This article first appeared at The McAlvany Intelligence Advisor on Wednesday, January 15th, 2014:
The warm, smiling actors in the Obamacare ads are hiding something. Behind the seductive invitation to buy health insurance because it’s the right thing to do, because your friends are buying it, because it’s “smart,” lies the steel-clad fist of the Internal Revenue Service.
Some are suggesting that many won’t sign up, even through the threat of force. The Congressional Budget Office has estimated that some six million won’t sign up, regardless. It’s built into their estimates.
At the moment, a little over two million have signed up, far below the estimated 3.3 million by the end of the year, and a good long way from the seven million anticipated by the end of March. Robert Laszewski has shed light on the problem: 20 million, at the barest minimum, need to sign up to make ObamaCare work. Further, 40 percent of them have to be young and healthy – between ages 18 and 34. Otherwise the actuarial calculations behind the premiums fail. At the moment, less than 25% who have signed up fall into that category.
And no wonder. Why would they? Aside from the “invincibility” factor of being young, half of those uninsured don’t like Obamacare. The surveys don’t ask why, but one can hazard a guess: it’s being forced on them. This is much different from the calculus offered by Washington: the uninsured ought to be delighted that DC is taking care of them. Why would they object to that?
Here’s part of the reason. At the moment, the penalties appear to be modest, and offer a way out for young people to avoid the issue: pay the penalty, forget the insurance, get on with life. But the old saying, “Even if you’re not interested in politics, politics is most definitely interested in you,” will shortly apply.
In 2014, the penalty for not signing up is just $95. And $47.50 for each child, up to four, for a maximum of $285. In 2015, the penalties jump to $325, plus $162.50 for each child, for a maximum of $975. In 2016, the penalties really jump, to $695 for an individual and $347.50 for each child, for a maximum of $2,085.
Enter the fine print: “or 1.0 percent of family income, whichever is greater” (in 2014). In 2015 the fine print reads “or 2.0 percent of family income, whichever is greater” while in 2016 it reads “or 2.5 percent of family income, whichever is greater.” According to the CBO, penalties could reach $5,000, and then move even higher when adjusted for inflation in the out years.
At some point, the penalties will be so onerous that everyone will be forced into the plan.
Laszewski has pointed out the fatal flaw: people don’t like it, they don’t want it, and they sure won’t like being forced to pay for it:
I don’t think Obamacare can survive without people wanting to buy it.
How are you going to enforce a mandate to buy something that people don’t think is valuable enough to buy?
The IRS has the answer: badges and guns. In defending Obamacare in court, the Obama administration said that the IRS will be “restrained” in its efforts to collect those penalties: no liens, levies, or criminal prosecutions will be allowed, for the moment. Instead the IRS will simply attach refund checks to get their money.
But what if that fails? The issue then becomes political, according to Laszewski:
If the uninsured don’t start to see value in Obamacare and buy it, is the Democratic solution to fine the heck out of them until it hurts so much they have to buy it?
[What a] great political strategy!
This is an albatross that will be hung around the neck of every politician who voted for Obamacare. It will be the lasting legacy of Obama: the blatant public display of naked force to implement the unwanted program. The political implications could last for years. It could bring down Obamacare altogether. Here’s Laszewski:
The problem is that the government will be hard-pressed to collect a fine on something lots of people don’t believe has value.
This is when it will become a huge political albatross:
At its core Obamacare is not sustainable, and the mandate/fine is not politically sustainable.
November 2014 can’t get here fast enough.
The Washington Examiner: What if Americans rebel against the Obamacare mandate?
The Washington Examiner: Will IRS bully people to sign up for Obamacare?
Reuters: The death of the Obamacare individual mandate
The Associated Press: Obamacare enrollment: Only 24% are young and healthy
Infographic: The first three years’ rates/penalties
The Wall Street Journal: Half of Uninsured Say Health Law Is Bad Idea