Washington is abuzz tonight with talk of delaying Obamacare’s individual mandate. The Obamacare launch has been such a flop that Democratic Senators who are up for re-election next year are supporting the proposal. How fast the worm has turned! Two weeks ago, delaying the mandate was a wacko bird idea promoted by Republican anarchists and traitors. Today, it is advocated by the likes of Jeanne Shaheen and Mark Pryor. Schadenfreude? Absolutely: go ahead and enjoy it.
The movement to delay the individual mandate to buy health insurance raises a more fundamental question: what mandate? Under Obamacare, individuals are required to have health insurance. If they are not part of a group plan, they are supposed to purchase individual insurance through one of the exchanges. If they fail to do so, they have to pay a tax, or a penalty, or whatever it is. This tax/penalty was a major focus of the Supreme Court’s decision that narrowly upheld the ACA. These days, many commentators are advising healthy young people to forget about buying expensive Obamacare insurance, which is generally a bad investment for them, and instead go ahead and pay the penalty.
But they don’t have to pay the penalty. The mandate is a sham, and always has been. Theoretically, someone who chooses to be uninsured owes the government money, but the government is prohibited by the ACA from trying to collect it. What kind of a debt is it that can’t be collected?
The Joint Tax Committee prepared a summary of Obamacare that includes this discussion of the mandate:
The penalty applies to any period the individual does not maintain minimum essential coverage and is determined monthly. The penalty is assessed through the Code and accounted for as an additional amount of Federal tax owed. However, it is not subject to the enforcement provisions of subtitle F of the Code. The use of liens and seizures otherwise authorized for collection of taxes does not apply to the collection of this penalty. Non-compliance with the personal responsibility requirement to have health coverage is not subject to criminal or civil penalties under the Code and interest does not accrue for failure to pay such assessments in a timely manner.
As I understand it, the only way the IRS can possibly collect the penalty is by withholding your tax refund. No problem: if you arrange your taxes so that you don’t overpay, the penalty can never be collected from you.
Which is to say that there is no penalty for failing to comply with the Obamacare “mandate.” Many commentators have pointed this out, including us. Oddly, however, some observers who should know better continue to tell young people they should pay the penalty and forgo expensive insurance. No: young people, if they want to follow their self-interest, should forgo expensive insurance and NOT pay the penalty, because it can never be collected from them.
This is one of the reasons why many analysts say that Obamacare was designed to fail, that it is a house of cards that was always meant to collapse. Without any way to force healthy young people into the system to subsidize the elderly and those with pre-existing conditions, the Obamacare system is actuarially doomed. Either it is repealed; or insurance companies go bankrupt or refuse to participate further; or socialized medicine is achieved via the back door, i.e., taxpayers subsidize pretty much everyone so that the government inevitably takes control. Barack Obama is on video explaining that this is the real purpose of Obamacare; if you search our archives, you should find it.
Be that as it may, one thing is certain: there is no penalty for failure to comply with Obamacare’s individual mandate. If there is no penalty, there is no mandate. Which lends an other-worldly aura to the current discussion of delaying the effective date of the mandate.