Wednesday, October 2, 2013

Delay of the Obamacare Individual Mandate May be Necessary

As the partial government shutdown continues, one compromise proposal is to fund the government including Obamacare but to delay enforcement of the individual mandate requiring most everyone to buy insurance next year.  The House in fact sent such a bill to the Senate but the Senate rejected it.

The logic behind the Republican proposal to delay the individual mandate is straightforward.  The Obama administration has already delayed enforcement of the employer mandate, the requirement that large businesses to provide insurance to full-time employees by one year.  The President did this without Congressional approval, but apparently as a matter of discretion not to collect the penalties.  What drove that decision was not politics, but according to the government was because they are not ready to collect, process and act on information from employers as to whether they are in compliance or not.  Republicans say that if the government can give a break to big business, it should give a break to everyone.

Could a delay work?  One of the key promises of Obamacare is that people with pre-existing conditions  will be able to obtain insurance at the same rates as everyone else.  This is a bit like waiting until your house is on fire to buy homeowners insurance.  If people wait until they get sick to get insurance, the whole system will go bankrupt.  Insurance necessarily depends on most people paying in and not having losses.  Insurance is there for the few who have something go wrong.

That's why there's an individual mandate.  Because the government fears people will wait until they are sick to get insurance, they must be forced to buy insurance.

One of the weaknesses of Obamacare is that the penalties are small compared to the likely cost of insurance.  Here's a chart from the Small Business Guide to Obamacare showing the approximate penalties for 2014.

The penalties aren't enough to force people to buy insurance.  Delaying ineffective penalties may have little to no effect.  If that is the case, people could be allowed a year to see how the exchanges function, what their employees will do, and what the individual market looks like after implementation.  This seems like a winner all around.  If Obamacare works, the President wins because people won't feel like they are being forced into something.  If Obamacare doesn't work, the Republicans will be able to claim that they saved people from a bad system.

Given the total failure of the exchanges to function in many states, perhaps taking a year to get them up and running might be a good idea.  It's just not fair to penalize people for failing to get insurance when the system does not work.  Moreover, it's not fair to penalize those who have concerns that the security and other features won't work on the exchange sites.  Perhaps this is something where waiting to get it right will be worth the wait.

It seems like a fair compromise to me.  What do you think?

Now for Today's Obamacare Headlines:

Leftwing Cheerleading

How Oregon's exchange actually works.

Hard News

Enrollment encounters glitches.

Glitches and high traffic lead to exchange malfunctions.

Obamacare quiz results.

What small business needs to know about the exchanges.

Healthcare.gov crashes.

Tough choices for small business under Obamacare.

PPACA burdens entertainment industry.

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