Affordable Care Excise Tax, Part IV

What Marketplace?

:: By: Larry Walker II ::

“Putting thoughts into words is vastly different from putting truth into words. For words are not truth. As ardently as writers sort and select and polish their words, at the end of the day they are still words. They are not, in themselves, truth…” ~ Lionel Fisher

The act of naming the federal government’s unlawfully subsidized website an “Exchange” or “Health Insurance Marketplace” doesn’t make it one. In a true marketplace, when a product or service is inadequate new competitors are allowed to step in and offer something better. But free competition is stifled when a government controlled, crony capitalist managed, overpriced monstrosity places rigid restrictions on the types of products and services offered. This is precisely the case with the health insurance plans offered by the U.S. government’s imaginary marketplace.

The federal government should do away with the individual mandate, including the vile affordable care excise tax, and open the “marketplace” to catastrophic plans. What kind of marketplace bars consumers from choosing between all possible options, and then imposes a tax for failing to make a purchase? That would be a government-run marketplace.

What is a Catastrophic Health Care Plan?

According to the federal government catastrophic health care plans are meant to provide protection from worst-case scenarios. They generally require you to pay all of your medical costs up to a certain amount (i.e. a deductible), which is usually several thousand dollars. Also according to the government, “they are basically the same as either not having insurance, or opting for a Bronze plan.” A statement that reveals something many have already discovered regarding the latter.

After reaching your deductible, costs for essential health benefits are generally paid by the plan. But here’s the key; catastrophic plans have lower monthly premiums than comprehensive plans. Although they primarily protect you from worst-case scenarios like serious accidents or illnesses, they also cover 3 primary care visits per year at no cost, even before you’ve met your deductible. They also cover free preventive services. Such features make them better than most comprehensive options.

As the law stands today, only U.S. residents under the age of 30 are allowed to purchase low-priced catastrophic health care policies. Those age 30 and over are out of luck, unless they have applied for and received a government approved hardship exemption. Those over the age of 30 aren’t even allowed to view the costs and benefits of such plans until they have obtained the burdensome bureaucratic sanctioned privilege.

Small Business Owners

Many Americans have money tied up in small businesses. The fact that some receive K-1 Forms from S-corporations or partnerships, reporting that they earned “X” amount of dollars, doesn’t mean they actually received a dime. Yet they are forced to pay income taxes on such earnings whether or not physically received. This is hardly fair, but now it’s worse.

If forced to remove all, or even a portion, of their earnings (or capital) from such enterprises each year, in order to comply with the Individual Mandate, many small business owners may not have sufficient funds to cover upcoming salaries, payroll taxes, debt service payments, general operating expenses, and income taxes. For these, catastrophic health insurance plans may be the best option.

Most Democrats are clueless about what I just said. Knowledgeable Democrats and unelected bureaucrats will say, “No problem, just fill out a 14 page hardship application, attach copies of your personal and business tax returns (and all other required backup documentation), and the federal government will get back to you and let you know whether or not you qualify for a catastrophic plan.” However, if a bureaucrat decides you can afford it, then you’ll either need to purchase an overpriced government approved plan, or pay the affordable excise tax.

The federal government doesn’t have a problem reducing any American to the level of a means-tested welfare program applicant, but resource allocation decision makers should. Are small business owners working 12 to 18 hour days to be treated like welfare applicants? I think not. They shouldn’t need a bureaucrat’s permission to purchase whatever type of health insurance meets their needs, and if none of the available options fit, they should be free to go without (i.e. free from a punitive excise tax).

Individual Market

If you’re single and think you might be able to afford up to $6,300 in medical bills each year (the bronze plan deductible for individuals), but are not sure you would be able to after having already forked over five thousand dollars (or so) in government mandated health insurance premiums upfront, you’re not alone.

If you’re married and not sure whether you could manage $12,600 in medical bills annually (the bronze plan deductible for couples), but are fairly certain you would not be able to after having been forced to pay ten thousand dollars (or so) in government-mandated health care premiums upfront, you’re not crazy.

Exorbitant health insurance deductibles, $6,300 for singles and $12,600 for families, coupled with pricey monthly premiums are precisely Obamacare’s problem, not to mention the unconscionable excise tax levied for noncompliance. The federal government may have forgotten that it already snatches 17% to 50% of its most productive citizen’s income each year, in the form of Social Security taxes, Medicare taxes, excise taxes and income taxes, but those affected by such and also subject to the Individual Mandate have not.

