Carpe Diem

George Will: Because penalties for not buying insurance are limited, Obamacare may be on the path to ultimate extinction

George Will explains in today’s Washington Post that Chief Justice John Roberts may have temporarily rescued Obamacare by finding it to be constitutional, but by limiting the penalties for not buying health insurance, he may have made the Affordable Care Act (ACA) unworkable and put it on a path to ultimate extinction. Here’s why:

The point of the penalty to enforce the [health insurance] mandate was to prevent healthy people — particularly healthy young people — from declining to purchase insurance, or dropping their insurance, which would leave an insured pool of mostly old and infirm people. This would cause the cost of insurance premiums to soar, making it more and more sensible for the healthy to pay the ACA tax, which is much less than the price of insurance.

Chief Justice John Roberts noted that a person earning $35,000 a year would pay a $60 monthly tax and someone earning $100,000 would pay $200 per month. But the cost of a qualifying insurance policy is projected to be $400 a month. Clearly, it would be sensible to pay $60 or $200 rather than $400 per month, because if one becomes ill, “guaranteed issue” assures coverage and “community rating” means that one’s illness will not result in higher insurance rates.

But Roberts’s decision limits Congress’s latitude by holding that the small size of the penalty is part of the reason it is, for constitutional purposes, a tax. It is not a “financial punishment” because it is not so steep that it effectively prohibits the choice of paying it. And, Roberts noted, “by statute, it can never be more.” ….the penalty for refusing to purchase insurance counts as a tax only if it remains so small as to be largely ineffective.

Because the penalties are constitutionally limited by the reasoning whereby Roberts declared them taxes, he may have saved the ACA’s constitutionality by sacrificing its feasibility. So as the president begins his second term, the signature achievement of his first term looks remarkably rickety.

29 thoughts on “George Will: Because penalties for not buying insurance are limited, Obamacare may be on the path to ultimate extinction

  1. the difference is – you pay the penalty but you are not getting insurance for it, right?

    It’s like paying a premium for health insurance and nothing is covered.

    so all that money goes to pay costs for those that are covered.

    re: ” And, Roberts noted, “by statute, it can never be more.” ….the penalty for refusing to purchase insurance counts as a tax only if it remains so small as to be largely ineffective.”

    the actual quote is: ” Chief Justice John Roberts: [F]or most Americans the amount due will be far less than the price of insurance, and, by statute, it can never be more.”

    and Roberts was not deciding how much was too much or not or “can never be more”

    how could Roberts make that decision himself anyhow?

    here’s the full language:

    ” But the penalty can never exceed the cost of the national average premiums for the lowest-cost “bronze” plans being offered through the new insurance exchanges called for under the law. We have no way of knowing what that average rate might turn out to be in 2014, but there is reason to think it could be quite high. For example, the total cost of a basic Government Employees Health Association plan currently offered through the Federal Employee Health Benefit program (the model for the state insurance exchanges) totals $9,459 per year for a family plan, and $4,159 for individual coverage.”

    ” In his opinion, Chief Justice Roberts cited an estimate from the nonpartisan Congressional Budget Office that 4 million would pay, and cited that as a further reason to consider the assessment a tax rather than a penalty. “Congress did not think it was creating four million outlaws,” he suggested.”

    http://www.factcheck.org/2012/06/how-much-is-the-obamacare-tax/

    all this really boils down to is George Will blathering about what he hopes is a fatal flaw… but it’s clear he’s working off something different than what Roberts actually said and Will does this by using the tired old tactic of not showing the full context.

    this seems to be a standard tactic of some these days…

    any tactic, no matter how disingenuous is the standard tactic by the loyal opposition AKA the right-wing-echo-chamber these days.

    • “Republicans will ferociously resist exacerbating the nation’s financial crisis in order to rescue the ACA.” — George Will

      Even if the “penalty” could be raised to just below the cost of the least expensive plan, the adjustment – since it would constitute a tax increase – would have to originate in the House of Representatives, which is currently controlled by the Republicans.

