Sunday, March 28, 2010

Is the health care insurance mandate unenforceable?

The federal Joint Committe on Taxation issued a report last week which calls into serious question whether the insurance mandate in the new health care legislation is enforceable under the law:
Individuals who fail to maintain minimum essential coverage in 2016 are subject to a penalty equal to the greater of: (1) 2.5 percent of household income in excess of the taxpayer’s household income for the taxable year over the threshold amount of income required for income tax return filing for that taxpayer under section 6012(a)(1);67 or (2) $695 per uninsured adult in the household. The fee for an uninsured individual under age 18 is one-half of the adult fee for an adult. The total household penalty may not exceed 300 percent of the per adult penalty ($2,085). The total annual household payment may not exceed the national average annual premium for bronze level health plan offered through the Exchange that year for the household size.

This per adult annual penalty is phased in as follows: $95 for 2014; $325 for 2015; and $695 in 2016. For years after 2016, the $695 amount is indexed to CPI-U, rounded to the nextlowest $50. The percentage of income is phased in as follows: one percent for 2014; two percent in 2015; and 2.5 percent beginning after 2015. If a taxpayer files a joint return, the individual and spouse are jointly liable for any penalty payment.

The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code.68 The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
Morgen Richmond at Big Government believes this is really bad news for advocates of the mandate and the bill in general:
Because without an effective mechanism of enforcing the individual mandate, the entire system is likely to collapse. (The individual mandate is the “third leg of the stool” as many a liberal has been pointing out for months.) Given that the bill also bans insurance companies from denying coverage based on pre-existing conditions, WHY WOULD ANYONE OBTAIN INSURANCE COVERAGE PRIOR TO NEEDING IT? This was already going to be a problem with the relatively low cost of the penalty, but take away any meaningful enforcement of it and it is a complete and total joke.

The net result will be an ever increasing shift of healthcare costs on to those who remain in the insurance system (or to tax payers), and possibly even the bankruptcy of the insurance industry. Given all the double-talk the past year over the public option, and the demonizing of private insurers, it is hard not to wonder whether this was by design. But let’s give our Democratic friends the benefit of the doubt, in which case this represents an inexcusable level of incompetence from the people we have just entrusted with overseeing one-sixth of the economy. Nice job guys.
Daniel Foster at the Corner see the potential for "a pretty big moral hazard."

Ya think?


  1. First Republicans wanted a mandate, now they are against it. There is no need to hire 10,000 new IRS employees because the mandate can't be enforced. So the private health insurance cartel does not get 30 million new customers. Apparently GOP Inc didn't read the bill. Finally working Americans got some health insurance reform.

  2. So much for state law suits stating "health care reform as unconstitutional". It seems the roaring tsunami of indignation and outrage has been reduced to a drippy faucet.
    With this now behind us, perhaps GOP Inc can use its time searching for the "Death Panel" sections of the bill.

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