wahoo
3141
What a stupid piece of legislation. They made the Mandate deliberately UNENFORCEABLE. There is no penalty if you simply don’t choose to carry insurance. Without a mandate or a closed enrollment period, it’s not financially wise for a healthy person to carry insurance.
When you say there is no discrimination based on pre-existing conditions and an open enrollment period, it is no longer health insurance.
How so? Mind elaborating a bit?
Those two things that you’re taking issue with are economic considerations. If you’re going to assert that everybody has a fundamental right to health care, regardless of their personal condition, you’re no longer talking about health insurance, which is an economic system. If I’m an insurance company and I can’t refuse to cover a person because he’s too sick to ever actually pay more for his coverage than he’s going to take out of the system, it doesn’t work any more. You’re just outsourcing socialized medicine, in which case I would suggest that you’re better off doing it directly with the government and hopefully save some overhead.
I’m not Wahoo, but I agree to an extent. Insurace is based upon spreading out an unknown future risk among members of your community/pool. Let’s say someone has disease Xd, which requires treatment Xt. If they become covered under some healthcare plan, Xt is a known loss that the provider is accepting. While it’s health care coverage, providing payment for Xt is technically not health care insurance. Mind you, that makes it no better or worse in and of itself, but semantically I think Wahoo is spot on.
As to why it matters, insurance companies are set up to only cover future risk and are not specialized in adequately assessing ongoing care plans for new customers. That provides a substantial unknown difference to their bottom line, which in turn is passed along to our premiums. [pure specualtion alert] I suspect that our rates will jump significantly with the next renewal so that the companies have a buffer in line to allow for miscalculation. My guess is they’ll stay artifically high until 2015 at the earliest.
In what sense is there no penalty for disregarding the mandate?
“Insurance” implies evaluating risk and protecting against future unknown events. Wahoo’s point is this bill makes it a just-in-time payment plan for your medical needs instead.
wahoo
3147
Yep… And this is the death spiral due to adverse selection (premium increases leads to fewer people with HI leading to higher premiums etc). If there is no significant mandate penalty and open enrollment, then if you come down with the illness that Dan outlines, you can then sign up for health insurance. You’re not insuring against illness, you’re just buying a subsidy at that pt. It’s not a sustainable model.
What has some policy folks freaked about the mandate is this from the Jt Tax Cmte below. In short, there’s a mandate with no enforcement mechanism whatsoever. The IRS has no legal authority to collect the mandate. Subtitle F is what gives the IRS the legal authority to tax you, penalize you and garnish wages. So it’s a mandate with no penalty. Edit: This is why the O’Reilly/Weiner exchange was so illuminating. JCT report: http://www.jct.gov/publications.html?func=startdown&id=3673
[INDENT] Individuals who fail to maintain minimum essential coverage in 2016 are subject to a penalty equal to the greater of: (1) 2.5% of household income in excess of the taxpayer’s household income for the taxable year over the threshold amount of income required for income tax return filing for that taxpayer under section 6012(a)(1); or (2) $695 per uninsured adult in the household. The fee for an uninsured individual under age 18 is one-half of the adult fee for an adult. The total household penalty may not exceed 300 percent of the per adult penalty ($2,085). The total annual household payment may not exceed the national average annual premium for bronze level health plan offered through the Exchange that year for the household size…
The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
[/INDENT]
Ok, how is this not enforcement? They just aren’t treating it in the same manner as other owed taxes. If you were looking at a refund–but didn’t get coverage–oops refund is gone. And it’ll likely be interpreted to roll forward. So, unless you’re counting on inflation to shrink it away, it’ll still accrue year after year.
If you really felt like gambling, you could adjust withholding to not get a refund of any sort, not carry coverage, and hope they don’t change the enforcement…but that would be I don’t know…insane.
Wait - what? A legally unenforceable penalty with no additional penalties for failure to pay? Is that actually as stupid as it sounds?
Thanks (to you and the others who also offered their perspectives) for clarifying. I wasn’t sure if this is what you were getting at and didn’t want to assume.
I’m not sure I agree with the “there’s no enforcement of the penalty” aspect, but that’s mostly speculation on both our parts, really. I share your concern that if there’s not enforcement of some sort, then it’s a problem due to the sorts of issues you point out.
Health insurance isn’t just about illness, though. It’s also about injury. For younger, healthy, folks (who are the most likely to both not have insurance and otherwise to be able to afford it), it’s the latter that’s more at issue. There’s no retro-activity involved, so there’s still the same primary value in having insurance after this bill as there was before. The difference is that there’s now also a stick (mandate and penalty), not just a carrot. This should bring in more healthy people to the insurance pool, driving per-capita costs down.
