Inquiring minds are noting Married Couples Pay More Than Unmarried Under Health Bill

Some married couples would pay thousands of dollars more for the same health insurance coverage as unmarried people living together, under the health insurance overhaul plan pending in Congress.

The built-in “marriage penalty” in both House and Senate healthcare bills has received scant attention. But for scores of low-income and middle-income couples, it could mean a hike of $2,000 or more in annual insurance premiums the moment they say “I do.”

The disparity comes about in part because subsidies for purchasing health insurance under the plan from congressional Democrats are pegged to federal poverty guidelines. That has the effect of limiting subsidies for married couples with a combined income, compared to if the individuals are single.

People who get their health insurance through an employer wouldn’t be affected. Only people that buy subsidized insurance through new exchanges set up by the legislation stand to be impacted. About 17 million people would receive such subsidies in 2016 under the House plan, the Congressional Budget Office estimates.

The bills cap the annual amount people making less than 400% of the federal poverty level must pay for health insurance premiums, ranging from 1.5% of income for the poorest to 11% at the top end, under the House plan.

For an unmarried couple with income of $25,000 each, combined premiums would be capped at $3,076 per year, under the House bill. If the couple gets married, with a combined income of $50,000, their annual premium cap jumps to $5,160 — a “penalty” of $2,084. Those figures were included in a memo prepared by House Republican staff.

Under the Senate bill, a couple with $50,000 combined income would pay $3,450 in annual premiums if unmarried, and $5,100 if married — a difference of $1,650.

How Many Are Affected And By How Much?

The Wall Street Journal article got me thinking about how many people are affected by the legislation and by how much. It’s not easy to figure out.

What I am angling at is “How much money per month will be taken out of the pockets of those who do not have insurance but will be forced to buy it?”

The starting point has to be the number of uninsured people.

How Many Uninsured People Are There?

Keith Hennessey addresses the above question in How many uninsured people need additional help from taxpayers?

Hennessey has some interesting charts and graphs excluding various groups to address the question “how many need help?” Here is the key chart.

I am tackling a different question, “How many will be forced to spend money they were not previously spending?”

With that we can reasonably stop at the first two groups.

  • There were 45.7 million uninsured people in the U.S. in 2007.
  • Of that amount, 6.4 million are the Medicaid undercount. These are people who are on one of two government health insurance programs, Medicaid or S-CHIP, but mistakenly (intentionally or not) tell the Census taker that they are uninsured.
  • Another 4.3 million are eligible for free or heavily subsidized government health insurance (again, either Medcaid or SCHIP), but have not yet signed up. While these people are not pre-enrolled in a health insurance program and are therefore counted as uninsured, if they were to go to an emergency room (or a free clinic), they would be automatically enrolled in that program by the provider after receiving medical care.

For the sake of argument let’s conclude that all but the Medicaid and SCHIP undercount are affected. That total is 45.7 – 6.4 – 4.3 or 35 million.

Wellness Testing Loophole

Supposedly preexisting conditions are exempt from higher rates, but what about weight issues and smoking?

Please consider Health bill ‘loophole’ could allow rate hikes

Advocacy groups lobbied President Barack Obama and Congress on Thursday, trying to eliminate what they called a “loophole” in Senate health care legislation they said could allow insurers to raise rates on customers based on their weight or blood sugar levels.

House Democrats held a conference call during which a number of lawmakers vented frustration over provisions in the Senate bill they don’t want to be forced to accept, most prominently a tax on high-value insurance plans that House Democrats fear could hurt middle-class workers and union members. Obama will meet with union leaders on the issue Monday, union officials said.

That’s been an irritant from some state officials because Sen. Ben Nelson, D-Neb., the Democrats’ crucial 60th vote for the Senate health bill, got a deal to permanently exempt Nebraska from paying any cost of a Medicaid expansion in the bill. Nelson said Thursday he was working to extend the same deal to other states.

The so-called loophole is separate issue. It’s a provision that allows employers to establish “workplace wellness” programs giving financial incentives to workers who meet certain health or fitness criteria such as maintaining body mass or blood sugar levels.

The Senate bill also sets up a test wellness program beginning in 2014 for individuals and small businesses who buy insurance directly from insurance companies. Most Americans under age 65 are covered through their employers.

Separate provisions in the legislation would allow insurers to charge more to people who smoke and to older people. Insurance companies generally support wellness provisions.

Congressional, Union Frustration Over Versions

It makes it more difficult to calculate costs if there are two or three basic plans depending on weight and smoking habits.

Moreover, unions are upset and Nelson is getting other states riled up over the Nebraska Exclusion. That unions are pissed off is a sign that something in the bill makes relative sense, although not necessarily absolute sense.

