Mandatory car insurance vs. mandatory health insurance

Gina Roberts-Grey

ObamaCare sizzles as a hot-button issue -- in political campaigns, in boardrooms, in households and in courtrooms. In fact, the U.S. Supreme Court is scheduled to rule in June 2012 on the constitutionally of federal health care reform law, one of the cornerstones of President Obama's first term.

If the Supreme Court does not toss the mandate, most Americans will be required in 2014 to buy health insurance.

This isn't the first time that Americans have confronted an insurance mandate. Drivers in every state except New Hampshire are required to carry car insurance. So, why are Americans revved up about the health insurance mandate but relatively calm about the car insurance mandate? Here are four answers to that question.

1. Who's got the power?

One of the key differences between mandated health insurance and mandate car insurance: who's in the driver's seat. The health insurance mandate is part of a federal law. Meanwhile, state laws govern car insurance, including the minimum amount of coverage required and the rates that car insurance companies charge.

Richard Wright, a law professor at IIT Chicago-Kent College of Law, explains that state governments “have much broader authority to legislate on behalf of the general welfare. The federal government only has authority to legislate under a limited number of specific powers, including the part of the U.S. Constitution that allows the government the leeway to call for the health care law.”

Under the health insurance law, the federal government controls the situation, establishing coverage limits and penalties. Twenty-six states have sued the federal government over the law.

As for car insurance, the states hold the reins.

In the 1920s, Connecticut and Massachusetts led the way in requiring car insurance. California's car insurance mandate took effect in the '60s, with Nevada following suit in the '70s and Texas in the '80s.

Now, liability insurance -- which protects other folks' cars and property if your car hits them -- is mandatory in 49 states; New Hampshire is the exception. Collision coverage and comprehensive coverage are optional; collision coverage pays for damage to your car caused by a crash, while comprehensive coverage pays for damage to your car triggered by things like theft, fires and tornadoes.

Every state establishes minimum amounts of liability insurance. In most cases, the amount is divided into three sums. In New York, for example, it's expressed this way: 25/50/10. Translation: $25,000 is the most that one person can be paid for injuries, $50,000 is the most than can paid to all people per accident, and $10,000 is the most that can be paid for property damage.

States also set penalties for going without insurance or being underinsured. Californians who aren’t properly insured face a fine of $100 to $200 for a first offense; in Texas, the penalty for the same offense is $175 to $350.

2. What's the option?

Owning and driving a car is voluntary. Thus, you’re not required to carry auto insurance simply because you're alive, says Shane Fischer, a personal injury and insurance attorney in Fla.

“The Constitution doesn’t call for all citizens to have the right to drive a car; driving is a privilege,” Fischer says. “You’re not required to own a car. But if you do own a car, insurance is required. So no one is forcing you to spend your hard-earned cash on something you don't need to have.”

While you can choose whether to drive, you can't choose whether to get sick. Fischer says ObamaCare will create a safety net for Americans so their medical bills are covered when they do get sick. That safety net also will help protect hospitals and other health care providers from being socked with millions upon millions of dollars in bills for essentially free care given to uninsured people, he says.

3. Who's covered?

Mandatory health insurance is "first party" coverage, while mandatory car insurance is "third party" coverage, according to Wright. In other words, mandatory car insurance protects other people and their property if you cause a crash, but mandatory health insurance protects you and your family.

4. What's the penalty?

In most states, the penalty for not carrying car insurance is below $500 for a first offense.

By contrast, the penalty for not following the health care mandate will be $95 in 2014, or up to 1 percent of your income, whichever is greater, according to Nicholas Newsad, senior associate at HealthCare Appraisers Inc., a consulting company in Colorado. The financial penalty will climb higher in subsequent years.

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