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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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Affordable Coverage Choices for All Americans

That’s the title of Subtitle E.

And, because this is the Federal Government, affordable coverage choices start with taxes and subsidies. This shouldn’t surprise anyone that has taken any economics, as the primary tool of a government has to affect actions in the economy is through taxes and spending.

This particular section – 1401 – discusses a tax credit, given against a tax, for premium assistance. What the heck?!?

First – this implies that there is premium assistance for those who are unable to afford their health insurance premiums. And there is. Since insurance is mandated, the Act recognizes that not all people will be able to afford the premiums, so it gives some people money back. This applies if your household makes over 133% of the poverty level. If it makes less – you are probably (at least under the Act) eligible for Medicaid. There is some chance that your particular state will decide not to expand Medicaid coverage to people who make between 100% and 133% of the poverty line, or who don’t have dependent children. If your state doesn’t expand this coverage, I suggest you think about why, and possibly, how to move to state that does.

The premiums in the Exchanges, which are what the rebates are for, are also related to the color of the plan (remember the colors of the plans back in this post?) – with the amounts tied into the second lowest cost for a silver plan. Confused yet?

If you choose to buy insurance from your employer, rather than through an Exchange, and that health care is deemed to be meeting the essential minimal coverage guidelines, and to be affordable, or you receive health care under a free choice voucher (a later section) then you aren’t eligible for the premium assistance. It is up to you to decide if your health insurance would be cheaper through your employer, or through an Exchange.

So – because you received money, that’s considered income. To avoid having people taxed on this “income” the IRS gives you a tax credit. That’s the Feds for you – if there is a complicated way to do something – that’s what they choose.

There are provisions in this section to review this tax credit, and the insurance plans in general, after 5 years, to see if it met the purported goals of increasing health insurance coverage without being too burdensome on the populous. If the history of the US is any indication, it will be unlikely that a tax credit will get eliminated, but it’s possible.

You might be asking yourself, why all of this complicated tax credit, premium assistance, etc, is part of a Reform Act intended to make getting health care easier? Well – that’s because it isn’t precisely intended to make getting health care easier. If that were the goal, it would have set up a single payer system. Single payer systems, which have been referred to as socialist, the work of the devil, and sensible, are present in the US, but only if you are old, or a veteran. Otherwise, you get insurance. So the PPACA is there to make getting insurance easier. It’s also good, if you like the PPACA, that they picked a taxation system, rather than trying to implement a mandate strictly through the use of the Commerce Clause of the Constitution. The Opinion that supported the constitutionality of the individual mandate made it clear that they wouldn’t have done so had it not been a tax matter.

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