So far, we’ve learned that the minimum coverages are bare-bone – an annual physical and certain lab tests, like mammograms. Beyond that, we know that we are required to buy policies. If we don’t like the so-called “open market” (an oxymoron, like “corporate integrity”), we can go to state insurance exchanges. These will offer four levels of coverage (from the same damned companies!) – bronze, silver, gold and platinum. That coverage is merely 60%, 70%, 80%, 90% of covered medical expenses. Most people will opt for bronze coverage, as it is the cheapest. The monthly premium seems to be the only thing people want to talk about, but it helps to know that coverage is shit.
But what are “covered” expenses? From appearances, it seems that insurers anticipated a huge influx of new patients into the system due to pent-up demand for untreated conditions. So they constructed a huge barrier: physician office visits are not covered. In essence, the policies above are for hospitalization only. That means those with untreated conditions will remain that way.
That has all been covered here before, but yesterday at a tax conference I learned something startling in its implications: Starting in 2014 there are new penalties for failure to buy an insurance policy from the cartel, which we all know. They start out rather modest – as low as $95 with a host of provisions kicking in over time making them more severe.
The penalty is collected under normal procedures except:
1. No taxpayer shall be subject to any criminal prosecution or criminal penalty for failure to timely pay the penalty; and
2. The IRS may not file a notice of lien or levy on any property in connection with the failure to pay the penalty. But it can offset refunds, including those due to refundable credits.
This is deliberate. Why? The Final Nine ruled that it is a tax, so that normal collection procedures would apply unless someone deliberately inserted this escape clause. Someone did. Why?
Mere speculation on my part: To understand why they don’t seem to care much about collection of the penalty, one must look at the overall thrust of the act. The cartel has forced working and poor families to buy insurance, and the government is paying huge subsidies for it to cover these people. The policies are crap – there will be very little cash outlay for the cartel. Premiums will be low due to the 80% medical outlay provisions* (exactly where the cartel was at before the act).
That is the guts of ACA in my view – the subsidy. Everything else is window dressing, including the fines. They don’t really care if people not using the exchanges buy policies. If they did, fines would be collectible by force. They are using the uninsured and working poor as a conduit for taxpayer money.
The easy way to avoid paying the fine is to avoid being in a refund situation – don’t allow yourself to be over-withheld. Instead choose the maximum allowed exemptions on your W-4. (The form has a longer calculation of examptions on the back to allow extras for itemized deductions and credits.) The objective is to reduce your bottom line to the amount of the fine. This leaves the IRS powerless to collect it.
Liz Fowler will be pissed, sorta. She’s returned now to private industry after employing Max Baucus to help pass the bill, and President Obama to implement it. Her work is done now, she gets to sit back and watch the rewards roll in.
*In insurance jargon, when a company has to pay a benefit for a policy holder, it is known as a “medical loss,” and the total of medical loss payout prior to ACA was around 80% of premiums collected. ACA merely codified the existing practice. Note as well that companies self-report medical losses, hire their own auditors as well. Wall Street trackers are diligent and insist that 80% not be exceeded. In the early 90′s, prior to the great enclosure, not-for-profit insurers were paying out in excess of 95% of premiums in benefits, according to Wendell Potter in his book Deadly Spin. (Potter has become a leading proponent of Obamacare, meaning he likely never left insurance cartel pay even as he made a great stink about retiring from CIGNA in disgust. Will he now follow Fowler back to the cartel nest?.)