Sunday, February 10, 2013

Obamacare's Individual Mandate & You

Passed in 2010, the Patient Protection and Affordable Care Act (“Obamacare”) established the level of health care coverage an individual needs to have in order to meet the “minimum essential coverage.” This is the so-called, and controversial, individual mandate, with Health Insurance Exchanges making certain that people have the proper coverage as set by the law. Perhaps an oversimplification, but the HIE are designed basically as the government's insurance brokers. The legislation left it up to individual states to establish them, which several states, like Missouri, rejected because it would cost millions to the states (i.e., taxpayers) and preferring to leave it to the free-market and private insurance. As pointed out numerous times, there is no funding for the HIE in the legislation at the federal level and, given current economic conditions, the federal government does not have the financing to establish them.

As some have argued, legislative rejection by certain states, including Missouri, is simply token because if the federal government did have the money federal law trumps state law. This, of course, in and of itself – federal vs. states’ rights – is another argument; 152 years ago, the United States erupted into a Civil War over the issue. The fact that one meets the minimum coverage requirement exempts them from the euphemistically-named “shared responsibility payment” (i.e., the individual mandate tax/penalty…but we're not calling it that, even though both terms have been applied and interchanged by politicians and the Supreme Court). The fact that states like Missouri passed legislation rejecting establishing HIE theoretically exempts all residents of those states – no matter if they have coverage or not, or whether it's token or not – because there's no enforcement of the mandate at the federal level both legally and monetarily.

Yes, the Internal Revenue Service – tasked with collecting the “shared responsibility payment” – will seek payment by way of your federal tax return, but you can refuse to pay without penalty. And there’s the rub. Though “assessed and collected in the same manner as an assessable penalty,” the IRS’ Notice of Proposed Rulemaking and Notice of Public Hearing addressing the individual mandate expressly states, “taxpayer may not be subject to criminal prosecution or penalty failing to pay.” (p. 16) As the Supreme Court even stated in its majority ruling upholding Obamacare, citizens cannot be taxed or penalized for non-participation in commerce. For many, there is no doubt a sentiment that the government can collect it the same time they pry the Second Amendment and guns from their cold, dead hands. Of course, there are numerous exemptions to the mandate, including:  “individual is neither a citizen or national of the United States nor an alien lawfully present in the United States”; “individual is incarcerated”; “individual is exempt for a month that...has in effect a religious conscience exemption certification”; and “a taxpayer may claim any of these exemptions on the taxpayer's Federal income tax return for the taxable year.”

Addressing requirements for meeting the minimum essential coverage, one in particular should raise the ire of subjected citizens:  “an individual who resides abroad for an entire calendar year is treated as having minimum essential coverage for each month of that calendar year regardless of whether the individual has health coverage of any type.” (p. 15) Much like drone strikes, the same principles that apply to the average American citizen apparently do not for those living overseas; how many will start looking elsewhere to live? Conceivably, we even could see an increase in children put up for adoption, as “a taxpayer who is entitled to claim a child as a dependent…places the child for adoption during the year, the taxpayer is not liable for a shared responsibility payment attributable to the child for the months after the adoption.” (p. 17)  How many dire and negligent parents do you think would willingly divest themselves of a child in order to avoid paying? If you’re questioning that statement and shaking your head no, congratulations to you on having a very positive, albeit naïve, opinion of humanity.

For all the nonsense, there is one minor silver lining:  “These regulations are proposed to apply for months beginning after December 31, 2013.” (p. 37) Huzzah!

Read the full IRS notice -

©2013 Steve Sagarra

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