Understanding the “Individual Mandate” and Stopping the Misinformation Campaign Against It.

Crossposted from ThisIsOurTime Blog

PhotobucketIn this article, I compiled a number of key benefits of the Affordable Care Act (ACA) or ObamaCare which included many benefits that are currently in effect and helping many Americans today. What I did not included was things that will be in effect in 2012 and beyond. While I am working to compile the benefits that will take effect in the future, there is one element (the Individual Mandate which will take effect in 2014) that I feel has gotten a bad rap as it has been used to undermine ACA and scare many Americans because it requires penalty if a qualified individual does not buy insurance in the exchange.

I will explain what the Individual Mandate is, its benefits to controlling the cost of health care and its central principle, how the individual mandate works, the penalties for being without health insurance, the process to determine who would qualify for Medicaid or Government Subsidies and what it means if the individual mandate is repealed by the Supreme Courts but the rest of the Affordable Care Act survives.

What is the Individual Mandate and the center of its principle?

As part of the Affordable Care Act (ACA), one of the changes to the health insurance system is to guarantee access to coverage for everyone regardless of pre-existing health conditions. It used to be that insurance companies were able to price-discriminate based on individual health risks and prevent exceptionally risky people from being insured in order to guarantee that they have a high profit margin. This practice has left over 45 million Americans out of the health care system while the cost of health care is skyrocketing at about 18% of our GDP.

What ObamaCare has done is change the discriminatory practices of insurance companies by mandating and insisting that those high risk people, mostly people with pre-existing conditions, must be allowed to purchase insurance and that their premiums will not be determined by an individual’s risk factors but by the community in the pool risk factors. If all people bought insurance, the risk factor is diversified while coverage for all is provided and premiums are regulated to be affordable as part of ACA. The Individual Mandate basically will requires everyone to buy into a health insurance plan or they will have to pay a penalty.

The basic principle for mandate centers around (1) fairness to Americans who are fearful that they will have to declare bankruptcy if they are sick or have major medical condition; (2) eliminating wasteful cost-shifting to those privately insured where the cost of the littlest item go off the roof to cover the cost for those uninsured ("free riders") who go to emergency care; and (3) reduces healthier folks from opting not to carry insurance as was the case in the past whereby those with poorer health will be left to subsidize the cost of health care, thus see major premium increases year after year and a lose of coverage when the premium becomes unaffordable.

How the individual mandate works:

The requirement to buy coverage through Exchanges under the Affordable Care Act begins in 2014. The following steps explains how the individual mandate works and if penalties would apply to you.

Step 1: If you belong in the following category (see below), there is no penalty for being without health insurance:

  1. You are part of a religion opposed to acceptance of benefits from a health insurance policy.
  2. You are an undocumented immigrant.
  3. You are incarcerated.
  4. You are a member of an Indian tribe.
  5. Your family income is below the threshold requiring you to file a tax return ($9,350 for an individual, $18,700 for a family in 2010).
  6. You have to pay more than 8% of your income for health insurance, after taking into account any employer contributions or tax credits.

Step 2: If Step 1 does not apply to you and if you are insured for the whole year through a combination of any of the following sources, the requirement to have health insurance is satisfied and no penalty is assessed.

  1. Medicare.
  2. Medicaid or the Children’s Health Insurance Program (CHIP).
  3. TRICARE (for service members, retirees, and their families).
  4. The veteran’s health program.
  5. A plan offered by an employer.
  6. Insurance bought on your own that is at least at the Bronze level.
  7. A grandfathered health plan in existence before the health reform law was enacted.
Step 3: If Step 1 and 2 do not apply to you, it means you are without health insurance and you will be charged penalty for being without insurance.

How the penalty works:

The following penalties are pro-rated by the number of months without health insurance while there is no penalty for a single gap in coverage of less than 3 months in a year.

In 2014, the penalty for being without health insurance is $95 per adult and $47.50 per child (up to $285 for a family) or 1.0% of family income, whichever is greater.

In 2015, the penalty for being without health insurance is $325 per adult and $162.50 per child (up to $975 for a family) or 2.0% of family income, whichever is greater.

In 2016, the penalty for being without health insurance is $695 per adult and $347.50 per child (upto $2,085 for a family) or 2.5% of family income, whichever is greater.

