Good News: Obamacare Mandate Tax Jumps Higher in 2016

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Posted: Oct 20, 2015 10:27 AM
Good News: Obamacare Mandate Tax Jumps Higher in 2016

Congratulations, nation: Starting next year, Americans who lack government-mandated health coverage will pay substantially more for the high privilege of being uninsured:

The math is harsh: The federal penalty for having no health insurance is set to jump to $695, and the Obama administration is being urged to highlight that cold fact to help drive its new pitch for health law sign-ups. That means the 2016 sign-up season starting Nov. 1 could see penalties become a bigger focus to motivate millions of people who have remained eligible for coverage, but uninsured...the penalty for being uninsured will rise to the greater of either — $695 or 2.5 percent of taxable income — for someone who goes without coverage for a full 12 months. This year the comparable numbers are $325 or 2 percent of income. While the increase isn't good news, it does create a marketing opportunity...The requirement that individuals get health insurance or face fines remains the most unpopular part of President Barack Obama's health care law, a prime target of Republican repeal efforts. It started at $95 or 1 percent of income in 2014. The fact that it's up to $695 may take consumers by surprise.

This policy change isn't a surprise, however, in the sense that a gradual increase in the individual mandate tax was written into the legislation.  The idea was to attract consumers with carrots (affordable coverage!) at first, then resort to sticks down the line.  The former approach hasn't worked out especially well, so the law's supporters have no choice but to go with the latter -- drawing attention to one of the law's most enduringly unpopular provisions in an effort to coerce people into compliance. The problem is that when you add up thousands of dollars in spending to meet high deductibles plus inexorably rising monthly premiums, paying the mandate tax fine is still a bargain for people who simply can't afford Obamacare, many of whom can claim a hardship exemption anyway. The Associated Press report also mentions a story we highlighted last week, namely that the administration has sharply downgraded its new enrollment expectations:

Although Obama's law is five years old and has survived two Supreme Court challenges, administration officials say the upcoming open enrollment season won't be easy. It may be a struggle to just keep about the same number of people covered. The administration has set a goal of 10 million customers enrolled and paying their premiums by the end of 2016 on HealthCare.gov and state insurance markets. That's roughly the number covered now, and well below what congressional budget analysts had estimated for 2016. The administration expects most will be returning customers, but 3 million to 4 million will be people who are currently uninsured. There's a lot of turnover in the market. Among the difficulties for next year: Premiums are expected to go up more than they did this year, even if taxpayer subsidies cushion the cost. The most eager customers have already signed up. And many of those remaining appear to be stretching tight household budgets, with other financial priorities, like car repairs or putting money in savings accounts.

The Affordable Care Act at work, ladies and gentlemen.  Elsewhere in Obamacare news: (1) A federal judge has ruled that a lawsuit filed by House Republicans against the Obama administration must proceed, validating a previous decision.  (2) Lawmakers on both sides of the aisle say prospects for a bipartisan deal to fend off coming Medicare premium hikes are dimming.  (3) Critics are alleging that the administration is withholding a 'secret' list of 11 state-based Obamacare co-ops feared to be on the verge of financial collapse.  A series of such implosions have made headlines in recent months, including instances in Kentucky and Tennessee in the last week alone.  Nebraska Sen. Ben Sasse has announced his intention to put a hold on all executive HHS nominations until the White House agrees to a "compete and transparent accounting" of these failures.