It’s been reported that middle class Americans, those most affected by Obamacare’s inflated premiums, are beginning to skip medical checkups and scrimp on their own health care, because once the premiums have been paid there isn’t much of anything left to cover the associated deductibles and out-of-pocket expenses dictated by an out of touch overlord.

Millions of middle class Americans don’t need to break their piggy banks trying to comply with the individual mandate, to know they would be forced to cut back on their own personal health care. After having wasted thousands of dollars a year to satisfy the Democratic Party’s seemingly drunken delusion, that every U.S. resident can afford health insurance, what they will be left with is a worthless insurance policy, not better health care.

To spell it out in terms anyone should be able to understand: Gross income minus federal and state income taxes, Social Security and Medicare taxes, rent or mortgage payments, utility bills, car payment(s), auto insurance, auto fuel and maintenance, debt service, food, clothing and personal expenses, retirement savings, and other family obligations, equals next to nothing for most of America. Yet, being well aware of this, the Democratic Party made the purchase of what it calls “minimum essential coverage” mandatory.

Quid Pro Quo

To better visualize the idiocy of Obamacare let’s compare it to a vehicle service contract and extended warranty. I recently purchased the package on a new vehicle. It covers the first five years or 60,000 miles for a one-time premium of $5,000. The cost was fairly steep, but what do I get in return?

When my truck needs an oil change, any regularly scheduled maintenance, or if any part fails, it’s covered. There are no deductibles or out-of-pocket costs. In other words, I don’t have to worry about shelling out another dime for nearly any situation which may occur with the truck over its first 5 years, or 60,000 miles. Not bad.

In comparison, an Obamacare bronze plan would cost me around $5,000, each and every year, subject to annual inflation increases. In addition, I would be forced to cover the first $6,300 I incur in medical expenses (the deductible), each and every year out of my own pocket. So over a five year period, I am expected to cover $25,000 in Obamacare premiums (subject to inflation), plus another $31,500 in out of pocket costs. Had this been the case with my truck, I would have bit the bullet.

Although a human being, at least in Western civilized society, is in theory worth more than a vehicle, that doesn’t mean a single middle class American can magically come up with $56,500 ($113,000 for a married couple), over a five year period, to comply with the Democratic Party’s pipe dream. Yet, for middle class taxpayers in their 50’s that’s what Obamacare demands. Let me check my bank book and see if I’ve got an extra $56,500 lying around from the last five years. What about you?

When it comes to getting something for something, that’s not what we find when it comes to the individual mandate. Thanks, but I’ll take a pass on Obamacare. Anyone that thinks this is a rational plan was either already covered by a governmental or employer health care plan, or is pitifully out of touch with reality. But this is always the case with big government programs run amok. Unless a program affects people in a personal manner, most tend to be idealistic or apathetic.

Fixing Obamacare

As revealed in Part III, in spite of Obamacare, 30 million U.S. residents are projected to remain uninsured indefinitely. Among them, 26 million are expected to claim an exemption from the penalty. Did I say penalty? Sorry, I meant excise tax. In its present form, the law is without question a colossal failure, and ignoring the results of the most recent landslide election would be a monumental miscalculation.

Government intervention in the health insurance market, in the form of excise taxes, tax credits, subsidies and regulations has led to the unintended consequences of artificially high insurance premiums and lofty deductibles. Imposing an excise tax on consumers least able to comply with the mandate, forcing them to choose between purchasing an overpriced policy or paying a tax, has created another unintended consequence – animosity toward one’s own government.

How can we amend this broken concept?

  1. The federal government should simply drop its individual mandate and let the market operate freely. That means no subsidies and no excise taxes.

  2. Then, it should allow anyone desiring to purchase a catastrophic health insurance policy the right to do so, regardless of age or household income.

Any hope of reducing costs, restoring national allegiance, and encouraging the uninsured to enter (or reenter) what used to constitute a health insurance marketplace rests on this combination. If the federal government is sincerely concerned with the welfare of all of its citizens and residents, it will repeal the individual mandate and establish a true marketplace.

The End; hopefully of Obamacare.

