We are a little less than a year away from Obamacare’s individual mandate becoming the latest tax you will be forced to deal with and already there is trouble in the air with whether or not the law will work.
The mandate says that you must purchase health insurance or else face a fee. That fee, which the Supreme Court ruled was a tax when it upheld the law as constitutional last summer, is considerably smaller than the cost of purchasing health care.
In 2014, the first year that the tax will be collected, the tax is $95. It will increase to $325 or 2 percent of your income in 2015. In 2016, it will increase to its highest amount of $695 or 2.5 percent of your income. Even at its highest point, the tax is cheaper than health care in some cases.
And that fact is scaring many of the people that designed and are in the process of implementing this fatally flawed system.
For Obamacare to work as they claim it would, many more healthy people than sick people need to be paying health care companies for coverage. The more money healthy people spend on coverage makes it possible for the companies to cover the sick.
But many of the uninsured healthy people would probably opt to pay the tax, which is lower than the cost of coverage. This is causing many health care providers and those in the Obama administration to worry that there is not enough incentive to take part in the new system, the result of which could be increased taxes and more fees as well as a spike in the cost of health care coverage.
Many opposed to Obamacare warned about this result. The incentive structure created by such a system would only result in ever increasing penalties to ensure that enough healthy people subsidize the unhealthy people.
As the masterminds behind this system are discovering — even before the system is up and operational — they have no clue how to get the healthy people to participate without increasing the taxes for abstaining from purchasing health care to a higher rate than the cost of health care coverage.
What this whole failure before launch exposes is that incentives matter and that government does not fully comprehend that simple fact. Creating a system where people are forced to purchase a product by penalizing them if they don’t — and the penalty is cheaper than buying the product — it’s odd that they would just now realize that people will pay the penalty.
After all, Obamacare forces insurance companies to insure those with pre-existing conditions, so you only have to buy health care when you need it. It makes little sense to purchase health care when you can go the cheaper route of purchasing only when you need it.
Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center said the following to Politico about the incentive structure that the government faces when trying to sell ObamaCare to the young and healthy: “If you have a positive outreach campaign with the message, ‘Here they are, here are the exchanges, here’s affordable coverage, come and get it.’ Isn’t that more effective than, ‘Come and get it or we’re going to come get you?”
We are about to find out which route is more effective as the government attempts to make Obamacare a success. It is much more likely that they will use the tax system to correct their mistake than use a message of come and buy a product you don’t yet need.
So get ready, Obamacare’s first failure won’t cost the government money, just you as the taxes are increased and the cost of health care rises.
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