Saturday, July 14, 2012

Let's Get Down to the Brass Tacks of What Obamacare Really Means to You

The Hubcap Lady
As in 'your pocketbook, wallet, checkbook, automatic debit from your checking account'...however you choose to make your everyday purchases and health care payments and, yes, your taxes.

We have been assiduously trying to find out 'exactly' what this means for you, primarily since even then-Speaker Nancy Pelosi said in 2010: "We have to pass this bill to find out what is in it'.

Now in 2012, after 2 years and a Supreme Court ruling last month, all of the details are coming to the forefront and to the light of day where some of it might turn out ok if everything falls precisely into line as the proponents of the bill say they will.

However, a lot of it might not turn out all that ok if their predictions and presumptions about human behavior are askew by even 5% or 10%.

Case in point:  We already know pretty much for a fact that many to most of the large companies and corporations with over 50 employees are going to dump all of their employees into the state exchanges, when and if they are ever set up that is.

Simply because a simple cost/benefit analysis shows that each employer stands to gain between $3000 and $10,000 per employee per year to their bottom-line by paying the $2000 tax instead of continuing to provide full comprehensive health benefits.

How do we know this?

Because every single business person we have talked with lately has said they are going to be 'forced' into doing this because their competitors will be doing the same thing.

Part of this is a 'good thing', as Martha Stewart would say. Finally health care coverage will be decoupled from the corporate workplace.  It is a vestige of the wage-and-price controls of World War II and America just never reverted to pre-World War II practices.

The employers who do continue to provide comprehensive health care coverage for their employees will be saluted for their loyalty and intent to maintain a 'family-feel' to their employment practices.

President Obama, Speaker Nancy Pelosi and Senate Majority Leader Harry Reid all 'promised' that you could stay on your current health care plan 'if you wanted to do so'.

But seriously, just how long do you think any firm with 2500, or 25,000 employees will continue to spend roughly $17 million to $175 million more per year on providing health care to their employees when they can just dump them into the exchanges and pay the $2000 tax/head and be done with all those hassles and headaches?

We give them each about 6 months before they come to their senses and do this very same thing.  Pay the tax, save between $3000/year for every single employee, depending on age, of course, and about $10,000/year for every married employee with a family of four.

Don't count on your employer being Mother Teresa when it comes to saving $175 million, $17.5 million, $1.75 million, $175,000, $17,500, $1750 or even $175 per year when it comes to their bottom-line.  They are in business primarily to make products and sell services that will make money for their shareholders, not to provide health insurance coverage to the nation.

Second case in point: Did you know that even though an individual or corporation might pay this 'tax' in lieu of having insurance coverage, this does NOT guarantee that every person for whom the tax is paid will be covered by an actual health insurance policy soon thereafter?

Neither did we until like yesterday.

We guess there was a presumption that once this tax was paid by the individual or the corporation,  the person for whom the tax was paid would automatically be enrolled in a health care plan and perhaps this tax would be allocated in some fashion as the first couple of payments for that plan.

Nothing could be further from the case.

The Obamacare tax will be paid ('confiscated' out of your pocket) on April 15, just like any other tax to which you are subject during the year that you have to reconcile on April 15 such as income, payroll, estate or corporate taxes.

$695 for individuals
$2000/employee for corporations plus a general tax (fine) of about $40,000 per year as far as we know

(We are not sure how or why a corporation would be 'forced' to pay this $2000 more than one time because once they drop all their employees into the exchanges, how can the government tax them again and again and again for years after the employees have entered the exchanges?)

What happens then?

The employee/individual then has to go to the exchanges, again assuming each state has set them up, and purchase a health insurance plan out of their own pocket from the most basic of basic plans with very high deductibles of about $6000/person at the Bronze level up to the Platinum level which is far more comprehensive and expensive.

People who are eligible for certain tax credits based on lower income will get some marginal assistance from the government to help pay for this new coverage out of their pocket.

But they will now have to pay the $695/person tax assuming they are an individual who previously had no insurance PLUS the roughly $2000-$3000 in annual premiums (assuming they are in their mid-20's) to pay for in the exchanges for health care coverage they either chose not to buy or couldn't purchase previously.

Do you see where we are going with this?

Obamacare presumes that everyone will be completely rational in their decision-making and purchase health care coverage instead of paying the $695 annual tax each year.  We think a majority of people are so scared of a catastrophic occurrence to them or someone they love in their household that they will go ahead, bite the bullet and buy the health care plan.  If they are financially able to do so, that is.

What do you think they will do?

We think the vast majority of the young people who currently have foregone health insurance, many of whom have college degrees by the way and just think they are immortal during their 20's and 30's, will pay the $695 tax, reluctantly, and forego the $200-$300/month health care premium.

Many others will do the same, regardless of their education level, background, training or career choice.

Just as millions of Americans are doing today.  Foregoing health care insurance because it is too expensive or they just plain do not want to pay for it.

