(the) Health Savings Accounts Blog

There is much hub-bub about the new healthcare reform. In particular, you hear a lot of chatter from proponents who claim that one of the biggest benefits is that 30 million (new) people will “now be covered.”

At first blush, it almost seems as though the Government is going to be giving away healthcare to those who need it. But make no mistake: The Democrat’s idea of “providing” healthcare to millions who don’t have it now, is to require those people to purchase it.

That’s right. The healthcare reform bill would mandate that most US citizens and legal residents purchase “minimal essential coverage” for themselves and their dependents. They can get this either through their employer, or, if their employer doesn’t offer health insurance, they can buy it through new marketplaces called “exchanges” that will sell policies to individuals.

But what if you don’t want to buy a new health care plan from a Government approved provider?

No worries. Your Democratic friends have thought that through. They figure if you don’t want to voluntarily buy “mandatory” insurance, then they’ll just fine you.

That’s right. You’ll pay a fine if you refuse to coopreate. And just to make sure you comply, the Democrats have funded up to 15,000 new IRS positions to help enforce that new mandate.

Spiffy, huh?

If you ignore this mandate and don’t get health insurance, you’ll have to pay a tax penalty to the federal government, beginning in 2014. This fine starts fairly small, but by the time it is fully phased in, in 2016, it is substantial.

An insurance-less person would have to pony up whichever is greater: $695 for each uninsured family member, up to a maximum of $2,085; or 2.5 percent of household income.

There are exceptions. Certain people with religious objections would not have to get health insurance. Nor would American Indians, illegal immigrants, or people in prison.

Did you notice that? Illegal immigrants will not be required to purchase coverage. Do you think they are going to be turned away from Emergency Rooms?

Why is Congress (Democrats only) doing this? It’s a pretty obvious way to expand coverage, for one thing. It sounds good – until you hear the details. Also, it will help bring in a flood of new customers for health insurance firms, including healthy young people who might not need much healthcare.

For insurance firms, those new customers could balance out the losses they might incur if they can no longer deny coverage to people with preexisting conditions. (Yes, that’s another change the bill makes.)

And remember, many people will not be buying this coverage purely on their own. Uncle Sam will be helping them. The bookend to the individual mandate is federal subsidies for insurance purchases, which reach deep into the middle class.

It’s all based on the poverty line.

Let’s start with people who are unemployed, self-employed, or work for businesses that don’t offer insurance. Beginning in 2014 (that’s right, this is four years away, after Obama’s first term – hmmm, coincidence?), these people would be able to shop for coverage in new “health exchanges,” a sort of online bazaar in which insurers would offer different government-approved plans.

Congressional budget experts figure that about 25 million people will shop for coverage in these exchanges. That’s a pretty big market. Of these, about 19 million are likely to be eligible for financial aid.

The cutoff level would be an income of four times the federal poverty level. For one person, that’s about $44,000 a year. For a family of four, the comparable figure is about $88,000.

Subsidies would be figured on a sliding scale, with those who make less getting a bigger boost and those nearer the top getting a smaller one.

The formula is pretty complicated. Basically, though, people who make three or four times the poverty level would get enough federal money so that they would not have to pay more than about 10 percent of their income for a decent health insurance package.

People who make less would have to pay a smaller slice of their income for coverage. For instance, individuals who make about $14,000, and four-person families with incomes of about $29,000, would not have to pay more than 3 to 4 percent of their incomes for insurance.

And those who make even less – under 133 percent of the federal poverty level – would be able to enroll in a newly expanded Medicaid program.

The federal subsidy would go straight to the insurer. It would look like a discount on the policy to the customer.

But what if you work for an employer who does offer health insurance? You’re not shopping for policies on the individual market. At least, not yet. Can you still get a subsidy?

Yes, if you make less money than the poverty cutoff level, you would still be eligible for aid. The federal government will in essence guarantee that you do not have to pay more than 9.8 percent of your income for your share of health insurance costs.

There’s something of a catch there, however. The main way the feds would ensure this is to steer you, too, into this new exchange. Your employer would give you a voucher equal to the amount of money it contributes to your policy. Then you’d dive in there and shop for plans with all the self-employed people. (Unsurprisingly, the Congressional Budget Office numbers indicate it does not expect that many people will do this; only about 1 million.)

The Department of Health and Human Services would be the umpire making calls as to who would and would not get subsidies. The legislation establishes a process for appealing HHS decisions.

We’re thinking the bill, if enacted, also would make HHS one very busy place.

And you think waits are long at DMV huh?