Best laid plans

So, we have come to this at last. The new section of the PPACA we are looking into is Subtitle F – Shared Responsibility for Health Care. Part I addresses individual responsibility. Specifically, the responsibility to maintain a minimum essential coverage of insurance, section 1501.

Section 1501 starts out with a long discussion of why insurance is interstate commerce, talking about how expensive it is, and how this will insure almost all Americans. It notes that in Massachusetts, this same type of requirement actually increased the number of employers who offered employer-based coverage. It doesn’t mention who was governor when that happened – anyone remember? It talks about the economic impact of disease and shortened lifespan, the cost of providing care to those without coverage, and reminds us that the Supreme
Court already said that insurance was subject to regulation under the interstate commerce class.

All of that was, of course, intended to be part of the argument before the Supreme Court (because, again of course, this issue would appear before the Court) that this Act was constitutional because of the interstate commerce clause. Which the Supreme Court promptly said “NOPE” to when it made it there before it was even fully enacted. However, you shouldn’t fear – because Congress chose the IRS to be the people in charge of handling all of the penalties for not following the mandate, the Act, or at least most of it, was declared constitutional under the seemingly endless power of the Federal government to tax and spend. Which, if you think about it, is all they are really supposed to do.

What does the Individual
Mandate actually do? Well, it amends the Tax Code, specifically section 5000A, to say that every person, in every month starting January 1, 2014, has to maintain minimum essential coverage for their health expenditures. If they don’t, they are subject to a penalty on their tax return. I guess this means we get to learn new tax forms. Oh boy. The penalty is either calculated by a formula given in this section, or by the amount they would have had to pay for bronze level coverage (remember the colors!) in an Exchange, whichever is LOWER.

The penalty formula is per month, per person, and can be a flat dollar amount or percentage of income, whichever is GREATER. The flat dollar amount is $695, although there is a phase in period where it is $95 in 2014, and $325 in 2015. The flat amount is capped at 300% of total dollar amount, and is subject to cost-of-living increases. The percentage of income is also phased in – 1% in 2014, 2% in 2015, and 2.5% thereafter.

Let’s do an example.

Assume you are the sole income, and you make $50,000 a year, with 2 adults and 2 kids. If you didn’t have any insurance, then the most you would be required to pay, in 2016, would be $2085. If there were a plan that insured you for less, then you would be charged that amount, instead. But then, if there were a plan that would cover you for that – why didn’t you buy it?

Exemptions:

This doesn’t apply at all to people that are members of a recognized religious sect; a member of a health care sharing ministry (remember those?); the Not Lawfully Present (you know who you are); and people in jail. It also doesn’t apply if you can’t afford coverage, which is defined as being charged more than 8% of your income per month (also alterable with changing conditions) for health insurance, whether offered through an employer, or through the Exchange (after accounting for the credit); people who make so little they don’t have to file taxes at all; members of Indian tribes; any month where you weren’t covered, but the total number of months you weren’t covered was less than 3 consecutive (think changing jobs); or anyone who gets a hardship exemption through HHS.

Minimum Essential Coverage is defined as: Medicare, Medicaid, CHIP, TRICARE, the VA, Peace Corps health insurance, eligible employer-sponsored plans, individual plans, grandfathered plans, and other plans, such as the plan of being outside the US (no really – that counts!). So – that’s a lot of plans.

They can’t criminally charge you for not paying the penalty, and they can’t take your property either. I suppose they will write you sternly worded letters.

I haven’t yet noted that we are now required to purchase broccoli. I always wondered – do they mean we have to consume it too, when we are required to purchase it, or just buy it? Clarity, people, clarity.

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