The Individual Mandate

As most people know by now, the Individual Mandate is one of the key elements in the Affordable Care Act (ACA). The Supreme Court ruled in 2012 that the Individual Mandate is constitutional. Prior to that ruling, both proponents and opponents of the ACA agreed that it is essential enough that the ACA would not work without it.

Enforcement of the Individual Mandate lies with the Internal Revenue Service (IRS), which is supposed to verify compliance when taxpayers submit their income tax returns.

With all the discussion of the importance of the Individual Mandate, I was surprised–as many taxpayers must have been–to discover that the way the IRS is verifying compliance with the Individual Mandate is through a box taxpayers check on their 1040 form stating they have health insurance.

If taxpayers say they have health insurance, that’s good enough for the IRS. This certainly differs from all the verification the IRS requires when taxpayers report their incomes (W-2 and 1099 forms and the like). I’m not complaining about the lack of paperwork, but the fact that there is no verification might lead one to suspect that people could be checking the box saying they have health insurance when they do not.

For purposes of comparison, this website says that more than 12% of motorists do not have auto insurance, even though it is mandated. In my state of Florida, auto owners renewing their license tags must verify insurance by giving the name of their insurance company and their policy numbers, and the website says that 23.8% of Florida drivers are uninsured. The IRS requires no verification of insurance, making it that much easier for the uninsured to claim being insured.

There aren’t that many laws where the government assumes people are in compliance just because they say they are. Imagine telling a police officer, “No sir, I was not exceeding the speed limit,” or “No officer, I don’t have any illegal drugs,” and hearing back, “OK, I just wanted you to verify you are in compliance with the law.”

At the other extreme, the opposite of the government’s simply accepting you are in compliance because you say so, civil asset forfeiture laws allow the government to take your assets and require you to prove you weren’t doing anything illegal to get them back. If the Individual Mandate were enforced the same way, everyone would be required to pay the Individual Mandate tax for noncompliance, and then be forced to prove they had health insurance to get the money back.

Given the importance claimed for the Individual Mandate, I am surprised at the minimal verification effort behind it.