Obamacare’s Individual Mandate is Repealing Itself

Obamacare liberals mandate individualThe Senate this week is expected to vote on a tax bill that includes a controversial provision to repeal Obamacare’s tax penalty on the uninsured.

Democrats and some conservative policy analysts fret that if Congress scuttles the so-called individual mandate, insurance premiums will rise.

The reverse may be closer to the truth: Premiums for Obamacare policies next year will be so high that millions will be exempt from the tax penalty whether Congress repeals it or not. Even the skimpiest coverage now costs so much that many uninsured people with six-figure incomes will be exempt.

The individual mandate is repealing itself.

The mandate represented a grand bargain between the government and the insurance industry. Insurers agreed not to base premiums on applicants’ medical conditions, and in exchange, the government agreed to subsidize premiums and penalize the uninsured. In theory, the threat of tax penalties would induce healthy people to pay an unfairly high price for a product they wouldn’t otherwise buy, creating a stable insurance pool that would generate billions in profits for insurers.

It hasn’t worked out that way. Healthy people have largely shunned the exchanges, making the individual health-insurance market a losing proposition for most insurers. The number of people with individual policies, which grew during Obamacare’s first two years, has been shrinking since 2016. The erosion has been most pronounced among those who earn too much to receive premium subsidies.

So why aren’t more people who refuse to buy Obamacare policies forced to pay tax penalties? One reason is that the Obamacare statute does not permit the IRS to collect the penalty in cases where premiums would exceed 8 percent of an uninsured person’s income. That is a high bar: The average household spent 5.5 percent of its income on health-insurance premiums last year, according to the Bureau of Labor Statistics.

But that number includes people with employer coverage. Obamacare premiums are so high that they often exceed that threshold even for families with relatively comfortable earnings. For a 35-year-old couple, subsidies end at about $65,000 in income — but Bronze-level coverage costs an average of nearly $7,800, according to the Kaiser Family Foundation’s premium calculator. This premium will exceed 8 percent of the couple’s income unless their earnings approach $97,400. A 31-year-old couple with a toddler loses subsidies at an income of about $82,000, but would have to pay more than $9,800 for a Bronze plan — meaning they would be exempt from the penalty unless their earnings total nearly $123,000.

Middle-aged people pay higher premiums under Obamacare, making them even more likely to qualify for exemptions. A 50-year-old couple ineligible for subsidies (which end around $65,000) would face premiums of nearly $11,400 for a Bronze policy, freeing them from the penalty if their income is below $142,000. At the extreme, a 64-year-old couple (facing the same $65,000 subsidy cutoff) wouldn’t have to pay the tax penalty unless their earnings topped $239,000.

Lavish premiums don’t buy lavish coverage. Family deductibles for Bronze plans average more than $12,000, and limits on out-of-pocket spending for covered, in-network services average nearly $14,000. Our hypothetical 35-year-old couple would have to shell out more than $21,700 in premiums and medical bills before their insurance company began bearing the full cost of their in-network expenses. Hardly an appealing proposition.

The reflexive response of Obamacare proponents is to blame higher premiums on President Trump. For them, there is no problem with Obamacare that impeachment wouldn’t solve. They cast his decision to discontinue cost-sharing-reduction subsidies to insurers beginning in January 2018 as an act of sabotage. These federal outlays compensate insurers for providing generous benefits to certain low-income people.

Congress has never appropriated money for these payments. A federal judge ruled in May 2016 that it was unconstitutional for the government to continue to make them. Both the Obama and the Trump administrations have made them anyway. By the end of this month, the government will have spent an estimated $22 billion in unappropriated money on this program. Trump’s decision to halt those payments looks less like sabotage than like constitutional governance.

It is true that terminating the cost-sharing-reduction payments has forced insurers to raise premiums to compensate for their loss. But in most states, those higher premiums apply only to Silver plans. The rates quoted in this piece are national averages for Bronze plans, whose premiums were largely unaffected by the termination of cost-sharing-reduction subsidies in most states.

Repealing the mandate would, of course, induce at least some to drop their individual policies. Those who decline coverage are more likely than not in reasonably good health, leaving the insurance pool worse off. But the effect on premiums would likely be small. Healthy people have generally refused Obamacare policies because they cost too much and cover too little. Tax penalties have not altered that value proposition.

As premiums have risen, the mandate’s power and reach have waned. Congress should finish the job and repeal a mandate that already is repealing itself.

From - National Review - by Doug Badger

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Chuck Zitting
5 years ago

I received the update on my premium increase for 2018 from Kaiser Permanently- cheat you. Last year, with huge deductibles and co pays, I paid monthly in the mid $600 to avoid the threatened tax penalties. For that $8000+ yearly charge, I received mindless advertising about THRIVING and one 15 minute yearly visit with my designated doctor. Everything else was paid with additional out of pocket reimbursements. These one year payments added to a higher total than the total cost of my medical care for any 20 year period in my entire life. Then something even more insane happened. My 65th birthday showed up. That one birthday means I can now have real medical coverage for the first time in my entire life. It includes low deductibles, small co pays, and a small maximum out of pocket all for $134 per month. This is a sweat deal for a guy who is now old and much less productive than he was for the last 40 years.
First we’ve ruined a great health care system and now we are going to use up the last of that service on our least productive groups. I am now in one of those groups and I still think it is a pretty stupid way to go.

5 years ago

I never understood why President Trump spent so much political clout and time on obama care. I love Donald, and i felt so sorry for him, as his republican cronies time after time stabbed him un the back. Sure, I’m just a nobody, but i still couldn’t and still can’t see the benifit in fighting obama care. Its gotta be like the Titanic, sure to sink. Just let it. I wonder where did this ground swell of support for obama care come from? I was really surprised to see it. I just don’t get it. It must have come from poor people, where else could have it gained support? Poor people couldn’t get off their a$$es long enough to vote, but yet obama care managed to survive.
I know, if i wasn’t old, I’d just have to die off, oh wait, i still have the VA.
I know a lady, she’s 62 and she pays $900 a month w/7000 deductable and she’s an health insurance specialist. How can that be?

5 years ago
Reply to  SARGE

Hi Sarge
The minute the Republicans let up on Obamacare, the more ingrained in our culture it becomes, like a wart–it’s there, but it doesn’t bother me a whole lot. We can’t let it happen. The government can’t even be trusted to run the VA without deliberately killing veterans (double-booking: one to show false records to the public and the authorities, and the other that shows real delays of months or years before a veteran is seen by a doctor) —so this tells you how well the feds will run almost a fifth of our economy. If left to its own devices, yes, Obamacare will fail. But how would that look if everyone, especially Republicans, just stood by and watched it happen? Imagine the headlines in the MSM! Pelosi would go apoplectic!
The support for Obama’s pet project is rooted in the false promises made by him and his administration. “You can keep your doctor.” “You can keep your plan.” And the biggest lie of them all: “And it’ll cost your family $2500 less per year than you’re paying now!” And then the subsidies were distributed like Halloween candy so that millions of people didn’t have to pay much at all while the rest of us picked up the tab. How fair is that?
The best way to run the health care industry is as if it were a business. That would mean taking it out of the hands of the federal government, putting it squarely into the free marketplace, complete with profits, accountability, and competition. And there is no better time than now, while the Republicans have the House, the Senate, and the White House. I will be very disappointed it we can’t get this, while it’s sitting like icing, on a cake.

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