We have anywhere between 33 million and 55 million people who are without health insurance coverage for some period of time each year at any one snapshot in time BEFORE Obamacare.

Not all of these are 'dirt-poor' simply because the 'dirt-poor' in this nation are covered by Medicaid.

Many, many millions of these people are educated young professionals or even some older wealthy folk who figure at age 62:
'What the heck!  I am about to go on Medicare at age 65 and I am in relatively good health and can basically self-insure for the next few years.   
I'll just save that money for the next 3 years and then I am olley-olley oxen home free where my sons and daughters will pick up 85% of the tab for my Medicare through Parts A, B, D and now the rest of the alphabet from Obamacare!'
After all, paying the $695 annual tax is far less than actually paying the $2000-$3000/year annual premium (much, much higher if you are over the age of 40 with a family of 4, let's say) so what would you rather pay, the $695 or the $3000+?

What does that mean in practice and in actual English?

'Many of these same people currently without health care insurance coverage will pay the tax and take their chances with their own health care, just like today.  If they do get ill or hit by a car or a bus one day, and are coherent enough to do the following, they will find the 'app' on their IPhone to sign up for health care coverage in one of the exchanges on the way to the hospital and then be covered for the $1 million costs of their treatment and recovery for perhaps one single health care premium payment for the first month.'

As we said, 'just like what is going on today', except many people don't sign up for health care coverage today either because they can't afford it on their own or they know the hospitals will treat them regardless of their health insurance coverage or lack thereof due to their Hippocratic oath and a sense of ethics and morality.

What about the newly-freed-from-the-corporate-health-care-plan people who will have to fend for themselves in the exchanges?  Will they just pay the annual $695 tax and forego buying the more expensive health care coverage as well?

We have had some experts say this will not happen.  They say that in Massachusetts, there has been a significant buy-in by individuals even though the tax is relatively light.

We hope they are right.  We hope, pray and wish every American citizen does the right thing every single second of the day and night, don't you?

But they don't, do they?  Just look at the obesity epidemic today.  You would think everyone would know that they are killing themselves slowly but surely and driving up not only their health care costs but that of the entire nation, wouldn't you?

We don't know about Massachusetts.  But we do know from experience working in the public sector, politics and government with the good people of the South for many decades that they can count and add and subtract and will put a sharp pen to the paper on this decision when it comes.

When that decision does come, we would be shocked and surprised if 100% of them opt-in to the exchanges, or even 90% of them.

What in the world happens if only 50% of them join the exchanges once set up?

Where do you think the tax would have to go before people will enroll in the exchanges on their own?

That is right.  Precisely $1 over the annual cost of the health insurance premiums.  If the tax is $3001 and the health care premium is only $3000, which one will they pay?  The health care premium, of course.

So get ready for a rapid expansion of the tax in the next 5 years.

Without an auto-enroll feature in this Rube Goldbergian Obamacare apparatus, we get a sinking feeling in the pit of our stomachs that we might wind up seeing millions of individuals sitting this one out who will pay only their annual $695 tax and adopt an attitude of 'I'll just wait and see when I need health care insurance and then buy it then'.

After all, Obamacare also got rid of any insurance rejection due to any 'pre-existing conditions', didn't it?

A person in a coma after a car accident is a 'pre-existing condition'.  Their spouse, family member or friend could buy the coverage for them on the new app perhaps.

Why not?  That makes financial common sense, doesn't it?

We remember hearing the great Christian speaker and pastor Tony Campolo give a talk on Capitol Hill one time at a Faith and Law Forum meeting where he said that some of the poorest people he had ever encountered 'were the best businessmen and cost/benefit analysts he had ever met!'

When pressed, he said: 'Think about it.  Many of the people who steal hubcaps or tires from cars have carefully weighed the costs and risks of doing so in order to sell them at a profit to someone who will pay them for it!'

He has a point.

Don't you think many more fortunate and educated Americans will do the same precise and in-depth 'cost/benefit' analysis before they enter one of the Obamacare state exchanges and perhaps just pay the tax and not buy the health insurance until and unless they absolutely have to?

After all, even the Supreme Court made it pretty darn clear that Congress could 'tax' people but they could no longer use the Commerce Clause to 'force' people to buy something that they had not previously purchased.

We are afraid that the number of people entering the exchanges will not be as high or as rapid as proponents promised when the bill was passed.

We remain skeptical that this might wind up being just another tax hike on middle-to-lower income people who can least afford it.

Many will be cut out of the corporate health care coverage and not enroll in the public exchanges until and unless the federal government picks up almost the full tab of their annual premiums which will send the CBO cost estimates through the roof.  More so than the estimates already are doing where the original costs estimates have doubled and tripled since March 2010.

The lack of an auto-enrollment feature in Obamacare is something to think about and could be a very serious flaw in the whole plan.

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