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Angie Drobnic Holan
By Angie Drobnic Holan September 28, 2009

Health reform includes a tax penalty if you don't have insurance

The Republican National Committee launched a new ad attacking health care reform as a big tax increase.

"Barack Obama and Democrats promise that health care reform will lower costs, but their plans deliver increased taxes," the ad says. It then lists several taxes it says the Obama plan will increase.

Here we're checking the claim that "they've even proposed a tax for not having health insurance."

The ad then flashes to video of Obama and George Stephanopoulos arguing over the meaning of the word tax on This Week with George Stephanopoulos , with Stephanopolous reading the dictionary definition. Obama said the measure is necessary to make sure that everyone takes responsibility for having health insurance. He also said that a tax penalty is not the same thing as raising people's taxes.

The tax in the Democrats' bills won't affect anyone who has insurance. But if health care reform passes, it will be an issue for those who don't have insurance.

The tax is the mechanism that Democrats want to use to prod people to get health coverage. If they fail to get insurance, they would have to pay it.

We've studied the health reform proposals being considered in Congress right now, and the main Democratic versions propose a tax penalty on people who don't carry health insurance. Policymakers usually call this provision the "individual mandate."

Among Democrats, there is much consensus that an individual mandate is needed to make sure everyone is covered, especially when coupled with other measures to make affordable coverage more widely available.

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Obama opposed the individual mandate when he was a candidate, but he has since changed his mind and now supports it, as long as it contains a hardship exemption for individuals who are truly unable to find affordable coverage.

The proposals in Congress each handle the individual mandate differently.

In the bills in the House of Representatives, a person who failed to get coverage would face a penalty of 2.5 percent of their modified adjusted gross income up to the cost of basic health insurance, as defined by the new national health insurance exchange. The House grants exemptions for dependents, religious objections and financial hardship.

In the Senate, the Health, Education, Labor and Pension Committee caps the penalty at $750. It exempts residents of states that don't establish health insurance exchanges, those for whom affordable coverage is not available, and those without coverage for fewer than 90 days.

The Senate Finance Comittee specifies a tax penalty of $950 for an individual and a maximum penalty of $1,900 per family. The penalties are a little lower if the person's income is below 300 percent of the poverty level. People are exempt from the mandate if they live below the poverty level, if the lowest cost insurance exceeds 10 percent of their income, or if there is financial hardship or religious objections.

We should note that the bills tend to leave the definitions of financial hardship up to other officials, such as the secretary of Health and Human Services.

We're going to duck, for now, the question asked by Stephanopolous, about whether Obama is breaking his promise on raising taxes. If health reform passes, then we'll evaluate the mandate with respect to our Obameter campaign promises database . Promise No. 515, "No family making less than $250,000 will see 'any form of tax increase,'" is currently rated Compromise .

The details for these mandates are very much a work in progress, and Congress will ultimately have to vote on one set of standards for the mandate. But all of the Democratic plans include the mandate, which is a tax penalty on those who don't have insurance. The RNC called it "a tax for not having health insurance," and there's no doubt that it is a form of tax. There are provisions for those who face hardship, but absent special circumstances, everyone will have to have coverage. We rate the RNC's statement True.

Our Sources

Republican National Committee, 'Dictionary' ad , Sept. 28, 2009

U.S. Senate Finance Committee, Chairman's Mark: America’s Healthy Future Act of 2009 , Sept. 16, 2009

U.S. Senate Health, Education, Labor and Pensions (HELP) Committee, Health reform proposal , July 15, 2009

U.S. Government Printing Office, HR 3200 (health care reform legislation), July 14, 2009

Senate Health, Education, Labor and Pensions Committee, HELP Committee Affordable Health Choices Act – Detailed Summary , Sept. 14, 2009

Kaiser Family Foundation, Side-by-side comparisons of the major health care proposals , Aug. 7, 2009

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Health reform includes a tax penalty if you don't have insurance

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