Loosening ACA Tax Penalties Could Expand Health Care Coverage
Consumer Power Report #523
Harsher tax penalties against the uninsured won’t save the Affordable Care Act (ACA), nor will ramping up subsidies for the compliant, despite calls for each from Obamacare proponents scrambling to salvage the law as average 2017 premiums increase by 25 percent and health insurers jump ship.
One of the most controversial parts of ACA is its individual mandate. This is the law’s requirement that people obtain health insurance through their employer, buy insurance themselves, or else pay fines costing hundreds or thousands of dollars. The Internal Revenue Service (IRS) collects the fine by withholding money from individuals’ tax returns each year.
In 2016, the penalty for deciding against spending thousands of dollars a year on an Obamacare insurance plan you may never use is $695 per adult or 2.5 percent of one’s household income--whichever is higher--plus $347.50 per child under 18, for a family maximum fine of $2,085, Healthcare.gov states. This is an increase from $325 per adult or $975 per family in 2015. In 2014, adults were fined $95 each and the maximum penalty for a family was $285.
If the above 2016 penalties sound higher than what The New York Times reported at least twice in the past week--once in an editorial and once in a news article--it’s because they are.
“People without health insurance will have a tax penalty of about $700 a year in 2017, up from about $400 in 2016,” the Times editorial board wrote on October 25.
“The full weight of the penalty will not be felt until April , when those who have avoided buying insurance will face penalties of around $700 a person or more,” the Times reported on October 26.
Such delicate phrasing, while technically accurate, seems calculated to make 2016 ACA penalties sound lower than they are. Just because the IRS collects Obamacare penalties in arrears does not change the fact the Obama administration is currently fining millions of Americans almost $700 per person or $2,100 per family--not $400 per person or $1,000 per family--for decisions people are making right now.
Why whitewash the price tag of 2016 Obamacare penalties? Because if ACA proponents can convince the American people penalties are low, they can more easily persuade them to increase the penalties. This is precisely what The New York Times editors have in mind: “One way to lift enrollment would be to increase the penalty,” their editorial states.
Maybe harsher fines would boost enrollment a little, which is all ACA proponents can reasonably hope for the floundering law. But the 20 million people who declined to buy ACA-compliant health insurance plans in 2014 appear to have reasons for rejecting Obamacare other than avoiding fines.
Approximately 8 million of the 20 million who rejected Obamacare insurance in 2014 decided to pay the fine. (This number dropped to 5.6 million people in 2015.)
The remaining 12 million of the 20 million qualified for one of the law’s exemptions from the penalty in 2014. For example, the law exempts from the individual mandate people suffering certain financial hardships and people who would have to pay more than 8 percent of their household income to buy the most affordable coverage offered on the exchange.
Interestingly, many who qualified for one of these exemptions would probably also have qualified for Obamacare subsidies to help pay their premiums. By exempting them, the ACA itself concedes these people should have the right to reject Obamacare insurance anyway.
That ACA includes exemptions from the penalty is not an ode to the law’s flexibility, Congress’s generosity, or a spirit of liberty conspicuously absent from the Obama administration’s policies.
ACA’s exemptions underscore that millions of ordinary Americans have great reasons to reject Obamacare even in cases when Obama would help them pay for it. Ramping up tax penalties would undermine the part of ACA that concedes this.
In fact, current ACA exemptions include one of the best alternatives to Obamacare insurance and subsidies money can buy. The 625,000 people who reject Obamacare in favor of health care sharing ministries (HCSMs) have obtained individual and family coverage through faith-based cost-sharing agreements for a fraction of the total cost of Obamacare insurance premiums and deductibles. Virtually any health care provider who takes cash (i.e., all of them) will discount their prices to treat HCSM members, who pay cash up front and apply for reimbursement later">.
Congress should add and the U.S. Department of Health and Human Services should welcome an exemption from the ACA penalty for people with direct primary care memberships. These are private agreements in which patients directly pay doctors a modest monthly fee for a wide range of preventive care services, which accounts for 75 percent of all patient care.
If they want more people to obtain access to high-quality health care and coverage, ACA proponents should be calling for expanded exemptions from fines instead of jockeying for harsher fines against people who decide Obamacare insurance and subsidies offer poor value.
-- Michael T. Hamilton (firstname.lastname@example.org) is a Heartland Institute research fellow and managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.
IN THIS ISSUE:
With nearly a third of all U.S. counties expected to have just one insurer on the ObamaCare exchanges in 2017, President Obama knows that health care choices are disappearing as insurers continue to abandon the marketplace. In order to prop up his signature law, the president may exit office with a legally questionable bailout at great cost to taxpayers.
Rather than appealing to Congress for money, indications suggest the Obama administration may resort to a ‘sue-and-settle’ strategy, essentially agreeing to insurers’ recent demands that the government pay them billions in the form of taxpayer bailouts.
Here’s the backstory: Earlier this year, several insurers sued the federal government because they had not received the funds they believe were promised through ObamaCare’s ‘risk corridors’ program. The law’s risk corridors provision is a temporary program that expires this year. It was designed to divvy up gains among profitable insurers to less profitable ones so that insurers that sold low-cost plans to high-cost patients didn’t lose massive sums.
Hoping that ObamaCare would be a cash cow, many insurers initially flocked to the exchanges. Now, so few have been profitable that there’s been a massive gap between the money requested and the money received – to the tune of $5 to $15 billion in 2014 and 2015. As a result, over 40 insurers have exited the exchanges in the past two years.
The administration is getting desperate to keep insurers on the exchanges. Since the law required the risk corridors program to remain revenue neutral – meaning that it could not dip into taxpayer funds – insurance companies have only recovered 12.6 percent of the money they anticipated receiving in 2014 – and the losses are estimated to be larger for 2015 and 2016.