Related:

Affordable Care Excise Tax, Part I

Affordable Care Excise Tax, Part II

Affordable Care Excise Tax, Part III

#Healthcare

Picture credit: Emergency Physicians Monthly

Affordable Care Excise Tax, Part III

Paying Your Fair Share

:: By: Larry Walker II ::

In Tax Simplification, Part II, I expounded on a 2010 Annual Report to Congress, in which National Taxpayer Advocate Nina E. Olson focused on the need for tax reform as the No. 1 priority in tax administration. In particular, she focused on the problem of delivering social benefits through the tax system, which complicates the mission of the Internal Revenue Service (IRS), resulting in a dual mission of welfare administration as well as revenue collection. But instead of taking heed, the federal government doubled down, adding a new health care excise tax and health insurance premium tax credit to the IRS’s burden.

Telephone hold times with the IRS can sometimes run as long as four to seven hours these days, and if you don’t believe me try calling yourself. A taxpayer facing a federal tax lien, levy or wage garnishment doesn’t have a choice. He or she must call immediately in order to prevent an adverse action, but unless they have a day to spare and a very powerful battery, may wind up on the phone for several days just trying to get someone on the line. The federal government has taken an agency best suited for revenue collection, and turned it into a socialist style welfare office, long lines and all.

In Part 2, I affirmed that the shared responsibility payment isn’t a fee, because nothing is received in return. Nor is it a penalty, because failure to purchase health insurance doesn’t constitute a crime. The individual shared responsibility provision imposes an excise tax on a tiny minority of U.S. residents who don’t have government-mandated health insurance or qualify for one of several exemptions. Although Internal Revenue Code – Section 5000A refers to it as a penalty, in general, if it involves filling out a federal income tax form (i.e. Form 8965), and is assessed on and payable with your personal income tax return, it’s a tax.

Opting Out

Many U.S. residents opted out of government mandated health insurance last year. Most simply couldn’t handle the government dictated concoction of monthly premiums and annual deductibles. For these, the Affordable Care Act’s punitive excise tax only makes matters worse. To those affected by this odious tax, it represents a discriminatory confiscation of wealth they are least likely to possess.

For example, the lowest cost Bronze Plan in the state of Georgia currently costs a married couple in their late 40’s to early 50’s (without children and with annual income of around $80,000) a monthly premium of around $622. Conjoined with an annual deductible of $12,600, their insurance policy won’t cover a dime of medical expenses until they have exhausted slightly over a quarter of their annual income ($20,064 / $80,000).

If the couple reasons that they may be able to afford the first $7,464 in medical bills, but would be screwed if they had to pay an additional $12,600, they would be better off not wasting their money on insurance premiums. Once having come to this conclusion, in steps the government to impose the execrated tax. The couple is then forced to hand over 1% of their income (above the filing threshold) in 2014, 2% in 2015, 2.5% in 2016, and more thereafter.

In this example, the government-inflicted excise tax is meant to encourage, or if you will, coerce the couple into purchasing a service they deemed impractical from the get go. But will it? Since the problem boils down to its exorbitant overall cost, how does a government imposed tax of $597, $1,194 or $1,493 help this couple? Newsflash: It doesn’t. Taking money away from one middle class taxpayer and handing it to another serves no meaningful purpose.

What is the purpose?

The premise behind the Affordable Care Act (ACA) was originally as follows: Too many Americans are being denied access to medical care. Health care is a fundamental right for every American. Therefore, every American should have universal access to health care. Anything less is immoral. Yet, in spite of an unprecedented level of government intervention, according to the Congressional Budget Office (CBO), roughly 30 million nonelderly U.S. residents will remain uninsured in 2016, and every year thereafter.

One critical detail, virtually forgotten in its more than 20,000 pages of regulations, is that prior to implementation of the ACA, 42 million U.S. residents were uninsured, according to an annual report from the U.S. Census Bureau. And now, after upending the entire American health care system, and throwing another monkey wrench into U.S. tax administration, come to find out that 71% of them will remain uninsured for the duration.

But at least 12 to 13 million got covered, right? Well perhaps, but not without taxpayer assistance, or what’s known in the real world as additional government debt. According to the Heritage Foundation, roughly 6 million of the newly insured were added to taxpayer-funded Medicaid programs. And according to H&R Block, the other 6.8 million purchased health insurance, but only after employing taxpayer-funded subsidies (i.e. premium tax credits).

