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  Health Underwriters Say Fines for Lack of Coverage are Too Low
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ContributorPenguin 
Last EditedPenguin  Apr 24, 2010 01:48am
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News DateTuesday, April 20, 2010 07:00:00 AM UTC0:0
DescriptionWhile states across the nation challenge the constitutionality of fining people who don't buy health insurance, the Wisconsin Association of Health Underwriters doesn't believe the fines are large enough.

Dan Schwartzer, executive vice president of the statewide association, told IB that while health care reform is necessary, Congress enacted health insurance reform that misses the mark in many areas. WAHU has long supported several of the insurance reforms that are in the bill, such as the removal of pre-existing conditions and health status as a rating factor, but with that comes with the caveat that there must be a strong penalty mechanism to avoid abuse. Without a strong penalty mechanism, he predicted that people would go without coverage and just pay the penalty; when they need insurance, they buy it because it's a guaranteed issue. For insurers, that creates adverse risk.

"Our theory is that you can't buy house insurance when your house is on fire," he stated. "The same is true with health insurance."

In Schwartzer's view, the annual fine for not having health insurance, which reaches $695 in 2015, must be comparable with the cost of a health insurance premium, which is several thousand dollars, or it invites consumers to game the system. Since the fine is far less expensive, and because of the prohibition against pre-existing conditions, he said many consumers will choose to pay the fine and only seek coverage when they need it, and then drop coverage when they no longer need it.

That's exactly what's happening in Massachusetts, which enacted a similar provision as part of a health care measure signed into law by former Gov. Mitt Romney, who ran for president in 2008 and is considered a contender should he run for the Republican nomination in 2012. "The average life of an insurance policy in Massachusetts is now four months," Schwartzer said, "and that's because people understood how to get around the system."
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