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Auto Vs. Health Insurance
October 21, 2009 - 1:10 PM | by: William La JeunesseWhat can mandatory car insurance tell us about the likely success of mandatory health insurance?
In 49 states, car insurance is mandatory. Very soon, health insurance could be mandatory as well. But will Americans comply? No, according to data from the Insurance Research Council.
Even though you can lose your license, your car, get fined or go to jail, 16% of Americans still refuse to buy car insurance, according to IRC studies.
In Massachusetts, where penalties include jail and fines up to $5,000 fine, just 1% are uninsured. But in New Mexico, where fines are just $300, almost one in three drivers are not insured. But their studies suggest, stiffer penalties don't necessarily mean more compliance. Even in states like California, where penalties are as stiff as those in New York and Massachusetts, some 18% of drivers still don't buy insurance
"We believe that the responsible thing to do is to have insurance coverage, but the track record of the mandatory element has not been, all that stellar," says David Sampson, of the Property Casualty Insurers Association.
One problem, regulation is only as good as enforcement, and many times courts and state agencies do not fine destitute violators. Research also indicates some people are simply irresponsible. They let others buy insurance and simply show up at the emergency room when they get into an accident. Others simply refuse to stand in line or fill out paperwork. Unless health insurance is free, they won't buy it.
Affordability is also an issue. As the unemployment rate goes up, more people drop car insurance, according to the IRC studies. That means during a recession, as more become unemployed, subsidies for health insurance will have to vastly increase. And when a policy costs up to $5,000 or more, some would rather roll the dice or pay the fine.
"When you are being forced to spend $3,000 or $4,000 for a health insurance policy, many don't see the value in buying one. They will chose to pay the $750 fine and not have insurance at all," says professor Neeraj Sood, at the University of Southern California Schaeffer Center for Health Policy.
The fines articulated in the health reform bills currently in Congress are as low as $200 and reach up to $750. According to most experts, those are not high enough to incentivize or guarantee people will buy health insurance, which supporters say is vital for insurance reform to succeed.
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