Sunday, July 1, 2012

Who is Taxed for Obamacare? Young People Are


This week the U.S. Supreme Court rules that the penalty that Obamacare levies on those without health insurance is a tax, not a penalty.  Pundits will discuss endlessly the finer points about whether it is a tax or penalty.  The government argued both before the court and Obama insists that it is not a tax, and therefore one would gather, that it is unconstitutional.  Pretty messed up, right?

Call it a tax or penalty, it is going to hit young Americans much harder than the rest of the population.  

As Keith Hennessey points out, the tax will only affect about one in five Americans without insurance.  Of the 21 million uninsured in 2016, the CBO estimates that only 3.9 million will be subject to Obamacare's tax.  He presents a list of those who won't be covered:

You won’t have to pay the tax if:
  • you’re not in the U.S. legally;
  • you’re in prison;
  • you’re poor (measured two different ways);
  • you’re a member of an Indian tribe;
  • you’re in a period of being uninsured that’s less than three months long;
  • your religion forbids getting health insurance; or
  • you get a waiver from HHS.
 Indians aren't subject to the Obamacare tax?  Who knew?

So who will be in the 3.9 million that are subject to the Obamacare tax?  Overwhelming young people.  As I have pointed out earlier on this blog, Obamacare imposes limits on the differential ion premiums between what insurance companies can charge the young and old.  Actuaries find that the cost to cover the average young person is between one-fifth and one-tenth the cost of an older person.  Obamacare limits the difference in rates to one to three.  That means higher premiums for young people.  The higher premiums on the young are then used to subsidize the old.  That also means that young people will experience a larger differential between the amount paid in premium and the value received in health care services.  More young people will decide to go without high cost insurance and just pay the tax (about $750).  The result is that young people not only are more likely to go without coverage, they also get hit with the cost of the Obamacare tax.  http://www.forbes.com/sites/aroy/2012/03/22/how-obamacare-dramatically-increases-the-cost-of-insurance-for-young-workers/


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