      Let us hope that they decline to bailout the insurance industry (so anxious to sell us out to the socialist left in the hope of securing a larger clientele through government coercion) and let this pig die of it’s own deformities.

      • Are you sure about the adjustment needing to be made in congress, Che? This thing is a tax for the purposes of keeping it constitutional, but not a tax for any other purpose. It’s a tax that’s not a tax. The worst kind of tax.

        Still, if the penalty is $1 less than the insurance plans, you’re still better off not buying insurance – and it is required to be less than insurance.

        I suspect this will end in single-payer or it will end the unholy sh*tfest of distortions and shifting in the current system and result in more free-market solutions. I don’t think these beast can survive.

      • Sounds to be that the tax is not determined by Congress but by the regulatory agency that administers the law.

        For instance, under Medicare many of the cost provisions are handled administratively not legislatively.

        ” But the penalty can never exceed the cost of the national average premiums for the lowest-cost “bronze” plans being offered through the new insurance exchanges called for under the law. We have no way of knowing what that average rate might turn out to be in 2014, but there is reason to think it could be quite high. For example, the total cost of a basic Government Employees Health Association plan currently offered through the Federal Employee Health Benefit program (the model for the state insurance exchanges) totals $9,459 per year for a family plan, and $4,159 for individual coverage.”

        this does not sound like a legislative action…..otherwise, you have them involved every time some cost changes and it’s not likely the law was set up that way…..

        the way the GOP is going these days, they’re going to lose the house in 2014 anyhow….

    • Although pertinent, I think the penalties aren’t the greatest of our worries. When you start picking the periphery of the act apart, the “You’ll have to read it to see what’s in it” issue, we’re finding that the legs this thing has grown are monstrous.

      The effect this is going to have on lower middle income earners is devastating…to say the least. We’re talking about 20% decreases in earnings! The definitions of a full-time employee are dramatically changing which is causing business owners to start running for the hills. I don’t know about you, but cutting by salaries 20% doesn’t seem like a good path to creating prosperity.

      Here’s an example of what employers are already doing just to maintain their businesses. Good, bad or indifferent, this is the reality:
      Part time employee currently averaging 35 Hours:
      Current Wage – $10.00
      Annual Hours – 1,820
      Annual Income – $18,200
      Same employee capped at 28 Hours:
      Current Wage – $10.00
      Annual Hours – 1,456
      Annual Income – $14,560

      The question of a penalty or “tax” is moot if a good percentage of the population is taking a 20% hit on their incomes. Disposable income goes right out the window when your income is cut this much. Could the solution for these folks be to find two jobs that equate to a 40 hour week? I just don’t see that happening.

      We’re just seeing how the act is going put the kibosh on any potential of the recovery that’s supposedly been happening since 2009. Yah…”Mission Accomplished”

  2. The younger healthier people who opt out of buying health insurance are people more likely to have an accident than an illness. Can health insurance be purchased in the ambulance on the way to the hospital after a car or motorcycle wreck?

    • In the event of an auto-accident they would be covered by their auto-insurance. Or, the auto-insurance of the other party, depending on who was at fault.

    • Pretty much.

      It doesn’t matter whether you are struck by illness or by a semi, the result is the same. After the event, you can buy “insurance” for which you cannot be turned down and for which you will not be charged more. In effect, Oblundercare ensures adverse selection.

      I’ve heard from some people in the health insurance industry that insurance companies are coming up with new products because they don’t expect anyone to actually buy insurance.

      • re: adverse selection…

        is that really true in a universal health care system?

        it just become one giant community rating, right?

        ultimately the GOP is swimming upstream…

        if they are perceived as blocking and more gridlock, they likely will lose in 2014 – then what?

        • It’s not a universal health care system unless everyone is in it automatically. As it stands, it’s a mandated insurance system where the cost of complying with the mandate is higher than the penalty for not complying – until an individual needs significant healthcare.

