Thursday, December 24, 2009

Jane Q. Public and the Proposed Health Insurance Mandate

In an article I posted last night, "The Mandate and Massachusetts," there was the implication that requiring people in that state to carry health insurance drove them into foreclosure, or at least some have inferred that from what I wrote. So, let me be perfectly clear. What happened in Massachusetts after health reform legislation passed in April, 2006 was part of a national trend in foreclosures.

But, if you read the article closely, you'll also see that adding the cost of health care to the already overwhelming expenses of people who were marginally getting by in the first place was posited to be among the factors driving people into foreclosure, and not the only factor...not by a long shot.

When Jane Q. Public sits at her kitchen table at the end of the month confronted by a stack of bills, she will defer to what she considers most essential: rent, auto insurance, electric bill, utilities, car payment, credit card debt, and she will find herself prioritizing payments. In Massachusetts, as in other states, all too often people will try to do what they were taught was right: pay that dental bill, pay that creditor, etc., and they may find themselves choosing between paying the monthly mortgage and feeding their families.

In a state where housing costs are notoriously high, and outpace earning capacity, it's not surprising that one might find themselves with not enough money left to make the mortgage, or the rent, which is where the foreclosure, or eviction process begins. All my article suggests is that when Massachusetts mandated insurance, it became a little more challenging for Jane Q. Public to make her mortgage, and this may be a contributing factor, not the cause, of an egregious spike in homelessness in that state in the years after this legislation passed.

The plan Congress is fine tuning now, like the one in Massachusetts, will require working Americans to be responsible for buying insurance. This is called a government mandate. Some will say it's an idea whose time has come. I agree with Andy Stern, head of the Service Employees Union, that if the salary requirements are raised, or adjusted sufficiently to account for the cost of living, it's not a bad idea.

After all, a person making $50,000 a year whose only expenses are rent, food, and auto insurance should be able to spend 9% of his income on health insurance.

But, if you're going to ask a single female who earns $9 an hour, and puts in overtime so that she can have that something extra every once in awhile, who thus clocks in at $25,000--if you're going to take $240 a month away from her in monthly health insurance premiums, that's okay, too, as long as you realize that, out of her $25,000 annual salary, which works out to slightly more than $2000 a month, she has to pay federal, state, and local taxes, contribute to her unemployment and disability insurance, pay $1400 a month in rent, cover her car insurance, buy groceries, pay off the loan on her car, buy clothes, pay for gas, pay off credit card debt, etc., etc., etc. How may people ended up going into foreclosure, or being evicted because, in good conscience, they tried to pay off their credit card debt.

Let's not be stupid about this. If you're going to make something a government requirement, don't do it at a time when people are having a hard time meeting their rents and mortgages.