Posts tagged ‘insurance mandate’

Obamacare Mandates Delayed -- And That Other Shoe

Well, it certainly comes as happy news to this correspondent that the Administration announced this week it will delay health insurance mandates on businesses.  Our company has spent a ton of time since last November trying to minimize the expected cost of the mandates -- the initial cost estimates of which for our business came in at three times our annual net income.  Our preparation has been hampered by the fact that the IRS still has not finalized rules for how these mandates will be applied to a seasonal work force.  Like many retail service businesses, we have studied a number of models for converting most of our work force to part time, thus making the mandates irrelevant for us.

I know this last statement has earned me a fair share of crap in the comments section as a heartless capitalist swine, but the vitriol is just absurd.   Many of the folks criticizing me can't or don't want to imagine themselves running a business, so let's say you have an annual salary of $40,000.  Now, on top of all your other expenses, the government just mandated that you have to pay an extra $120,000 a year for something.  That is the situation my business is in.  Are you just going to sit there and allow your savings to become a smoking hole in the ground, or are you going to do something to avoid it?  Unlike the government, I cannot run a permanent deficit and I cannot create new revenues by fiat.  Congress allowed business owners a legal way to avoid the health insurance mandate, and I am going to grab that option rather than be bankrupted.  So are every other service business I know of, which is why I have predicted that full-time jobs are on the verge of disappearing in the retail service sector.

Anyway, it appears that the IRS and the Administration could not get their act together fast enough to make this happen.  Not a surprise, I suppose.  You and I have both been in committee meetings, and have seen groups devolve into arguments aver useless minutia.  This is not a monopoly of the government, it happens in the private sector as well.  But in the private sector, in good companies, a leader steps in and says "I have heard enough, it is going to be done X way, now go do it."  In government, the incentives work against leaders cutting through the Gordian knot in this way, so the muddle can carry on forever.

There are at least two more shoes that are going to drop, one bad, one good:

  1. On the bad side, while companies like mine complain about the cost of the PPACA, they are going to freak when they see the paperwork.  My sense is that we are going to be required to know in great detail what kind of health insurance policy every one of our employees have, even if it was not obtained through our company, and will have to report that regularly to the government.  In addition, there are gong to be new reporting requirements to new agencies for wages and hours.  It is going to be a big mess, and my uneducated guess is that someone in the last week or so looked at that mess and decided to hold off announcing it.

    But readers can expect a Coyote freak out whenever it is announced, because it is going to be bad.  Wal-mart will be fine, it has the money to build systems to do that stuff, but companies like mine with 500 employees but only 2 staff people are going to get slammed.  There is a reason government agencies, even government schools, have more staff than line personnel -- they live and breath and think in terms of complex reporting and paperwork.  They love it because for many it is their job security.  Swimming every day in that water, it is no surprise they impose it without thought on the private sector.  This makes it hard for companies like ours that try to have 99% of our employees actually serving customers rather than pushing paper.

  2. The individual mandate is toast for next year.  No way it happens.  If the Administration cannot get the corporate piece done on time, there is no way in hell it is going to get the exchanges up and running.  And even if they do, some prominent states with political influence with this President, like Illinois and California, likely will not get their exchanges done in time and will beg for a delay.

Yes, It's a Tax

Obama continues to deny that the health insurance mandate which is backed with a penalty to be collected by the IRS is a "tax."  He says "For us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase."  Three responses:

  1. Asking people to take individual responsibility for their health care expenses is not a tax.  Asking them to do so via a particular method, in this case the purchase of an insurance policy rather than, say, just paying expenses as they go, is a tax.
  2. Obama might argue that since people are getting value for the policy they have to buy, there is not net tax but just a (forced) exchange of value.  But this is the classic technocratic fault, to assume that the central planner's definition of value is the same as every individuals.  But its not.  Many folks don't get value from a policy, which is why they don't buy one today
  3. Even if Obama were right in #2, he would still be wrong given the rules embedded in this bill.  Young, healthy people will be forced to subsidize the old and those with pre-existing conditions by the rules imposed on insurance companies.  These rules effectively make it impossible to charge full cost to the old and sick, so that the young and the healthy will have to pay more.  Because the young and the healthy will not see values in policies at the prices they will be paying (given these transfers), they won't value the policy with is EXACTLY why the law has to force them to buy it.  Which is why it is a tax.

John Stoessel via Carpe Diem

Competition is a "discovery procedure," Nobel-prize-winning economist F. A. Hayek taught. Through the competitive market process, we producers and consumers constantly learn things that force us to adjust our behavior if we are to succeed. Central planners fail for two reasons:

First, knowledge about supply, demand, individual preferences and resource availability is scattered -- much of it never articulated -- throughout society. It is not concentrated in a database where a group of planners can access it.

Second, this "data" is dynamic: It changes without notice. No matter how honorable the central planners' intentions, they will fail because they cannot know the needs and wishes of 300 million different people. And if they somehow did know their needs, they wouldn't know them tomorrow.

It's a Tax

Forcing people to pay money or pay a fine on their tax return to buy a product they currently don't buy is a tax.  Particularly when that product will likely be over-priced to the young and healthy not buying it today to subsidize the older folks.

At Least Four New Taxes in Baucus Bill

The Baucus Health Care bill follows in the tradition of many other pieces of recent legislation in raising taxes in ways such that Congress can claim that it didn't actually raise taxes.  Here are four such taxes in the Baucus Bill  (note that no one that I know of has read any actual legislative language, so this is based on the press releases by the bill's authors.  Actual bill language can only be worse).