As of now, there is no know method to enforcing the penalty if you don't buy insurance and you don't pay the penalty. In fact, the law specifically states that no criminal action or liens can be imposed on you but I am certain that will change. I would also think that if a large numbers of people continue to choose not to enroll and the cost of premiums increase, the chance to revise the low penalties and increased enforcement are inevitable.

Who qualifies for Medicaid or Subsidies?

There is a lot of assertion and misinformation about how the individual mandate is going to cost the poor and working Americans in premiums when in fact it helps all individuals and families with incomes at or below 133% of the federal poverty level ( 16% or 50 million Americans) making them eligible for Medicaid. Further, for individuals above the federal poverty level, subsidies will be available for people purchasing coverage on their own in the Exchange (not through an employer).

This means, if you are a single individual, 40 years of age earning $15,250 a year in 2014, which would be at 133% of the federal poverty level, you will not pay any premium for health insurance as Medicaid will kick in to provide your health care. Likewise, a policy holder, age 40 and a family of four making $31,150 will be considered at the 133% of the federal poverty level, which means the family will be subsidized to obtain health insurance through Medicaid.

The other side of the equation is how much will the Affordable Care Act provide premium assistance to an individual/family who earn above poverty level and how much would be the mandated premium the person/family has to pay for coverage in Exchanges if eligible for a subsidy? Using the Kaiser Family Foundation Health Reform Subsidy Calculator, for an individual, 40 years of age earning $35,000 a year in 2014, the unsubsidized health insurance premium would be $4,500 for the year. Off that, the individual actual required premium payment would be $3,325 ($277/month) while the person receives a Government tax credit of $1,175 ($4,500 - $3,325). However, most importantly, the maximum out-of-pocket costs the person will be responsible for in 2014 (not including the premium) is $4,167. Any health care expense incurred above this amount will be subsidized by the insurance exchange plan regardless of the amount.

Same scenario but now let's assume the individual is 60 years of age earning $35,000 a year in 2014. The unsubsidized health insurance premium at that age and earning level would be $10,172 adjusted for age relative to a 40 years of old. In this case, the individual actual required premium payment would be $3,325 ($277/month) while the person receives a Government tax credit of $6,847 ($10,172 - $3,325).

Furthermore, for a family of four (40 years of age policy holder) above the poverty level with an annual income of $50,000, the unsubsidized health insurance premium would be $12,130 in 2014. However, because of the income level the actual family required premium payment would only be $3,385 ($282/month) and a $8,745 tax credit which covers 72% of the overall premium. Keep in mind that the maximum out-of-pocket costs the family will be responsible for in 2014 (not including the premium) is $6,250 regardless of the amount of health expense they incur.

Whereas, for a family of four (60 years of age policy holder) above the poverty level with an annual income of $50,000, the unsubsidized health insurance premium would be $24,042 in 2014. However, because of the income level the actual family required premium payment would only be $3,385 ($282/month) and a $20,657 tax credit which covers 86% of the overall premium. Keep in mind that the maximum out-of-pocket costs the family will be responsible for in 2014 (not including the premium) is $6,250 regardless of the amount of health expense they incur.

However, there is a threshold on how much one could qualify for a subsidy. For example, a single individual making $46,030 and a family of four making $93,700, both policy holders at age 40, would not be qualified to receive subsidies as they will be required to purchase into buying health care insurance that will cost them $4,500 and $12,130, respectively. Keep in mind that health insurance premiums bought through Exchanges would vary by age. According to the Congressional Budget Office, it "estimates that the national average annual premium in an Exchange in 2016 would be $4,500-5,000 for an individual and $12,000-12,500 for a family for Bronze coverage (the lowest of the four tiers of coverage that will be available).

The effect of a Supreme Court decision on Individual Mandate:

Right wing effort to undermine the President and reverse the progress President Obama's has made is not something new to most of us as it has been the Republican's motto since the day President Obama was inaugurated. The campaign to repeal ACA to take away health care insurance from 30 million Americans is one of the many campaign promises many Republicans have made and indeed have been full force to repeal it from the moment the most important Health Care legislation in half a century was passed in 2010. Today, we are at a crossroad where the effort to have one of the most important part of the legislation, the Individual Mandate that tries to control health care premiums, is under heavy Republican partisan attack as we are faced with their effort to make it unconstitutional using a Republican majority US Supreme Court .

