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?

John McCain’s health care plan is right for America.

In a campaign where both candidates claim to be the agent of change, McCain wins that accolade, hands down, at least when it comes to health care. But he has done a miserable job in enunciating his plan.

I urge you to consider this editorial from the Wall Street Journal. It is written by Dr. David Gratzer, MD, a fellow at the Manhattan Institute.

In a nutshell, McCain’s plan aims to provide tax credits to individuals who purchase their own coverage. He also wants to allow people who live in states where premiums are high to purchase plans in other states where rates are much lower. And yes, his plan encourages high deductible health plans designed to work in conjunction with a health savings account.

At the heart of McCain’s plan is the recognition that employer-sponsored plans are growing increasingly scarce — for a variety of reasons, of course, but scarce nevertheless.

Encouraging people to buy their own plans through tax-incentives has at least 3 advantages, including:

1. Portability (employees who change jobs often lose their coverage)
2. More choice (most employees have only 1 plan to choose from at work)
3. A more mobile workforce (people would no longer feel compelled to stay at Job X for health benefits)

By contrast, Obama proposes more of the same-old, same-old, only with more regulation.

A noted economist has observed that this approach fails to address the underlying problems in the current system. In short, it would do nothing to decrease national health care spending, and in fact, would increase it.

That economist is Jason Furman, of the Brookings Institute. You may recognize the name — Mr. Furman is now economic policy director of Senator Obama’s campaign.

No plan is perfect. Ultimately, I predict that Medicare will become our version of “national health care.” We’ve already seen suggestions to lower Medicare admission age to 55. Something along those lines will eventually come to pass.

But regardless of how we get there as a nation, one thing is for certain: We are not going to be paying less for health care in the future. That being the case, individuals deserve the same tax-breaks enjoyed by corporations for decade when they purchase their own health care plans. And opening access across state lines is an idea that seems to have little, if any downside.

Thanks for reading. Your thoughts and comments are welcome.

C. Dean Richard, JD, MSBA
“the HSA king”

As the New York Times article states:

Virtually all large employers offered coverage, but only 62 percent of small companies did. People working for big companies were also paying less — about $3,000 a year for family coverage — compared with $4,100 for those in small companies.

Faced with the choice of dropping coverage altogether, many small companies have opted for health plans that ask employees to pay much more in the form of deductibles and out-of-pocket expenses. One in three workers in small businesses has annual deductibles of $1,000 or more, in contrast to one in five in the previous year’s survey.

The article jumps to the conclusion that government intervention is closer than we may think.

COMMENT:
Typical left-wing perspective from the Times, but the numbers don’t lie either. As more and more small companies are dropping coverage all together, they are opting for individual coverage. And all individuals who are taxpayers are eligible for health savings account plans.

These plans can save a bundle, especially when the employer sponsors a health reimbursement plan. Ask us for more details.