Employer Penalty is a Tax: In a step right out of Goldilocks, the Baucus bill will impose "penalties" on employers with no employee health care plan as well as on employers who have plans that are "too rich."  Never mind the insanity of the government micromanaging how an employer chooses to structure his compensation package to employees.  These "penalties" are structured as percentages of wages -- the one for having no health care plan was 8% of wages in the last bill.  This is a direct tax on employment, making hiring people more expensive (effectively the same magnitude as doubling the Social Security tax).  So how does this effect the average person?  Think of it this way, for the same wage, you job will be more expensive to a company that it was before the bill, making it less likely you will get hired at that wage.

Insurance Mandate as a Tax: The mandate that everyone must have insurance is a tax on the young and the healthy, as I explained previously:

People focus too much on the penalty itself being a new tax.  But the new tax is actually the requirement that individuals buy a product (in this case a health insurance policy) that they feel has no value (or else they would purchase it of their own free will today).  The government stopped pretending long ago that these younger middle class families will get much value from such a policy.  In fact, if they did get value commensurate with the premiums they will be paying, the mandate would not be achieving its purpose.  The whole point is that healthy people pay more into the insurnace system than they get back to support sick people.  If that payment is mandatory, then it is a tax, even if it is called an "insurance mandate" instead.

In fact, this is made all the more clear when politicians also suggest that cheaper high deductible health insurance plans be banned, as they were in Massachusetts.  Again, the whole point is to get young healthy people to overpay for insurance, and allowing them to buy sensible, cheaper, high deductible insurance defeats the whole purpose.

In fact, the bill's supporters have explicitly discussed requirements that insurance companies raise the price of insurance to the young and healthy to help reduce premiums for the old and, er, politically more active.  This is a redistributive tax, hidden within an insurance rate structure that will be heavily regulated by Congress.  Though don't expect Congress to admit this when young folks start to complain, they will say "blame the insurance companies."  Which is the whole beauty of such a hidden tax.

Corporate Taxes as Consumer Taxes: The plan would place new excise taxes on insurance companies, drug companies, and medical device providers.  But these taxes, particularly in the low margin insurance businesses (Yeah, I know if you only listened to Obama, you would never realize they were low margin but they are) just get passed onto consumers in the form of higher prices.  Congress knows this, but pretends it doesn't happen, so it can tell the economically ignorant that it hasn't raised taxes on consumers, and that rising prices are all the fault of the evil insurance companies blah blah, you know the drill.

Price Controls as a Tax: A large part of the Baucus Medicare savings is instituting price controls on doctors and other medical suppliers --  basically cutting their reimbursement rates.  This, by the way, just confirms what we all have known, that Obama and the Democrats don't have some mysterious win-win way to cut medical costs.  The only levers they have are 1. Price Controls and 2. Denying care.

There is absolutely no difference to a doctor between price controls and a tax.  A cut in the reimbursement rate from $50 to $40 is the same as having a 20% tax put on his $50 reimbursement.  Again, price controls in this context are just a way of hiding a tax.

And this might be the most dangerous tax of all, as such price controls always, by the immutable laws of economics accepted by monetarists and Keynsians alike, reduce available supply.  Doctors, for example, are going to be less willing to stay in the medical profession.  The result is inevitably shortages and long waits, something that should surprise absolutely no one as shortages and queuing are endemic in every government health care system in the world, starting with liberal darling Canada, whose citizens get medical treatment quickly only by crossing the border into the US.

The New Middle Class Tax

From Joe Biden, in the debates:

"No one making less than $250,000 under Barack Obama's plan will see one single penny of their tax raised, whether it's their capital gains tax, their income tax, investment tax, any tax."

Oops:

Under the plan, people who earn between 100% and 300% of the poverty level (or between about $22,000 a year and $66,000 a year for a family of four) would face fees ranging from $750 to $1,500 a year.

For taxpayers with incomes above 300% of poverty, the penalty starts at $950 a year and reaches as high as $3,800 for families. Nearly 12 million people fit in this category, according to the National Institute for Health Care Management.

The idea behind the penalty is that those who can afford insurance but don't buy it are imposing costs on the entire health system. Under the proposal, nearly 12 million people who currently have no insurance could be subject to such fines, according to figures compiled by the National Institute for Health Care Management.

People focus too much on the penalty itself being a new tax.  But the new tax is actually the requirement that individuals buy a product (in this case a health insurance policy) that they feel has no value (or else they would purchase it of their own free will today).  The government stopped pretending long ago that these younger middle class families will get much value from such a policy.  In fact, if they did get value commensurate with the premiums they will be paying, the mandate would not be achieving its purpose.  The whole point is that healthy people pay more into the insurnace system than they get back to support sick people.  If that payment is mandatory, then it is a tax, even if it is called an "insurance mandate" instead.

In fact, this is made all the more clear when politicians also suggest that cheaper high deductible health insurance plans be banned, as they were in Massachusetts.  Again, the whole point is to get young healthy people to overpay for insurance, and allowing them to buy sensible, cheaper, high deductible insurance defeats the whole purpose.

This is a tax on middle America, and Obama knew he was going to propose it way back in the campaign.  This is not something he just thought up or was a victim of changing circumstance.  This is an out and out lie on his part.