New Year, New Problems For Obamacare

Low-income Americans are in for a nasty surprise this tax season, thanks to an Obamacare accounting glitch.

Obamacare overpaid up to 3.4 million Americans to help them buy subsidized health insurance. Now, those citizens will have to pay back the IRS when they file their taxes. But most of these working-class Americans have already spent that cash — ostensibly, on the health insurance the Obama administration forced them to buy.

This tax snafu is just one of the many intrusions Obamacare will make into the lives of ordinary Americans this year — boosting their healthcare costs and lowering the quality of care they receive in the process.

Take the employer mandate, which took effect on New Year’s Day, one year later than scheduled. All companies with 100 or more full-time employees must offer health insurance to at least 70 percent of these workers. Next year, that requirement will increase to 95 percent of full-time employees — and will apply to all companies with 50 or more workers.

The employer mandate hits Americans’ pocketbooks by encouraging employers to cut their working hours. Firms only need to provide full-time employees — defined as those who work 30 or more hours per week — with health insurance in order to comply with the law. So companies can dodge the mandate by reducing employees’ hours below this cutoff.

And they’re doing so, according to a series of surveys conducted by the Federal Reserve Bank. One-fifth of employers moved some employees from full-time to part-time, and one in ten outsourced work.

Employer mandate-driven changes like these have cost employees $22 billion in foregone wages, according to former Congressional Budget Office director Doug Holtz-Eakin.

American workers indirectly lose billions more thanks to fines levied on companies that fail to comply with the employer mandate. These fines are considerable — $2,000 per uninsured worker, not counting a firm’s first 30 employees, if the company refuses to provide insurance altogether and has one employee who receives federal subsidies through the law’s insurance exchanges.

If a company offers coverage that Obamacare considers unaffordable or not generous enough, the firm pays $3,000 per employee who gets exchange subsidies or $2,000 per employee — whichever is less.

All told, the CBO expects the employer mandate to cost American companies $139 billion in fines during the next decade.

That’s $139 billion that could have been used to hire new employees or raise workers’ salaries and wages.

Sadly, the employer mandate isn’t the only provision within Obamacare that packs an added punch in 2015. The individual mandate, which requires nearly all Americans to purchase health insurance, took effect in 2014. But the penalties for not acquiring coverage weren’t meted out — until now.

The individual mandate will snare about four million Americans who didn’t buy health insurance last year and don’t qualify for a hardship exemption. When they file their taxes this spring, they’ll pay a fine of either $95 per adult and $47 per child up to $285, or a fine of 1 percent of their taxable household income, whichever is greater. The penalties for going uninsured in 2015 will increase to $325 per adult and $162 per child or 2 percent of taxable household income.

This year, low-income Americans may also have a tougher time accessing medical care. That’s because the feds will implement huge cuts to already-low Medicaid reimbursement rates. Obamacare temporarily increased reimbursements to primary care providers, such as family doctors and pediatricians, in 2013 and 2014. Those increases have now expired, effectively cutting reimbursement rates by a national average of 43 percent.

These cuts could force doctors to turn away new Medicaid patients. Today, 41 percent of primary care physicians either refuse to see Medicaid patients or limit the number they treat — thanks largely to the program’s low payment rates, which sometimes fail to even cover the costs a provider incurs treating a Medicaid patient.

Poor Americans may simply have to wait for care — if they can find someone who will see them at all.

Fortunately, there’s hope on the horizon. The Supreme Court will hear King v. Burwell, a case that challenges the IRS’s authority to grant Obamacare tax credits to people on federal healthcare exchanges, on March 4. If the justices follow the text of the healthcare law and rule that the IRS doesn’t have this authority, Obamacare will no longer offer subsidies in the more than two-thirds of the states that refused to establish their own health insurance exchanges.

Defenders of the law claim that without these tax credits, some poor Americans won’t be able to afford insurance. But these Obamacare advocates don’t acknowledge a more important implication — without the credits, the employer and individual mandates effectively become null and void.

That’s good news for many lower-income Americans, who will no longer be forced to spend up to 9.5 percent of their incomes on health insurance. The mandates don’t just impose an unaffordable expense on millions of Americans — the requirements deprive citizens of the right to determine what level of health insurance is appropriate for them and their families.

The demise of the healthcare law — and its economically disastrous mandates — would be good news for millions of Americans. But a return to the pre-Obamacare status quo isn’t the solution. Instead, Congress must prepare a replacement law that puts Americans in charge of their own healthcare decisions. That, even more than the fall of Obamacare, would truly make 2015 a year to remember.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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