ObamaCare: Tax versus Penalty
After an initial phase-in period, the "tax", as we now know it to be, for not buying health care insurance maxes out at $695 per adult per year, or half of that for children. A household's total liability is capped at $2085. (All this is in Section 5000A.) The cost of health care insurance for a family of four is about $15,000. So, obviously, the rational young and healthy person or family will pay the tax, and sign up for insurance only if and when it is needed. At that point, the insurance company must accept them, under the law.
Such a system must impose massive losses on the insurers because the only people who sign up will be those who know that they will get back more than they pay in premiums.
But this was not the scheme envisioned during the special interest bargaining that led up to the law. Then, the imposition of the mandate was a deal-breaker for the insurers, who need cash from the young and healthy to subsidize the old and sick. The companies could not agree to guaranteed issue and community ratings without the promise of this cash.
So how long will it be before Congress, ever subservient to any special interest with a fat check book, begins ratcheting up the "tax" to make sure that people buy insurance rather than pay the government?
And at that point, when it is clear that the payment is indeed designed to force people to buy insurance so as to be cash cows, do we get to go back to the Supreme Court and ask for a mulligan? - "Oops! I guess it was a penalty after all"? Or "At $695, it is a tax, but at $10,000 it is a penalty, so the constitutionality of the law flips back and forth"?
James V. DeLong is the author of Does the Constitution Make You a Cash Cow? and Ending Big 'SIS' (The Special Interest State) and Renewing the American Republic.