The GEICO conundrum

So easy a caveman could do it. Save money on your state-mandated auto insurance with GEICO? Pass your signature legislation while holding the White House, a filibuster-proof majority in the Senate, and a 70+ seat majority in the House? Obtusely obfuscate the lawyerly difference between a dollar seized by the government through fine and a dollar appropriated by the government by tax? Confuse the practical utility of automobile liability insurance and health insurance?

Now, technically Obama is right in the Stephanopolis interview. A fine is not a tax. The net effect is the same but he’s the kind of technically right you might expect a Constitutional lawyer to be on this issue. He’s stuck on the hot seat, though, because he’d look like a dick nattering about what kind revenue generating bill originates in which house of Congress. So deny it, impugn Merriam Webster (a fine, upstanding woman I’m told), and misdirect with a fallacious comparison to state-mandated auto liability insurance.

Who’s the genius that cooked up that line of reasoning? It’s a flawed argument for a couple of obvious reasons.

First, state auto insurance laws mandate liability coverage – i.e. damage caused to other parties’ property when you are at fault. There is no legal requirement to carry full coverage unless the car’s financed and it’s mandated in your note (which is a civil and not criminal matter at that). And for all the peace of mind that comes with knowing insurance is mandated most people pay extra for uninsured motorist coverage just in case they get hit by a scofflaw.

The money you pay never provides you with any benefit, you’re just required to make sure the other guy can get his vehicle/property fixed. The only similarity to health insurance is the insulation from any financial liability incurred in a “catastrophic” (a $2,000 fender bender is hardly a catastrophe) event.

Second, being liability insurance your state-mandated insurance doesn’t pay for unexpected mechanical repairs or routine maintenance. Even full coverage auto insurance doesn’t cover those expenses. No $10 co-pays on oil changes, no 70/30 coverage on new tires, no nothing when you blow an engine.

In other words, more of a supplemental cancer policy than a traditional health policy. Benefits are only paid under very limited conditions.

The only similarity between mandated auto liability and mandated health insurance is how it forces enough people into a pool that there’s enough money to pay the claims submitted. A de facto tax, especially if you’re unfortunate enough to never have an accident or health issue that allows you to see any benefit from your monthly payments.

Wouldn’t you feel more secure knowing that the cars around you have had all their regularly scheduled maintenance? And wouldn’t the streets be safer? Plus there’s all the money we’d save in the long run by fixing minor mechanical problems before they become serious.

Now consider how much a mandated full coverage auto policy would cost if it covered not only accident damage but also paid for all scheduled and unscheduled auto repairs. Any chance unlimited access to auto parts and repairs might create a scarcity of resources and inflated auto repair rates?

That’s the health reform Obama is proposing. Take comfort in knowing the extra $2,000 a year of your money that ends up in Uncle Sam’s pocket every year won’t technically be a tax.

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