Now, a handful of insurers, led by a defunct Oregon health care co-op, have sued the federal government for the money the Obama administration wrongly promised and now can’t deliver.
And that’s where the sue-and-settle strategy comes in. Rather than working to protect the United States from any financial loss, it appears that the Obama administration may be working to give insurers the bailout that they’re demanding – and that Congress explicitly banned. Twice Congress has required that the administration operate the risk corridors program as the law directs: free of any taxpayer funding, meaning that if CMS doesn’t collect adequate money from insurers, officials have no authority to raid any taxpayer funds.
Last month, Center for Medicare and Medicaid Services officials clarified that they believe these risk-corridor payments are ‘an obligation of the United States government,’ and went as far as stating that they are ‘open to discussing the resolution of those claims,’ suggesting that the administration is open to settling the cases behind closed doors – and potentially hand over billions of taxpayer dollars to insurers rather than defending itself in court. …
SOURCE: Andy Koenig, Forbes
When I woke up that weekday morning, the frontal sinuses above my eyebrows felt as if they’d fossilized overnight, like amber. There was no way my brain wasn’t smashed against my skull, and my nasal passages were impassable; breathing involved gulping mouthfuls of air. I knew immediately: Sinusitis--a sinus infection. The sniffles, with an agenda. Mild headache, pressurized forehead; these symptoms had emerged two days before. I’d muted them with ibuprofen until I couldn’t. Now I needed a doctor. The green mucus had arrived.
I sighed, rolled over, and dialed my primary care physician. The assistant asked for my name, my insurance, my symptoms. Then, I don’t think we have any available times today. Let me check again. I glanced at my insurance card--urgent care, $45, more than double the cost of an office visit. I sighed again. And then she told me they’d had a cancellation at 3 p.m.
This tiny victory made me forgive the drive to the doctor’s office, the day off work, the hour wait for the pharmacist to fill the prescription. I only spent nine minutes in front of the physician assistant and the doctor. He felt my lymph nodes, stuck an otoscope in my ears, pressed above my temples, amplified my deep breaths with a stethoscope, peered down my throat--verifying my claims that I did not, in fact, feel pain below my neck or in my ear canal, verifying that I didn’t have any fluid in my lungs, verifying whether my uvula was stained Kool-Aid red. And then I had the scrip, a goodbye wave (handshake is too risky), and a debit card receipt.
Those nine minutes cost about seven hours in wait and travel time. Could I have dialed or video-conferenced with a physician at 9 a.m., when the symptoms began in earnest, from my bedroom? Almost 15 years ago, a pair of entrepreneurs launched a telemedicine company in North Dallas that tried to monetize that very concept. Teladoc targeted large employers, offering bridge services to employees when they couldn’t get into the doctor’s office for their cold or urinary tract infection or pink eye. Last year, Teladoc became the only telemedicine company to be publicly traded on the New York Stock Exchange. It posted annual revenue of $77 million in 2015, a year-over-year increase of 78 percent.
But there’s a broader public health question, as well. Of Texas’ 254 counties, 185 lack a psychiatrist. Thirty-five have no practicing family physician, and 80 have five or fewer, according to research by Irving recruitment firm Merritt Hawkins. And this situation is growing more severe by the year. Like I’d asked as my sinuses pulsed: What could we do with our phones to make healthcare easier and more available? And how should it be regulated? …
SOURCE: Matt Goodman, D Magazine
Vermont’s regulatory healthcare board approved a statewide all-payer ACO model to improve healthcare quality, coordination and spending.
The Green Mountain Care Board -- which is in charge of lowering Vermont’s healthcare costs while maintaining quality care -- voted Wednesday to sign an agreement with CMS to implement an all-payer healthcare payment system. The approval comes after roughly two years of negotiations, VTDigger reports.
The Vermont All-Payer Accountable Care Organization Model will incentivize healthcare value and quality under a uniform payment system for the majority of the state’s providers. Under the model, physician payments from commercial insurers, Medicare and Medicaid will be based on monthly fees instead of a fee-for-service model. Physicians will operate under an ACO that will accept the payments. The ACO will then pay physicians based on quality of care.
Vermont will become the first state to implement an all-payer system for all providers. Maryland currently operates the only U.S. all-payer system for just hospital services. …
Vermont aims to have about 30 percent of primary care providers under the model by Jan. 1, 2018, with 80 percent under the model over a five-year period.
In addition to the all-payer model, CMS approved a five-year extension of Vermont’s Medicaid program.
SOURCE: Morgan Haefner, Becker’s Hospital Review
The demand for health care in the United States is growing as the average age of our population increases. Because of this change in demographics, the Department of Health and Human Services expects our shortage of primary care physicians to reach 20,000 by 2020. Mid-level health care professionals are starting to fill the void, but state-level regulation is stifling their considerable potential.
Pharmacists are a good example: Mid-level professionals who could do more to help patients but often cannot because of seemingly arbitrary barriers that appear to have little effect on health care quality or safety. Our new research for the Mercatus Center at George Mason University lays out a relatively simple fix.
Under the Clinical Laboratory Improvement Amendments (CLIA) of 1988, pharmacists can obtain a waiver allowing them to perform routine tests for patients on site, such as for blood glucose levels or strep throat. Patients are then able to save money and avoid visits to doctors or outpatient clinics.
Requirements to obtain CLIA waivers vary significantly at the state level. …
By 2014, 33 states had approved more than 50 waivers and Hawaii was the lone state that did not have a pharmacy with a CLIA waiver. Texas now has over 1,000 pharmacies with waivers. This growth allows more individuals to take advantage of the lower costs and greater convenience of pharmacy testing. …
SOURCE: Edward Timmons and Conor Norris (The Mercatus Center), RealClearHealth