Inquiring minds are reading Union Heads Warn of Political Toll for Backing U.S. Health Tax

Harold Schaitberger, president of the International Association of Fire Fighters, said Obama “will be held accountable” if he continues to push for the excise tax on the insurance plans, which is intended to help fund the overhaul.

“The president’s support for the excise tax is a huge disappointment and cannot be ignored,” he said yesterday in a statement about the levy, which would be imposed on insurance plans worth more than $23,000 a year for families.

Trumka, Service Employees International Union President Andy Stern and other labor leaders met with Obama and aides at the White House to talk about their disagreement over the proposal.

The union presidents declined to discuss the meeting when it was over. Trumka, in a statement, called it a “frank and productive meeting between friends on moving forward on health-care reform.”

There is clearly a lot of Congressional frustration on both sides of the aisle. All it takes is one senator to defect to kill this extremely fragile coalition.

Is The Bill Constitutional?

The Heritage Foundation explains Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional.

Mandating that all private citizens enter into a contract with a private company to purchase a good or service, or be punished by a fine labeled a “tax,” is unprecedented in American history. For this reason, there are no Supreme Court decisions authorizing this exercise of federal power. There are strong grounds to predict that the current Court will not devise any new doctrines by which to uphold an individual health insurance mandate. First and foremost, as already mentioned, to uphold this exercise of power, the Supreme Court would have to affirm for the first time in its history that Congress has a general or plenary police power–a position the Court has repeatedly refused to take.

This statement from a 1994 Congressional Budget Office Memorandum remains true today. Yet, all of the leading House and Senate health-care reform bills being debated in Congress require Americans to either secure or purchase health insurance with a particular threshold of coverage, estimated by CBO to cost up to $15,000 per year for a typical family.[2] This personal mandate to enter into a contract with a private health insurance company is enforced through civil and criminal tax penalties in section 501 of the House bill[3] and with a freestanding mandate and equally questionable civil tax penalties in sections 501 and 513 of the pending Senate bill.[4]

Nowhere in the Constitution is Congress given the power to mandate that an individual enter into a contract with a private party or purchase a good or service and, as this paper will explain, no decision or present doctrine of the Supreme Court justifies such a claim of power. Therefore, because this claim of power by Congress would literally be without precedent, it could only be upheld if the Supreme Court is willing to create a new constitutional doctrine. …

Expect this case to get to the supreme court.

The Youth Penalty

To understand who is most adversely impacted by health care legislation, please consider Young, Invincible, and Now Forced to Shell-Out for Health Care.

You’re 27 and employed, but you’re not raking in the dough. You’ve always been healthy, so the fact that you don’t have health insurance isn’t a big deal to you. Now, though, you’re hearing something about a “congressional mandate” to buy health insurance.

The health insurance industry considers you a member of the “Young Invincible” demographic (whether you realize it or not). Like many of the rest of the people in your demographic, you’ve decided that you don’t want to shell-out a few thousand dollars a year for health insurance because you usually don’t go to the doctor, and the cost just isn’t worth it. After all, that’s your prerogative, right?

According to reports, among the millions of Americans in your demographic, one in three is uninsured. Who you are or why you don’t want to spend money on health insurance really doesn’t matter.

With the passage of the Senate health care bill, you no longer have that choice (unless you’d like to violate the law and pay a $750 fine, leaving you poorer and without insurance). Regardless of how healthy you are and how you’d like to spend your money, Congress plans on forcing you to buy health insurance.

No one is really sharing that information with you, though. Sure, there has been a lot of talk of the “congressional mandate” to buy health insurance and how it’s unconstitutional, but no one is telling you how much it’s going to cost, and no one is giving you an explanation.

Well, here’s a general idea, but it varies based on who you are and where you live. (Note that the following estimates are based on preliminary calculations by The Heritage Foundation’s Center for Data Analysis):

Right now, a single 27-year-old living in Fairfax County, VA, can log-on to and purchase a health savings account for $103 per month or $1,236 per year (that gives you a $2,700 deductible, 0% coinsurance, in a PPO). That’s a mouthful.

Under the new health care exchange in the Senate bill, that same 27-year-old would have to pay $2,648 per year for mandatory health insurance. That’s $1,412 more expensive than the plan they could purchase online today (if they so chose).

In other words, Obamacare is being balanced on the backs of the Young Invincibles.

Health Care Plan Raises Questions

The Washington Post is writing Health-care reform bill’s proposed tax on high-cost plans raises questions.

