Speaker Nancy Pelosi’s (D-CA) health care plan presumes that about 8-to-14-million American workers will pay fines rather than buy health insurance. Unless they do, there’s a $167-billion hole in her financing plan and everything falls apart.
Like the rest of us, this group would face higher-than-ever insurance prices under Pelosi’s proposed bill.
Speaker Pelosi, President Obama and others claim they will make coverage cheaper, yet the official projection relies upon millions who would prefer to pay fines rather than join their system. In some cases the individuals would pay the penalty; in others their employers would pay; and sometimes both.
The estimate of 8-to-14 million who would be fined is based on the official projections made by the Congressional Budget Office (CBO).
The plan is built around a major contradiction. Only if it fails to make insurance more affordable would the bill generate the promised $167-billion by fining people who would still remain uninsured.
Why would this happen? Because insurance would become more expensive if the legislation passes, thus increasing the disincentives to buy coverage.
Premiums under the new government-run “public option” will probably be higher than from private insurance, according to CBO (page 6 of its report). The Associated Press reports that, “premiums in the public plan would be higher than the average for private plans.” Rather than inducing private carriers to lower their premiums, other experts agree that private insurance will also be costlier under Pelosi’s plan, as insurers pass along the bill’s tax increases.
Yet Speaker Pelosi claims the measure will bring “lower costs for every patient” by “lowering health care costs for all of us.” President Obama campaigned on a promise that his plan would save families $2,500 a year in lower premiums. He doesn’t mention that figure anymore.
The exact number of those who will pay fines is unknown, but is huge. Here’s how the projection of 8- to 14-million was calculated, based on the CBO report:
-- It starts with the finding by CBO that $167-billion in penalties would be paid in the next ten years–$135-billion by employers who don’t provide insurance and $32-billion by workers who don’t buy it. For companies, it’s an 8% payroll tax; for individuals it’s a convoluted formula that comes out to about 2 or 2.5% of income.
-- CBO concluded that by 2019, the employer tax would generate $27-billion a year. Since that’s 8%, it represents a tax on $340-billion in wages. If an average wage were $40,000, that would represent 8.4-million workers for whom fines would be paid.
-- CBO also says by 2910 the annual fines paid by individuals would be about $6-billion per year. If their average wage were $40,000, it would represent 6-million tax filers (individuals and couples) paying the penalty.
-- There would be overlap between the groups, so the total paying the penalty should be in the 8 to 14-million worker range—akin to about 1 worker in every ten nationwide.
For this group of uninsured, the Pelosi plan makes them pay a lot and get little or nothing.
This is not a “millionaire’s tax”. It’s a tax on the uninsured. According to The New York Times, these tend to be “the working poor.”
Only a fraction of these Americans might receive some form of subsidy or assistance under the Pelosi Plan. Yet sponsors claim they will finance the plan by collecting $167-billion in taxes from the uninsured! It contradicts the very premise of the legislation.
While attention has focused on the “public option” provision, the notion of collecting billions of dollars from millions of Americans—and still leaving them uninsured—is a serious wrong that deserves serious attention.
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OPINION:Millions Would Pay Fines Under Nancy Pelosi's Health Care Bill
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It's not healthcare reform.
It's extortion. It's essentially the same scam the auto insurance industry pulled in most places, where safe drivers either cough up to cover the insurance companies' profits, or face fines.
This is even uglier. The average family now pays over $13,000 per year for health insurance , either directly, or indirectly through "employer paid" premiums which reduce their wages accordingly. For many, health insurance costs more than their homes. Some two out of three bankruptcies filed in the US are the direct result of medical bills. For most, even with the typical 80% coverage, a major medical emergency would wipe them out trying to come up with the other 20%.
It truly is not a "millionaire tax". It's a reverse Robin Hood deal of robbing from the poor to give to the rich.
- Don Earl
November 2, 2009 2:47PM
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Heritage As Usual
Ugh, Heritage has reading comprehension problems.
"Unless they do, there’s a $167-billion hole in her financing plan and everything falls apart."
Well, considering that $135 billion is derived against employers for whom it would be more expensive to insure their staff then just to pay the fine - it's save to say we are getting that $135 billion if they aren't stupid. That leaves approximately $33 billion over 10 years from individuals who don't. Even if all of those people decide to enroll, it's still deficit reducing. But, do you think its realistic that all of those people are going to enroll?
"Like the rest of us, this group would face higher-than-ever insurance prices under Pelosi’s proposed bill."
There is no evidence to support that.
"The plan is built around a major contradiction. Only if it fails to make insurance more affordable would the bill generate the promised $167-billion by fining people who would still remain uninsured."
Insurance will be more affordable, just some individuals will not want it (young, healthly people) and the fine will be cheaper than most insurance options. There is no contradiction.
"Premiums under the new government -run “ public option ” will probably be higher than from private insurance, according to CBO (page 6 of its report). The Associated Press reports that, “premiums in the public plan would be higher than the average for private plans.” Rather than inducing private carriers to lower their premiums, other experts agree that private insurance will also be costlier under Pelosi’s plan, as insurers pass along the bill’s tax increases."
That's because its not a strong enough public option, it's a very tame one actually. However, if you actually bothered to read page 6 you would see the CBO noted that it was due to a less healthy pool of enrollees joining their program because insurance companies will not take those unhealthy people. I'm sure the people that can afford it who have a preexisting condition might like to get some form of insurance, even if its marginally more expensive (and its marginal).
Not surprisingly, Heritage misses the most important purpose of the public option. It's primary purpose is not to decrease costs immediately. It's designed to prevent the out-of-control growth in expenses. If it slows growth somewhere near normal levels, it will have done wonders for the system. Heritage doesn't actually understand the purpose of the public option. It's to control costs from rising at the rate they are.
"Yet Speaker Pelosi claims the measure will bring “lower costs for every patient” by “lowering health care costs for all of us.” President Obama campaigned on a promise that his plan would save families $2,500 a year in lower premiums. He doesn’t mention that figure anymore."
Pricing competition posed by the public option will likely slow the growth rate by a minimum of 1%. Some estimate 1.5 - 2% but I think their estimates are too peachy given how our government is going to run it. Assuming current growth rate without the public option, we get the cost of insurance per family in 2020 should be, on average, $23,850; A decreased annual growth rate by 1% would indeed save over $2,500 per family once you calculate it out so ... uh, yeah.
You need a great deal of American insured to make the program work properly and a fee (its not a tax if you want to use the correct definition) is an incentive to purchase since the Americans hit with the fee can actually afford insurance (if they couldn't the meet eligibility for either medicaid or a tax subsidy).
I don't even support forcing people to buy insurance because I think it would be unnecessary after a few years of the plan in action since wages will rise , but premiums won't be rising as quickly.
But, I don't make things up like Heritage does.
- caelum
November 3, 2009 10:10AM
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