With the Supreme Court currently taking up the Affordable Care Act, the news media are talking about the individual mandate, typically describing it, incorrectly, as a requirement that all Americans (or "almost all") have health insurance. This understandably leads people to think that people will be forced to buy unaffordable policies. That's simply not true. Here's the real story:
When the relevant part of the law takes effect in 2014, then if you live in the U.S. and
- You don't already have insurance through a family policy or your employer, your union, Medicare, Medicaid, CHIP, the VA, or some other source, and
- You're not a member of an exempt group, such as religions that reject health insurance or provide health care for their members, and
- You make enough money to have to file a federal income tax return, and
- There's at least one health insurance policy available to you that meets the law's requirements and costs less than 8 percent of your income,
Then you have a choice of either buying a health insurance policy or paying a modest additional amount of income tax (which would not start being collected until 2015).
Suppose you don't do either? Surprisingly enough, the penalties are close to non-existent. Unlike other income tax violations, you can't be criminally prosecuted for failing to obey the law, and most other enforcement mechanisms are blocked as well.
The reason for the "mandate" is simple: People who don't have insurance can run up large health care bills as the result of an accident or serious injury. When they can't pay, doctors and hospitals end up passing the costs on to the rest of us. Moreover, since the law will also require insurance companies to accept all applicants regardless of preexisting conditions, then without something to encourage them to get insurance in advance, some people would likely game the system by waiting until after they get sick or injured to get covered, which is, in a word, cheating, because it would again drive up the cost of insurance for everybody else.