According to the Wall Street Journal of November 18, the latest front of the health care debate is a charge that people who refuse to buy health insurance could, under the House bill, spend five years in prison. The article quotes Rep. Peter Roskam (R. Ill.) as stating “if you don’t comply with the individual mandate, what happens to you? You can be subject to five years in prison and you can be subject to a quarter of a million dollars in fines?” Could this be true?
The “individual responsibility” requirement of HR 3962 is found in section 501, which adds a new section 59B to the Internal Revenue Code (IRC). That provision imposes a tax of 2.5% of the excess of the taxpayer’s modified adjusted gross income for the taxable year that exceeds the tax filing limit found in section 6012(a) of the IRC. The amount of the tax cannot be more than the cost of the national average premium of a basic plan offered through the exchange (a plan with 70% actuarial value). The 6012(a) filing limit for 2009 is $8350 for a single person, $18,700 for a married couple filing jointly.
The tax is only owed by persons who do not have “acceptable coverage” for themselves and their dependent children. Acceptable coverage is defined to include individual or employment-based coverage through a “qualified health benefits plan;” grandfathered coverage; Medicare; Medicaid; coverage under the VA, Department of Defense, or Indian Health Service; or other coverage deemed to be acceptable. HR 3962 includes a number of other exceptions from the requirement, including a religious conscience exception and exceptions for de minimis lapses or for cases of hardship.
There is, therefore, no criminal penalty for failing to be insured. An uninsured person simply needs to pay a tax, which can in no event exceed the cost of a basic health insurance policy.
The vast majority of Americans, however, will neither have to purchase insurance no pay a penalty, either because they are covered by a public insurance program, have employment-based insurance, or earn less than the filing limit. The Tax Foundation reports that in 2004, 57.5 million Americans had earned income but either were not obligated to file taxes or filed returns but owed no taxes. Although not all of these had AGI below the filing limit, tens of millions of them did.
What if a person adamantly refuses to either purchase insurance or pay the tax? Not surprisingly, there are penalties for failing to pay taxes. No government could function otherwise. Tax evasion is normally handled through civil penalties. Willful tax evasion, however, under 26 U.S.C. §7201 is a felony, punishable by up to 5 years in prison and a fine of $250,000. Willfulness means “a voluntary, intentional violation of a known legal duty,” United States v. Pomponio, 429 US 10, 24 (1976), and a good faith misunderstanding, even if not objectively reasonable, negates willfulness. Cheek v. United States, 498 U.S. 192, 202 (1991).
The Department of Justice has limited resources and criminal tax evasion charges are rare. In 2008, the Journal reports, 156 million returns were filed; there were about 100 criminal evasion prosecutions. Not surprisingly, prosecutions are focused on egregious situations, such as offshore tax evasion schemes, illegal trust schemes, drug lords, and terrorists. But one priority of the IRS is also illegal tax protesters and non-filers who intentionally fail to file tax returns, counsel others not to file, or illegally obstruct collection of the taxes. It is conceivable, therefore, that a person who adamantly and publicly refused either to be insured or to pay the tax could end up being prosecuted for evasion.
In sum, no one will go to jail for failing to buy insurance. If someone not otherwise insured, however, insists on becoming a martyr for this cause and not paying the tax, it is possible that the opportunity to do jail time may arise. Possible, but unlikely.
Update: The Senate bill filed last night explicitly provides that no one will be subject to a criminal penalty for failing to have minimum essential coverage or to pay the penalty for noncoverage. It also prohibits the collection of the penalty through the filing of liens or collection of levies against property.
Categories: Legal Issues
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The views reflected in this blog are those of the individual authors and do not necessarily represent those of the O’Neill Institute for National and Global Health Law or Georgetown University. This blog is solely informational in nature, and not intended as a substitute for competent legal advice from a licensed and retained attorney in your state or country.