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Effectiveness of the Health Insurance Penalty

Source: American Public Media, April 30, 2013 Under the Affordable Care Act, individuals will have to pay a penalty of $95 or 1% of their income (whichever is higher) for not having health coverage. The question is whether that amount is enough of a penalty, since health coverage can cost thousands of dollars. Kevin Volpp offers that this modest penalty could work better than most people think, because of a phenomenon known as loss aversion which refers to people’s tendency to strongly prefer avoiding losses to acquiring gains.