Obamacare and unintended consequences

For some unfathomable reason Congress seems convinced that it can suspend the laws of human nature by simply passing a bill. The current incarnation of Obamacare pending in the House is but another example of this folly.

Under section 501 (at page 296) of the Pelosi version of Obamacare, an individual is required to pay a tax, roughly equivalent to 2.5% of their adjusted gross income, if they do not have insurance.

Let’s analyze this.  Right now a healthy 25 year old male in New Jersey pays $5880 per year for insurance.  He purchases insurance for two reasons.  First, he knows that if anything happens to him his medical bills will be paid.  And, second, he knows that if he develops a serious illness, without insurance in force today, he might not be able to get insurance in the future.

Under Obamacare, the rules are different.  Anyone, at any time regardless of their physical condition can apply for, and be guaranteed issuance of  insurance at no higher premium (other than age) than anyone else. So, for our 25 year old New Jerseyan, if he has an adjusted gross income of $80,000 he can either pay a $2000 per year tax, or a $5880 per year premium.

Guess which option he’ll pick.  In fact no rational healthy person regardless of age would ever purchase insurance until they are on their way to a doctor’s office.  And, Congress has made sure of this result by providing in section 501 (b) that the tax imposed, regardless of income, can never exceed the “applicable national average premium”, and that the tax will be prorated so that it is imposed only for those months where one doesn’t have insurance.

Following this logic, our New Jerseyan cancels his $5880 per year insurance.  When he tears his ACL playing tag football, he purchases insurance for the 6 months needed to fully recover and pays $2940 for 6 months of  insurance.  Then he cancels his insurance, paying a $1000 tax for failing to have insurance for the remaining 6 months, thus saving himself some $1940 over what he would have spent had he kept his insurance in place for the entire year.

Here is the logic of Congress: all Americans should have insurance, and, if they don’t, we will tax them, thus forcing Americans to buy insurance.

Here is the logic of the American people: I don’t need insurance now, because the tax is cheaper than the cost of insurance, and, if I ever need insurance, regardless of my health, I can always get insurance.

So, if this bill passes, we will end up with fewer insureds, not more.  The law of unintended consequences is alive and well in our nation’s capital.

Did anyone in Congress ever take a course entitled “Reading and Comprehension”?