          Well, except that it’s not really insurance. With guaranteed issue and very little premium difference for people with greatly different risk, the actuarial aspect of insurance is almost completely eliminated. When the effective use of actuarial calculations is forbidden, it’s no longer insurance.

          • re: “no really insurance”

            it’s not market-based insurance for sure.

            but what would you call Medicare? Remember Medicare Part B is voluntary not mandated but most buy it anyhow and it is community rated and guaranteed issue.

            One of these things that Medicare has done – with the fact that people get regular care and screening, preventative/prophylactic care is that, in general they are healthier, and not chronically sick. It’s true that in the last months of life god-awful costs are racked up though.

            but in general that’s part of the premise behind larger pools that get regular care as opposed to little or no care then urgent, heroic care.

            Young people in the US don’t get insurance in part because the young just don’t see the need for insurance, even for their cars unless it is mandated but they also know that they’ll never be turned away at an ER if they are really sick. That also effects “adverse selection”.

      • I was not aware insurance could be bought after the injury or illness by the law. So, pay the penalty for not having insurance and just buy the insurance as needed?

          • walt-

            in fact, that is EXACTLY what happened in massachusetts.

            people could literally break their leg and get insurance by phone while waiting in the ER wait room.

          • And I thought I was saving all the money I could by analyzing all of my deductibles and self insuring part of my risk.

          • Don’t bother, Walt. Your risk has been socialized. Of course, the reality is that these promises are unreliable and that just makes wasting money on insurance a bad idea. You are better off saving and investing that money so that you can pay for the care that you will need (which is not necessarily the care that insurance companies will pay for – and likely not) when you need it.

        • Of course, what you’re buying is no longer insurance in any sense of the word and I think the product you will be offered will reflect that.

        • Actually even had the mandate been struck down, one could have finessed the rules such that open enrollment periods happened every 5 years after the intial one during age 18-26 for example. Futher there could be a penalty for late enrollement like medicare part B. Now yes there does exist post event insurance, the MGM Grand bought some after the fire, and it made sense since it was in that case a bet on the legal system and how long it would take the cases to settle. If you have enough money (where you don’t really need the insurance such as Bill Gates, you could buy almost any legal policy from LLyods at a nice fat premium.

  3. “…the penalty can never exceed the cost of the national average premiums for the lowest-cost “bronze” plans being offered through the new insurance exchanges.”

    So, if the penalty is $1 less, why can’t the government spend $1 to buy you the insurance?

  4. i think this argument, while cute, mostly misses the boat.

    1. if the tax is close enough to the cost of a policy, you’ll just carry the policy as it is easier and upgrade if you need somehting that is not covered. i have a feeling that a revenue hungry government will start cranking this tax rate up right away and vilify those who pay it as “not paying their share”.

    2. it misses one of the more insidious aspects of obamacare which, i think, is really the whole point. obamacare is a trojan horse for single payer. it was never intended as a permanent solution. the folks that passed it knew that full well and even got caught admitting it when they did not realize mikes were on if memory serves.

    the 2 key aspects of obamacare from this persepctive are the extremely broad mandate for care and acceptance of applicants combined with a “Cadillac” plan tax.

    the former is designed to make rates soar. the latter provides a sudden 40% price hike if you price goes over X.

    this is like pushing you toward a cliff with a bulldozer and then blaming you if you fall off.

    it’s DESIGNED to break the system. note that there are no cpi price escalators built into the price set for the cadillac penalty.

    they just need to wait. cpi would do this on it’s own even without all the new coverage requirements that will do most of the work right there.

    the whole point of obamacare is to break the system through impossible regulation and then claim a “failure of markets” and push for single payer. the US citizenry was not ready to vote for single payer so obamacare is designed to inflict pain and break the existing system to
    bring them around. it’s a stunning display of machivellian fascism.

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