Health analysts recently questioned the assumption that the tax would target only the most lavish insurance packages, nicknamed “Cadillac plans.” The analysts, writing in the journal Health Affairs, found that some less-generous plans could be taxed because they are costly for other reasons. The location of an employer and the type of industry, for example, have as much to do with the cost of plans as the generosity of the benefits and the kind of plan.

Smaller businesses, especially those with a preponderance of older workers, tend to have higher premiums, as do certain industries, including the health-care sector.

Separately, several health-care experts question whether shifting people into lower-cost plans is the best way to slow spending. It is possible, they concede, that the tax could move more employees into HMOs known for more efficient spending. But many markets lack such options.

It is more likely that employers would lower the cost of plans by increasing deductibles and co-pays, which skeptics say would not necessarily bring down health-care costs. Most costs are incurred by a minority of chronically ill patients. And health care is not like other markets, where consumers can make their own judgments based on quality and price; instead, patients make most major health-care decisions based on what their doctors tell them, skeptics point out.

“The biggest problem we have isn’t that we’re demanding so many services, but it’s that the type of services we’re providing are so expensive,” said Thomas Rice, a UCLA health-care expert.

Employer Mandates

Please consider FACTBOX-Major differences in US Senate, House health bills

Both bills would create insurance exchanges in which small businesses and individuals without employer-sponsored health benefits can shop for coverage. The Senate bill would create state-based exchanges. The House bill would create a national exchange but would allow states to operate state-based exchanges if they meet minimum requirements.

The House bill would require employers with payrolls above $750,000 to provide health insurance to workers. Those who do not provide insurance would face a penalty of 8 percent of payroll. Employers with a payroll between $500,000 and $750,000 would pay fines on a sliding scale of 2 percent, 4 percent and 6 percent of payroll.

The Senate bill has no such employer mandate. But large firms with more than 50 workers would have to pay a fine of $750 annually per worker if any of their employees obtain federally subsidized coverage on the exchange.

Both bills would require most individuals to obtain health insurance and would impose penalties on those who do not. The House bill would impose a 2.5-percent penalty tax on income up to the average cost of an insurance policy. The Senate would phase in a $750-per-person annual penalty up to $2,250 per family or a penalty of 2 percent of taxable income, whichever is greater. The full penalty would take effect in 2016.

There are many other differences but the House version is certainly punishing on small businesses.

Marginal Tax Rates

35 million people who did not have insurance before will be required to buy it. What is the impact?

Greg Mankiw addresses the issue in Marginal Tax Rates from Health Reform.

CBO has just released some new tables that demonstrate the increase in marginal tax rates inherent in the Baucus healthcare reform bill.

According to CBO, a family of four making $54,000 would pay $4,800 for health insurance. The rest of the premium would come from government subsidies. If the family’s income rises to $66,000, the subsidy falls, and the cost of health insurance rises to $7,600. In other words, earning an additional $12,000 requires the family to pay an additional $2,800. The implicit marginal tax rate is $2,800/$12,000, or 23 percent.

Similarly, a single person earning $26,500 would pay $2,300 for health insurance, but if his income rises to $32,400, his premium rises to $3,700. This yields an implicit marginal rate rate of 24 percent.

CBO does not fully incorporate the effects of these higher marginal tax rates in their cost estimates. If taxpayers respond to these new incentives by, say, working less, GDP and tax revenue from income and payroll taxes will decline. By the conventions of budget scoring, CBO ignores these macroeconomic changes. By contrast, households facing increases in marginal tax rates of 20 percentage points will not ignore them. This means that the healthcare reform bill will likely have a more adverse budgetary impact than CBO estimates.

Basic Problems Not Fixed

The Washington Post article points out “Most costs are incurred by a minority of chronically ill patients. “

Stepping back for a minute ….. Pray tell what in the health care bill fixes that basic problem? Unfortunately the answer is nothing.

Moreover, the bill did not allow drug imports from Canada and it does nothing to open up health care provider competition between states.

Finally, there is no incentive to hold down costs or treatments, many of which do nothing more than prolong the agony of someone doomed to die in months or even days. At some point the answers has to be “No”.

I am a firm believer in the right to die and my family knows full well my wishes should something happen to me where I cannot make my own decisions.

If someone else feels differently, they should have a plan that pays for it and if they don’t, they (not everyone else) should suffer the consequences.

All it takes is one senator to defect to kill an extremely fragile coalition. Given all the above issues, would that be such a bad thing?

Those young and healthy will likely have a different answer to that question than those with a preexisting health condition, scared half to death they lose their job and coverage.

Regardless of your point of view, if the health care bill does pass, expect a test in the Supreme Court.

Mike “Mish” Shedlock
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