Baucus plan includes compulsory insurance but exempts Health Sharing Ministries
Thursday, September 17, 2009 at 10:00AM by Kay B. Day
Sen. Max Baucus (D-Mont.) unveiled his healthcare proposal on Wednesday, the America’s Healthy Future Act of 2009. The plan includes a mandate for insurance—if you don’t purchase it, you’ll pay a fine. The Wall Street Journal said, “Maximum fine is $1,500 for families up to 300% of poverty level and $3,800 for families above 300% of poverty.” This is referred to as the “excise tax.” There’s irony in this mandate because many young professionals in their twenties who voted Democrat in the election will probably bear a large part of the economic burden of that mandate.
The section on mandates is pretty specific: “Beginning in 2013, all U.S. citizens and legal residents would be required to purchase coverage through (1) the individual market, a public program such as Medicare, Medicaid, the Children‘s Health Insurance Program, Veteran‘s Health Care Program, or TRICARE or through an employer (or as a dependent of a covered employee) in the small group market, meeting at least the requirements of a bronze plan, or (2) in the large group market, in a plan with first dollar coverage for prevention-related services as recommended by the U.S. Preventive Services Task Force – except in cases where value-based insurance design is used and cannot have a maximum out-of-pocket limit greater than that provided by the standards established for HSA current law limit.” [pg.28] IRS will be the enforcer for the mandate.
The bill expands Medicaid and opens the door for employers to ditch healthcare completely. WSJ said, “Those with more than 50 full-time employees must offer coverage or pay a penalty of up to $400 per employee.” If you’ve ever run a business, you’ll probably agree that $400 penalty will be cheaper than providing insurance. Thus this is a mini-door, one of several including public co-ops, to the public option leftwingers want. It also moves perk dollars from the individual to the federal revenue pool.
Also included is a tax credit for a qualified small employer for contributions to purchase health insurance for its employees. But what the federal government gives with one hand it takes with another: “Self employed individuals, including partners and sole proprietors, two percent share-holders of an S Corporation, and five percent owners of a C Corporation would not be treated as employees for purposes of this credit. There will also be a special rule for sole proprietorships to prevent them from receiving the credit for the owner and their family members. Thus, no credit would be available for contribution to the purchase of health insurance for these individuals and the individual would not be taken into account in determining the number of employees or the average full time equivalent wages.” [pg. 25]So even though for tax purposes you’re a sole proprietor and an employee, you only get the tax credit if you provide insurance to employees who are not family members.
For me that is one of the most troublesome aspects of the plan. I grew up in family businesses, and I believe that section of the proposal will be viewed with a very critical eye. No one is being hit harder by federal government policy than small businesses that have seen credit decline despite bank bailouts and consumer purchasing decline.
There is a quirky element I wasn’t aware of until I read the bill—Health Sharing Ministries. The Alliance of Healthcare Sharing Ministries website defines such ministries as, “a health care cost sharing arrangement among persons of similar and sincerely held beliefs. HCSMs are not-for-profit religious organization acting as a clearinghouse for those who have medical expenses and those who desire to share the burden of those medical expenses.”
The bill addresses the ministries and other groups directly, exempting them from the excise tax: “Exemptions from the excise tax will also be made for individuals below 100 percent of FPL, any health arrangement provided by established religious organizations comprised of individuals with sincerely held beliefs (e.g., such as those participating in Health Sharing Ministries), those experiencing hardship situations (as determined by the Secretary of Health and Human Services) and an individual who is an Indian as defined in Sec. 4 of the Indian Health Care Improvement Act. Additionally, in 2013, individuals at or below 133 percent of FPL will be exempt from the excise tax. When making these determinations, income from individuals not subject to the mandate should not be considered.” [pg.29]
There’s the nod to class warfare so popular with the political class—The WSJ said, “The biggest measure would raise $215 billion over 10 years with a 35% excise tax on "gold-plated" insurance plans. The levy, which targets insurers, would tax the value of plans above $8,000 for individuals and $21,000 for families.” This of course is nothing more than a federal money grab. Companies who provide for that level of insurance should be rewarded rather than penalized. The cost of course will be passed on to the taxpayer, the consumer and the individual covered under a private plan.
Subsidies for Medicare Advantage will be cut. This is one of the greatest insults in the bill, penalizing those over 65 who choose to buy a supplemental plan to offset expenses Medicare does not cover. This group has paid mandatory Medicare taxes as well. We anticipate a backlash, based on Americans who attended protests across the nation and in Washington on September 12. What pomp media like NBC and ABC missed: this constituency is well-informed by retiree advocacy groups. Leftist media, both branded and blogged, demonized these people and most outlets did not cover the marches.
After a cursory scan the worst we can say is that the bill will be more expensive for most, with the exception of incomes in the lowest quintiles. Some may view it as a back-door approach to a public option, an effort to please the far left wing in control of the Democratic Party at present.
On Wednesday economist Art Laffer told Fox News’ Neil Cavuto the current federal approach is to “tax people who work and pay people who don’t work.” The mandate, said Laffer, “will allow costs to skyrocket.” That is because of the 35 percent excise tax.
Baucus’s proposal is a start and we expect any number of amendments to be introduced, with rigorous debate from members of both major political parties. At present one expectation will deflate--benefits will primarily go to the lowest income quintiles and the plan may result in higher costs, direct or indirect, for the middle and upper quintiles. I believe retirees who opt to purchase Medicare Advantage will definitely see premiums increase and services decline.
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