Opinion: Daily Journal

Are We Witnessing the Individual Mandate’s Demise?

By the looks of it, the individual mandate is almost devoid of life. This tax was once viewed as the centerpiece of the federal health law. Without this critical element of government coercion, Obamacare could not work to its full capacity.

Now that the initial enrollment period to #GetCovered has for the most part officially ended, 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. The deductions are listed as such:

  • $10,150 for an individual
  • $13,050 for head of household
  • $20,300 for married couples filing jointly

So if an individual makes $50,000 a year and either refuses to purchase health insurance or his/her health insurance does not meet government standards, the penalty amount would be $398.50.

EX: ($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 pertain to those 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.

Those are just a few of the penalty exemptions. Below are some hardship exemptions from healthcare.gov:

  • Individuals who would have been eligible for Medicaid if their state opted for Medicaid expansion
  • Domestic violence victims
  • Family death
  • You had medical expenses you could not pay in the last 24 months
  • You 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 has prompted the Obama administration to add two more hardship exemptions:

  • If your individual insurance plan was canceled and you believe other marketplace plans are unaffordable
  • 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 former exemption addendum is operating on a self-attested honor system. Meanwhile, the latter implies the accessibility problems individuals dealt with when attempting to shop and select an Obamacare plan on the exchange website.

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 the young, healthy population sign up for these plans to offset the cost of those with pre-existing conditions in the individual market insurance pool. It is an attempt to reduce the number of uninsured.

And 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 only continue to undermine the individual mandate’s efficacy ever more.

Katherine Restrepo is Health and Human Services Policy Analyst for the John Locke Foundation.