As we all know, the Supreme Court has taken the case and is due to decide this summer on the constitutionality of the Individual Mandate after a 2 and 2 lower court decisions for and against its constitutionality. If the decision in a Republican controlled SCOTUS is to have the Mandate be dropped calling it unconstitutional, there is going to be a huge concern about whether the Affordable Care Act's other provisions can remain intact if the mandate is ruled unconstitutional and/or dropped by the court's decision.

In fact, according to a new study, it has concluded that dropping the individual mandate would result in overall lower health spending but increases in health insurance premium costs. A report by Sam Baker at The Hill's Healthcare Watch Blog reports: Premiums could rise 25 percent without insurance mandate:

Insurance premiums would rise by as much as 25 percent if the healthcare law is implemented without an individual mandate, according to a new analysis from the Robert Wood Johnson Foundation.

[...] Without the mandate, according to the Robert Wood Johnson analysis, costs would rise and fewer people would be insured.

The healthcare law establishes state-based exchanges for individuals and small businesses to buy coverage. In states where participation in the exchange is high, the loss of the mandate would raise premiums by about 10 percent, according to Thursday's analysis. Individual policies would get about 20 to 25 percent more expensive in states where fewer people use the exchange.

Premiums would rise because young, healthy people would be less likely to buy insurance. The purpose of the mandate is, in large part, to force healthy people into the system, offsetting the cost of guaranteeing coverage to people with pre-existing conditions.

Politico Pro also reports about the effect of dropping the individual mandate:
What would life be like if the individual mandate goes but the rest of the Affordable Care Act survives? Something like this: Overall spending would be lower, but individual premiums would be higher — and maybe a whole lot higher. That’s the conclusion of a new analysis by the Urban Institute, released Thursday. The analysis, sponsored by the Robert Wood Johnson Foundation, modeled what would happen to spending levels and insurance premiums if the mandate goes away — which could happen if the Supreme Court strikes down the mandate this summer but lets the rest of the law go into effect.
While things as of now are in the hands of the Supreme Court of the United States, Northwestern law professor Andrew Koppelman has a long essay making the case about why the Affordable Care Act and the Individual Mandate is constitutional and how the argument to the contrary is just a complete BS adding that his faith in this Supreme Court to interpret the law has diminished considering their ruling that Corporations are "The People" in the Citizen United ruling. His conclusion:
What will the Supreme Court do? There is no nice way to say this: the silliness of the constitutional objections may not be enough to stop these Justices from relying on them to strike down the law. The Republican Party, increasingly, is the party of urban legends: that tax cuts for the rich always pay for themselves, that government spending does not create jobs, that government overregulation of banks caused the crash of 2008, that global warming is not happening. The unconstitutionality of health care reform is another of those legends, legitimated in American culture by frequent repetition.
We all know that the individual mandate lawsuit in the Supreme Court is a political ploy by teaparty Republicans to stall health reform. Several lawsuits have been thrown out of the courts because many judges including most conservative judges don't see the merit for calling the individual mandate unconstitutional. We shall see which way the SCOTUS will go.

The Bottom Line:

This notion that the mandate is a terrible tax on hardworking Americans who don't want to purchases insurance has been a Right Wing teabagger talking point to discourage and demonize the Affordable Care Act (ObamaCare) and in the process undo everything President Obama had done. I think to try to undo something this important knowing it affects millions of Americans is un-Americana, unpatriotic and totally dishonest.

We as consumers have an option and the final say as to what we want to do -- to pay into a reasonable health insurance that will give us quality care or pay a modest fine for having free access to emergency care when we get sick. I would bet those who feel healthy would choose the later but that means people who will have health insurance will be only folks that develop medical condition (thanks to ACA that denial of insurance for pre-existing conditions is now illegal) . In that world, the greater portion of the population buying insurance on the exchanges are sick, and that means the average premium will continue to be extremely expensive. However, the mandate is design to bring healthy people into the pool, allowing them to have periodic checkups at their leisure which they probably wouldn't be able to if they didn't have insurance, which keeps average costs down and ensures that people don't become "free riders" relaying on the system by letting society pay when they break a leg or get hit by a bus. All I can say is that I don't want to be a "free rider" if I have an option and I do. For that, I thank President Obama's Affordable Care Act.

For more on the Affordable Care Act benefits, those that have been implemented to date, visit here.

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