Why Is The Individual Mandate Important For Obamacare To Succeed?


Click the graphic for a larger view.
Click the graphic for a larger view.

Starting in January, Obamacare mandates that every American must have government approved health insurance or pay a “shared responsibility payment” if they are not specifically exempted.

If you have group health insurance at work, Medicare, Medicaid or some other form of government health insurance, you do not have to do anything during the National Open Enrollment.

You also are allowed to delay buying an Essential Benefit Plan until later in 2014 if you already have a Qualifying Health Plan.  If you live in one of the 34 states that have relied on the Department of Health and Human Services, it will give CMS longer to identify and correct problems with their untested computer systems if you elect to buy your health insurance through the new health insurance exchanges.

However, if you are one of the millions of Americans who do not currently have health insurance or have a health insurance plan that does not qualify under Obamacare, you have no choice but to buy an Essential Benefit Plan for 2014.

If you do try to avoid Obamacare’s Individual Mandate, without and exemption from the Secretary of Health and Human Services, you will be required to pay the “Shared Responsibility Payment” a.k.a. “penalty” with your taxes in 2015.

SUPREME COURT RULING

Before you scream, “That’s unconstitutional!” remember that the U.S. Supreme Court ruled that congress could impose the mandate, provided it was understood to be a tax.

In his “opinion” on the topic, Chief Justice Roberts said, “The most straightforward reading of the individual mandate is that it commands individuals to purchase insurance. But, for the reasons explained, the Commerce Clause does not give Congress that power.  It is therefore necessary to turn to the Government’s alternative argument: that the mandate may be upheld as within Congress’s power to “lay and collect Taxes.” Art. I, §8, cl. 1. In pressing its taxing power argument, the Government asks the Court to view the mandate as imposing a tax on those who do not buy that product.”

In other words, the “Shared Responsibility Payment” is an additional tax to those people who elect to go without health insurance.

Although President Obama and his supporters swear that it is not a tax, the U.S. Supreme Court ruled that the only way for the Individual Mandate to be considered constitutional is if it is viewed as a tax.

Supporters of Obamacare are correct when they argue that without the mandate for healthy Americans to buy health insurance a vicious circle will occur in the health insurance marketplace.

THE RESULT

Many Americans still feel like the Individual Mandate is a government intrusion on their personal freedoms.  Whatever their personal feelings are do not matter.

All the legal challenges have been made that could be made.  The decision of the U.S. Supreme Court ends the arguments, for now.  As long as we have a President who vows to veto any bill that arrives on his desk that would repeal the PPACA, the Individual Mandate is law.

Those who do not buy government approved health insurance are breaking the law.

Here is the dilemma that had to be faced.  As health care costs to treat sick Americans continue to increase, the price of health insurance will increase.  The result is that fewer healthy Americans will pay the inflated prices.  That will result in health insurance companies raising rates even higher so they can collect enough money to pay doctors and hospitals.

The above phenomenon is called, “Adverse Selection.”  The insurance companies told the politicians that the only way to avoid Adverse Selection would be to require all Americans to buy health insurance.

While the health insurance lobby is quick to complain about the new taxes that are assigned to health insurance companies, which will be passed down to policy-holders, they are comparatively quiet in their protest of the Individual Mandate that will require all Americans to pay them.

THE ARGUMENT

The politicians and other supporters of the Individual Mandate, including insurance companies, argue that in order to keep the premiums lower for sick Americans, the government must force healthy Americans, who only pay for  hospitals and doctors when they need them, to pay what they feel is their “fair share.”

Whether this is morally right or wrong is immaterial.  It is the law of the land.  Unless a miracle happens in the next 9 weeks, the effects of the Individual Mandate start on October 1, 2013.

This makes me wonder if Americans are willing to sell their individual freedoms for government promises.

On October 1, 2013, the new health insurance exchanges (HIX) will open for business.  Many Americans live in states that have opted to build and sponsor their own HIX plans.  Most of those exchanges have already been tested.  There should be few problems with those computer systems.

Many more Americans are going to have to rely on Federally Facilitated Exchanges (FFE).  These marketplaces are not completed, at this time.  Although the Obama Administration promises that they will be ready by October 1, there is a difference in opinion on how effective they will be.

Many IT experts say that technology as complex as the HIX will need to be tested.  Even President Obama admitted that there will be “bumps along the way.”

If you want to avoid the computer delays that are expected in the Federally Facilitated Exchanges, there are a couple of strategies that you can use.

  1. Delay getting your Essential Benefit Plan until later in 2014 after CMS has had time to identify and correct computer problems.  If that is what you elect to do, you will need to get a Qualifying Health Plan with an effective date in 2013.  You will not be required to buy an Essential Benefit Plan until your Qualifying Health Plan renews in 2014.
  2. You can buy your Essential Benefit Plan outside of the HIX.  The politicians imply that the only option Americans will have to buy mandated health insurance will be the HIX.  THAT IS NOT TRUE!  The HIX is the only option for people who want to claim a “subsidy.”  If you do not qualify, or want a government subsidy, you will be able to buy your Essential Benefit Plan directly from an insurance company and avoid the frustration and extra expenses associated with plans bought through the HIX.

SUMMARY

I am not convinced that either politicians or the press want you to know that you will have more options than what they tell you about.   (I have definite opinions on why that is but I will keep them to myself, today.)

Regardless of their motivations, or mine, I urge you to ignore all the political propaganda that is floating around at this time in history.

Take your time.  Ignore what the politicians and media say.  Spend the time to find out what options are available before you buy your mandated Essential Benefit Plan.  Remember, while the Individual Mandate is important to Obama and his supporters, you are buying health insurance to protect you and your family.  Don’t allow some politician in D.C. to tell you the best way to protect you and yours.

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