Understanding Obamacare’s “Individual Mandate”

The Patient Protection and Affordable Care Act (PPACA), less formally known as “Obamacare,” is a health care reform law that requires Americans to obtain insurance or pay a financial penalty.



Story:
PPACA, is a 974 page piece of legislation that President Obama initially signed into law on March 23rd, 2010. The law requires Americans to buy, and most businesses to offer, government-approved, private health insurance starting in 2014, or else pay a penalty/tax. It is estimated that 43% of uninsured Americans are uninsured by choice meaning they could likely afford it but choose to not purchase it.[1] The requirement to purchase health insurance or pay a penalty is known as an “individual mandate.” The PPACA’s opponents, who include numerous organizations, 26 States, and private citizens, have legally challenged the constitutionality of this mandate. A July 2012 Rasmussen poll shows that 52% of likely voters at least somewhat favor a repeal. The United States Supreme Court upheld the law but rejected certain provisions in an opinion dated June 28, 2012.

This penalty/tax has been at the center of the legal argument. Initially, Congress based the legality of the mandate on the Commerce Clause which would mean that the mandate is commercial and economic in nature. The Supreme Court decision according to Chief Justice John Roberts Jr. determined that upholding the PPACA under the Commerce Clause “would open a new and potentially vast domain to congressional authority.”[2] The question was whether Congress is given the power by the Constitution to force the American people to purchase something or be penalized if they do not. Justice Roberts continued, “Congress already possesses expansive power to regulate what people do. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do”[3] Consequently, a “penalty” was deemed unconstitutional under the Commerce Clause.

To keep this legislation afloat, the Obama Administration’s second argument for the individual mandate is that in Art. 1, Section 8, Clause 1 of the U.S. Constitution, “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises...”[4] So as opposed to its view using the Commerce Clause which required individuals to purchase insurance or face a “penalty,” the government now wants to view it as penalizing the individuals who do not purchase insurance by taxing them. As Justice Roberts puts it, “Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income.”[5] The opinion goes on to state that the government will allow it to be called a tax if it keeps the law from being unconstitutional.

So how is this tax calculated? In 2016, the tax will be a minimum of $695 per person and no more than 3 times that for a family if your income exceeds $9,500 for a single taxpayer and $19,000 for a married couple filing jointly (tax filing income thresholds are based on 2011 figures). If your income is more than the tax filing thresholds, your tax will be 2.5% of any household income that exceeds the applicable tax filing thresholds.[6] As your income increases the penalty will also increase, which means people at a higher income level will pay a higher penalty. For example, if a couple earns $60,000 per year, they would be required to pay a tax/penalty of 2.5% of the difference between their income and the tax filing threshold which in this case would be $1025 ($60,000-$19,000 = $41,000 x 2.5% = $1025) There is a cap, the tax cannot exceed the price of a bronze insurance plan. The price of these plans for 2016 are not yet known but the Congressional Budget Office “…estimates that premiums for Bronze plans purchased individually in 2016 would probably average between $4,500 and $5,000 for single policies and between $12,000 and $12,500 for family policies.”[7]

These penalty/taxes are used to fund health insurance for those Americans that cannot afford to purchase insurance. Justice Roberts explains, “…the mandate forces into the insurance risk pool more healthy individuals, whose premiums on average will be higher than their health care expenses. This allows insurers to subsidize the costs of covering the unhealthy individuals the reforms require them to accept.”[8]

There are groups exempted from this mandate. Those who make less than $9,500, employees whose employers only offer plans that cost more than 8% of the employee's income, those with "hardships", members of Indian tribes, members of certain religions that don't pay Social Security tax, such as Amish, Hutterites, or Mennonites.[9]

Views:
Opponents of the PPACA are quick to note Obama’s promises to not increase taxes and also his adamant declarations that this piece of legislation is “not a tax.” In a 2009 interview with ABC News, George Stephanopoulos asked President Obama, “You reject that it’s a tax increase?” Obama responded, “I absolutely reject that notion.” He was also quoted as saying during the same interview, “…For us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”[10]

Proponents continue to refer to it as a “penalty” but accept the term “tax” if it upholds the law’s constitutionality.

Another challenge that has been brought up since the Supreme Court ruling that it must be deemed a tax to be constitutional is cialis prescription about the law’s validity since it originated in the Senate. Since it was initially brought into law as a purchase and not a tax, the law originated in the Senate but tax bills must originate in the House of Representatives according to Article 1, Section 7 of the Constitution.[11]

Ask Yourself:
Do you agree with the government requiring you to purchase a health insurance plan or pay a tax in order to support coverage for those who do not pay? Do you agree with the Supreme Court ruling?
Take action by contacting your congressman and give them your opinion, and by voting for candidates who support your point of view.

UP NEXT… More information on the PPACA - The financial aspect of the law. How it is being funded, what the money is being used for and how much it will cost you.

 

[1] http://www.medicalnewstoday.com/releases/155093.php

[2] http://en.wikipedia.org/wiki/Commerce_Clause#cite_note-27

[3] NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL. (2012), pg 23

[4] http://www.house.gov/house/Constitution/Constitution.html

[5] NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL. (2012), pg 32

[6] http://www.businessinsider.com/how-much-is-the-obamacare-penalty-tax-2012-7

[7] http://www.cbo.gov/publication/41891

[8] NATIONAL FEDERATION OF INDEPENDENT BUSINESS ET AL. v. SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL. (2012), pg 16)

[9] http://www.businessinsider.com/how-much-is-the-obamacare-penalty-tax-2012-7

[10] http://abcnews.go.com/blogs/politics/2009/09/obama-mandate-is-not-a-tax/

[11] http://www.usconstitution.net/xconst_A1Sec7.html