The Supreme Court handed the Obama administration a huge victory when it declared the health law's individual mandate constitutional. At the same time, it also dealt Obamacare a small blow: Calling the law's fine for not carrying coverage a tax rather than a penalty could lower compliance.
The individual mandate is not meant to generate revenue. If the health law works at its very best, no one would pay the tax for not buying a health insurance plan. The whole point of the individual mandate is to encourage as many people to buy insurance as possible, ensuring those who are both sick and healthy enroll -- and help balance out each others' costs.
The Supreme Court ruled in March that the individual mandate fine, levied on those who do not buy coverage, is a tax. George Washington University's Naomi Schoenbaum combs through the research on how Americans perceive taxes, and argues that a mandate construed as a penalty would be more successful:
Penalties suggest that you have to do something, and that failing to do it is wrong. Calling something a tax, on other hand, makes the matter appear more of a choice: buy health insurance or pay the government for failing to do so -- we don't care.
It is precisely the type of moral judgment the penalty label brings that can be effective at getting people to do something we want them to do -- even more than making them pay for not doing it. A study at several Israeli day care centers found that people were more likely to show up late for their kids after a lateness fine was instituted than when latecomers suffered only shame. It turns out that moral judgment was better at generating compliance than a fine.
Schoenbaum notes one interesting experiment from three years ago, where researchers asked participants whether they would pay the cost of offsetting the carbon emissions of a given activity, such as taking an airplane flight.
Some participants had that extra payment described as an "offset" while others were told it was a "carbon tax." The researchers found that, in the tax condition, compliance was significantly lower. Nearly all the change was among participants who identified as Republican.
The study isn't completely analogous to the individual mandate case; a penalty isn't the same as an offset. Schoenbaum makes the case that they could evoke similar reactions, as both suggest that the penalty is being applied because of an individual's own decision -- to fly on an airplane or not buy insurance.
A tax has a different feel to it: We tend to perceive it as an across-the-board government fee, levied on those who have done nothing wrong.
"Tax labels are problematic because we dislike a government charge more when we slap a tax label on it," she writes. "With the tax frame...individuals are less likely to buy health insurance. And the mandate as currently structured forces them to pay only a small amount for the failure to do so."
Even with the Supreme Court decision, there's still space for the health law's supporters and opponents to frame the messaging around the individual mandate and what, exactly, the fine is. As Schoenbaum suggests, there could be a at stake for the health law's success depending who wins.