The meltdown of the Obamacare mandate

Friday, February 07, 2014 by: J. D. Heyes
Tags: Obamacare, individual mandate, penalty tax

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(NaturalNews) To say that the roll-out of Obamacare is not going well is perhaps the understatement of the year. But even more than that, those who predicted that the law would ultimately collapse on itself might have been prophetic.

In particular, the "individual mandate" - the part of the law that the U.S. Supreme Court upheld as a "tax" and which requires, for the first time in U.S. history, that Americans be forced to buy a product or service - is failing miserably.

According to public policy experts James C. Capretta and Jeffrey H. Anderson, writing recently in the New York Post, the Obama administration is finding out that it is harder than they expected to get Americans - especially the healthy, young Americans necessary to fund older, sicker Americans - to buy insurance, leaving many to wonder if the mandate will actually survive:

Last month, the administration announced that anyone with a canceled 2013 individual insurance plan would be exempt from the "individual-responsibility requirement" this year, and would be allowed to buy the catastrophe-only insurance previously offered to those age 30 or under.

This exemption is likely only the first of many. How, for one, can the administration exempt people who had insurance last year but not exempt people who were uninsured because they couldn't afford coverage?

The penalty (er, tax) is a better buy

It's a valid question, especially given the manipulation of a number of unpopular (or unworkable) provisions of the law made by the president and his Health and Human Services department since its passage and implementation.

According to Capretta and Anderson, the architects of the Affordable Care Act were always undecided and unsure about the mandate. For instance, they realized that compelling Americans to buy insurance was key to making the system function. However, fearing a backlash, they also decided to impose a fairly weak penalty for anyone who did not obey.

In the end, the law's designers wound up with a mandate that still "provokes resentment" from the populace, but which probably won't work anyway.

And there is that Supreme Court decision:

The U.S. Supreme Court weakened the mandate even as it was saving ObamaCare. The law's authors hoped that the mandate would create the perception that insurance enrollment is now obligatory, but the high court made it clear that Congress has no authority to institute such a requirement. The justices ruled that the mandate could stand only as an optional tax, not as a fine for noncompliance.

So in other words, anyone who decides to forego purchasing Obamacare coverage (that has turned out to be very overpriced or comes with unreasonably high deductibles) is not really breaking the law; they are merely making the legal decision to pay the fine/tax instead.

On average, that tax will wind up being far lower than Obamacare premiums for tens of millions of Americans, based on the figures that I have seen thus far and based on a new study by the 2017 Project, which has compared premiums in the Obamacare exchanges in the 50 most populous U.S. counties to the tax that households could be liable for instead.

So much for the 'carrot-and-stick' approach

"This year, that tax equals the greater of two numbers: 1) $95 per adult in a household, plus half of that amount for each child, up to $285 for an entire household, or 2) 1 percent of household income in excess of the tax-filing threshold ($10,150 for singles, and $20,300 for married couples)," the experts wrote.

That means, for example, that a 31-year-old single male making $30,000 in Columbus, Ohio, will face a tax of $198.50, which amounts to about $2,000 less than the least expensive option in the state's Obamacare exchange - and that includes his taxpayer-funded subsidy.

Meanwhile, for a 36-year-old San Diego woman who makes $40,000, the tax would be $298.50, or some $2,400 less than the cheapest California exchange policy (this woman would not be eligible for a subsidy).

"ObamaCare can't work if the young and healthy don't sign up in large numbers - yet the law creates a clear incentive for them to opt out," the experts write. "There's more: The law also guarantees that you can always choose to buy during the next annual enrollment period - so if you fall seriously ill and find that ObamaCare has become a better investment, you can buy it then."

The carrot-and-stick approach that the law's designers hoped would make it functional has failed, clearly.





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