Also, the costs of the uninsured are being paid already. Hospitals treat uninsured folks all the time, especially in emergency rooms. The costs of those treatments get covered all over the place, from the hospital just eating it, to driving folks bankrupt trying to pay it, to the government subsidizing the costs, to lord knows what else. Perhaps some of our resident folks who are professionals in the field have a breakdown of how that all works out? With regards to insurance and health care costs, all of these things are effectively “out-of-band” costs. They’re not part a term in the equation figuring out how to effectively calculate the proper rates and such. That’s a problem, as it is a significant cost, and its exclusion skews the numbers and otherwise overcomplicates the system for no net gain. The insurance mandate is intended to narrow that gap and help bring things together into a cohesive system so that cost analysis can be done more effectively.
Houngan
3151
Er, let me bounce that back at you. How is this enforcement? You have to do this, and there’s a penalty for which you are not liable and I am unable to enforce in any legal manner and has no negative repercussions if you don’t pay. It’s pretty much asking people to pay out of the goodness of their hearts. They should at least tie it to credit score or something.
If we want to get riled up, let’s talk about the religious exemption from the mandate.
H.
jeffd
3152
This is flat out false.
edit: Ahh, I see what you’re saying. No, they won’t garnish you if you don’t pay the mandate violation penalty. But it will accumulate, and eat into any tax refunds you might be hoping for.
Houngan
3153
Ah, there it is. Thanks for pointing that out.
Now a question. Would someone ever be in the zero tax bracket and still have a penalty applied for the mandate? I know the penalty amount is sliding-scale as well. Further, would the IRS bring the full weight of its collection authority to bear if a zero bracket worker incurred a tax burden from the mandate penalty?
I would assume everything is set so that the penalty won’t be there if you don’t make enough to pay taxes in the first place, or Medicaid kicks in, or something.
H.
jeffd
3154
Houngan: It’s a little hard for me to parse what you’re asking, but I’ll give it my best shot:
“Would someone ever be in the zero tax bracket and still have a penalty applied for the mandate?”
Probably not.
- You’re exempt from the mandate if purchasing health insurance would cost more than some percentage of your total income (I think it’s 8%).
- If you’re making 133% of poverty or less, you just get Medicaid. BOOM you have health insurance, thus satisfying the requirement of the mandate.
“Further, would the IRS bring the full weight of its collection authority to bear…”
As I understand it, the IRS isn’t going to really go after you for the money you owe on the mandate. It’s just going to be a negative balance sitting in whatever database they have that will carve chunks out of any tax returns you get.
These people will be likely receiving help to get insurance in the first place – assuming we can educate them on the benefits they can apply for. I think that’s why there is no garnishment / penalty interest. I’m guessing they didn’t want to club people over the head until the system is in place and running. As is, the penalties seem to ramp up over time, so maybe in the future they’ll amend the penalty portion.
The funny thing it is likely that only people with a bizarre grudge are going to flirt with ignoring the mandate. Non-compliance will more likely be out of ignorance.
Houngan
3156
That, and the insurance companies will still be able to impose 90-day waiting periods before coverage kicks in, which I’m sure they’ll do to avoid the “cut my arm off, insurance please kthx.” scenarios.
Jeff, you got the gist, but don’t really have the exact info to answer it. I’m researching it a bit now, did you know that 41% (in 2006) of filers were in the zero bracket? Wow.
H.
I still don’t see a significant enforcement mechanism here, because it doesn’t address the issue of actual medical service.
There are going to be people who don’t buy insurance, who may or may not have any tax refunds to grab, and who will end up getting sick or injured and going to the doctor/hospital/emergency room. And they will receive treatment at those places, there’s no way emergency responders are going to turn away an ill or injured person.
So, who makes them pay? There’s no way tax returns are ever going to cover the cost of their treatment. The insurance companies are going to refuse, since they can hold off the 90 days for coverage, even if the jerks gaming the system try to buy at that point. And I’ve seen nothing to indicate the feds will somehow recover the cost of those uninsured being treated, which means there’s absolutely no incentive to buy the insurance in the first place.
Houngan
3158
You’re right, but you’re describing the current situation. The reform bill can only help, since ERs are required (by federal law) to provide a minimum level of care for everyone that comes in. So yes it will be a problem, but also yes it will be a smaller problem.
H.
Menzo
3159
Well, what can you really do, other than single payer? If someone outright refuses to purchase the required medical coverage, and still gets hurt, he’s going to go broke paying for treatment. Nothing we can do about that.
This system makes it possible for this hypothetical situation not to happen in the first place, though.
Exactly, and there is always non-compliance in any regulatory scheme. It’s probably priced in at some level. The fact is most people want access to health care.
I think the enforcement “problem” is overblown to begin with. People don’t want to comply? Fine, we’ll see if enforcement becomes an issue. If it does, it can be revisited. It probably isn’t going to be a huge issue.
