a financial setback, according to the United Health Group, the average cost of an emergency room visit to treat issues that could be handled at an urgent care or primary care facility was just over $2,000 in 2019. So many of these high costs in the medical area are actually kind of a result of all this kind of bureaucratic stuff that's going on. So it's kind of difficult to know what the costs of things are and what would be the impact on actual costs of items which are kind of distorted by the insurance and the laws and regulations around it. So they can be quite high though, clearly. So the cost is 10 times higher compared to seeing an urgent care doctor and 12 times higher than primary care, but people who don't have health insurance may assume the ER is their only option if they get sick or hurt. Additionally, illness and medical bills are known contributors to bankruptcy. So clearly if you have a medical condition and you don't have health insurance, it could lead to bankruptcy. So options for health insurance coverage before going without health insurance, Nicholson reviewed all of her options which include in being added to her husband's plan and enrolling in a healthcare cost sharing program. These are also things that you might consider if you're without health insurance or thinking about canceling your plan since coverage is no longer mandatory. If you consider short-term health insurance or catastrophic care policies, but these have their limitations in terms of what's covered and who's eligible. So you might say, hey, if I'm short on cash, maybe I'll just get the catastrophic care coverage, meaning if a big event kind of happens. Applying for Medicare, Medicaid may also be an option, but whether you qualify is dependent on your income and family size. Each state has different guidelines with regards to the income and asset thresholds allowed for eligibility for Medicaid coverage. Is it illegal to go without health insurance? The federal government no longer requires individuals to have health insurance, so not on the federal level. However, a handful of states and the District of Columbia have instituted a health insurance coverage mandate and most carry a penalty for not doing so. So you could still be penalized basically on the state level. So if you live in California, Massachusetts, New Jersey, Rhode Island, or Washington, D.C., you must have insurance or pay a penalty. Vermont's mandate does not include a penalty for non-compliance. Why do I need health insurance? It's important to have health insurance even if you are young and in good health because accidents and unexpected illness can have a serious impact on your finances. So the bottom line, obviously, if you're mandated to or not, I mean, the fact that you're not mandated to shouldn't be the driving factor to buy the insurance. And I generally have the feeling that if people are buying something or taking some action, it's better, it's more healthy to be taking that action because you chose to take the action and think that you're taking the action for a good reason. In other words, I would think that if you had two people, for example, that are not smoking, one's not smoking because they were forced not to smoke and the other one chose not to smoke, the second one's gonna be more healthy, right? They made a more healthy decision in terms of doing it. The first one's just required not to do it. It makes them dumb after time, right? You're just following the rules without thinking about why the rules are there. The rules are actually taken away and you're showing the facts that is a healthier decision-making process, generally, in my opinion. So for example, a broken leg can cost you thousands of dollars even if no surgery is needed. In addition, most health insurance plans give you access to preventative services like shots or screening tests for free. So generally, we would still want some kind of insurance that I think most people, of course, would argue so that you can be covered at least in the event of a devastating financial health emergency which can clearly put people into bankruptcy and possibly more coverage to cover some of the preventative cares or you could try to do some of the preventative cares out of pocket, you know? So how many Americans are uninsured? The number has fluctuated over the past few years but the number of Americans without insurance has generally been trending lower since the enactment of the Affordable Care Act, the ACA. Put simply, the ACA has made it much easier for uninsured Americans to obtain health insurance in 2010 when the ACA was enacted. 48 million Americans were without health insurance in 2022, that number had decreased to 30 million. Bottom line, not being required by federal law to make health insurance coverage doesn't mean you don't need it. So if you don't have health insurance, take time to research coverage options to determine which is the best fit for your healthcare needs and budget. And I think that's a generally good rule, generally a good bottom line. If you don't have, you know, generally everyone would want some kind of health insurance, typically at least health insurance that could be covering you in the event, you know, of a financial disaster and then of course mitigate and look at your health insurance from there. Obviously health insurance is one of those areas that's more complex than other types of insurance in many ways because of all the different variants that are involved in it, because it has that long-term insurance kind of format against a catastrophe and it's got those other kind of components that could be there for the preventative care and because of all the regulations and options that are kind of involved as well that are attempting to make insurance easier and more affordable, but clearly have other effects as well, including making them somewhat complex to understand.