Health law's fines are not the big stick everybody thought

There was one thing that supporters and detractors of former President Barack Obama's health care overhaul agreed on for years: unpopular fines on Americans forgoing coverage were essential for the plan to work because they nudged healthy people to get insured, helping check premiums.

Now it turns out that might not be so.

Numbers released this week by the government show just a slight dip in the number of people enrolled in Affordable Care Act coverage next year through That's the case even though the Republican-led Congress repealed fines for being uninsured effective Jan. 1. The drop — from 8.8 million to 8.5 million — was far less than experts forecast.

The numbers are likely to change policymakers' understanding of how the law actually works. That may affect the government's stewardship of its health insurance marketplaces for people not covered on their jobs. It could also undercut a Texas federal court case in which a Republican-appointed judge recently declared the Affordable Care Act unconstitutional since the fines no longer exist.

A look at why the long-debated penalties might not matter so much and how that could affect the future of the law:


"The law originally took a carrot-and-stick approach, and it's pretty clear the carrots had a lot more power than the stick," said Larry Levitt of the nonpartisan Kaiser Family Foundation, who has followed "Obamacare" since the congressional debate leading to its passage in 2010.

The individual mandate and its enforcement fines were the "stick" behind the law. Taxpayer-provided subsidies to help pay premiums and cover deductibles and copays were the "carrots," along with legal protections so people with pre-existing medical problems could not be turned away.

Economist Joe Antos of the business-oriented American Enterprise Institute said the fines were more important at the beginning of the program because "the mandate initially got people to take a look." But now "Obamacare" is a mature program and consumers who stick with it see its value.

"Anybody who realizes this is not for them is out," Antos said. "Everybody who identifies it as precisely what they want, they're going to stay in. This is probably the way it's going to look for the foreseeable future."


Justine Handelman, top Washington lobbyist for the Blue Cross Blue Shield Association, says she initially thought the coverage requirement and fines were critical for getting the health law to work. That was the approach successfully taken in Massachusetts, which passed a state program that served as a prototype for Obama's effort.

The insurance industry, the Obama administration and the law's supporters all argued that the mandate was crucial in the 2012 Supreme Court case upholding it as a constitutional exercise of the congressional power to impose taxes.

Without fines to put teeth in the mandate, "we have to look at the whole of what is doable," Handelman said. Premiums remain too high for solid middle-class people who don't qualify for subsidies, she said.

Another approach insurers favor involves government-sponsored pools of financing that individual carriers can tap to help pay claims for the sickest patients. Several states have set up such pools and seen premiums drop. There's bipartisan support in Congress, but proponents have not been able to overcome the divisive politics of health care.

Stepped-up advertising could also get more healthy people into the marketplace. A Kaiser Foundation analysis estimates that 8.2 million uninsured Americans, more than 1 in 4, would be eligible for financial assistance to pay their premiums.


The recent ruling that Obamacare is unconstitutional by U.S. District Judge Reed O'Connor in Fort Worth, Texas, rests on a legal analysis that the coverage requirement and its fines remain central to the law.

O'Connor noted that the Supreme Court upheld the law in 2012 because the mandate was enforced through fines that passed constitutional muster, since they were levied as taxes.

With the fines gone, the coverage requirement can no longer be considered constitutional, he reasoned. And the entire health law is defective because it can't be separated from the coverage requirement.

But steady sign-up numbers are factual evidence that in the real world the coverage mandate doesn't drive the health care law.

"The argument that it's somehow inseparable from protections for pre-existing conditions is a lot weaker," Levitt said.