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Constant changes undermine health law’s efficacy

Katherine Restrepo Contributing Columnist

April 21, 2014

By the looks of it, the individual mandate is almost devoid of life. This tax once was viewed as the centerpiece of the federal health law. Without this critical element of government coercion — imposing a tax on people who refused to purchase acceptable insurance coverage — Obamacare could not work to its full capacity.


Now that the initial enrollment period to #GetCovered officially has ended (more or less), those who go uninsured for more than three consecutive months in 2014 may have to pay the greater of $95 or 1 percent of annual income. If someone does forgo health insurance for longer than a three-month window, the penalty amount will be prorated for the amount of time uninsured.


The 1 percent penalty applies to those who file federal taxes, including the deductions of $10,150 for an individual, $13,050 for head of household and $20,300 for married couples filing jointly.


So an individual making $50,000 a year who either refuses to purchase health insurance or has coverage that does not meet government standards would have to pay a penalty/tax of $398.50. ($50,000 - $10,150 = $39,950 X .01 = $398.50).


The Kaiser Family Foundation provides some more examples and details on the penalty here. While the penalty does increase in years to come, consider it an annoying tax the feds have imposed at a steep discount for the time being.


And due to the lengthy lists of penalty exemptions and hardship exemptions, the individual mandate really lacks muscle. Exemptions apply to people who do not file federal taxes; whose premiums for the lowest-cost compliant plan available exceed 8 percent of their income or who do not have health insurance for less than three months at a time.


And there are additional “hardship” exemptions. From healthcare.gov, those who don’t have to buy an Obamacare plan include individuals who would have been eligible for Medicaid if their state opted for Medicaid expansion; are homeless, were evicted, or had utilities turned off due to lack of payment; are victims of domestic violence; experienced the death of a “close family member;” had medical expenses that were unable to be paid over the last 24 months or experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.


But wait. There’s more. The turbulent rollout of state and federal health insurance exchanges last October prompted the Obama administration to add two more hardship exemptions. You will not have to pay a fee if your individual insurance plan was canceled and you believe other marketplace plans are unaffordable or if you’ve had difficulty obtaining health insurance in some way.


Although Blue Cross and Blue Shield of North Carolina has heeded the Obama administration’s request to reinstate canceled policies for another year and perhaps even longer, the those final two exemptions are being enforced on the honor system — if a patient says she’s had trouble, then insurers have to accept that explanation.


The point of the mandate is to get people to sign up for a federally qualified health plan on Obamacare’s exchanges. It is an attempt to have young, healthy individuals sign up for these plans and offset the cost of covering those with pre-existing conditions in the individual market insurance pool. It is an attempt to reduce the number of uninsured.


The administration fancifully thought that the majority of people would steer themselves away from Uncle Sam’s miniscule tax (for the first year at least) and purchase an expensive Obamacare plan built off government price controls. But the administration’s constant changes to the law continue the gradual erosion of the individual mandate’s efficacy.


Katherine Restrepo is health and human services policy analyst for the John Locke Foundation.