In short, 30 million of the 42 million who were uninsured prior to the ACA will remain uninsured in 2016 and every year thereafter. And, of the 12 to 13 million newly insured, every last one received a taxpayer handout. What’s up with that? Couldn’t we have achieved the same result without maiming the tax code?

Ironically, and according to the U.S. Census Bureau, around 30 million U.S. residents, age 18 or older, never made it past the 11th grade, but that’s another story. Although not likely the same 30 million who will never have health insurance (because they get theirs for free), you can bet Progressive’s will constantly characterize them as hard-working Americans worthy of evermore governmental assistance (i.e. a higher minimum wage, free child care, free junior college, free health care, etc… etc…)

Right, so they didn’t make it past the 11th grade, but now it’s our job to hand them a free ride? Are you kidding me? These are not hard-working Americans; they are society’s losers. Close to half probably aren’t even legal. Oops! The notion of robbing the middle class, in order to dole out freebies to a bunch of flunkies is absurd. If you want something in life, work for it like the rest of us. But I digress. The affordable excise tax, being levied against the true middle class, is damnable.

Are you paying your fair share?

Now get this. Of the 30 million (or so) who will remain eternally uninsured, the majority are expected to be exempt from the new excise tax. That’s right! Despite the federal government’s ultimatum, the CBO estimates that 23 million will qualify for one or more of the following exemptions:

  1. Not lawfully present. Any individual who is neither a U.S. citizen, U.S. national, nor an alien lawfully present in the U.S. If you are in the U.S. illegally, then according to the law you are exempt.

  2. No filing requirement. An individual whose household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on filing status, age, and types and amounts of income. If you are not required to file a return, then no other action is required.

  3. Income below the federal poverty level. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.

  4. Plans are unaffordable. You have no affordable coverage options because the minimum amount you must pay in annual premiums is more than 8% of your household income.

  5. Indian tribes. Any member of a federally recognized Indian tribe. You may claim this exemption directly on your tax return through self-attestation.

  6. Incarceration. Any individual in jail, prison, or a similar penal institution or correctional facility. You may claim this exemption through self-attestation when you fill out your federal tax return.

For more on exemptions, see Part 2. So in the year 2016, only around 7 million of the 30 million uninsured will have to deal with this new excise tax, in one fashion or another. The CBO estimates that among the 7 million, 3 million will either request hardship exemptions, or simply refuse to pay (i.e. take advantage of the IRS’s inability to administer and collect the tax).

All in all, the CBO believes a mere 4 million hapless Americans will be forced to fork over an estimated $4 billion in affordable care excise taxes in the year 2016. The figure climbs to an estimated $5 billion a year from 2017 to 2024. Note: The CBO neglected to offer estimates for tax years 2014 and 2015, which will likely involve higher numbers subject to the tax due to novelty of the law.

In brief, 4 million pay, while 26 million get a pass. Well, so much for the vaunted Fair Share theory! Perhaps all should be granted immunity, or at least an opportunity to purchase catastrophic health insurance policies, as I pleaded for in Part 1.

Squashing the Real Middle Class

Among the doomed 4 million (i.e. those subject to the affordable care excise tax), the CBO estimates that roughly 74% will be from what many consider to be the middle class (i.e. income exceeds 200% of federal poverty guidelines), with the remaining 26% in the low income category (i.e. income below 199% of federal poverty guidelines).Great!

So by the year 2016, out of 30 million perpetually uninsured Americans, comprising roughly 10% of the population, only 4 million, or just over 1% of the population, will be forced to pay what the Supreme Court said, “…may reasonably be characterized as a tax.” The bulk of the disheartened will represent the middle class, with a minority from the lower middle class. Wow!

Prior to the ACA, 42 million U.S. residents were uninsured. Following its implementation, 30 million, or 71%, will remain uninsured indefinitely. Of the 12 to 13 million newly insured, every single one is on the government dole, either through free Medicaid or subsidized health insurance premiums. In 2016, 4 million uninsured American citizens will be forced to hand over 2.5% of their income to the federal government in exchange for nothing, while another 26 million, in essentially the same boat, will remain uninsured but at least suffer no further humiliation. So the U.S. is finally taxing the 1%, eh?

Although the ACA focuses its excise tax on a tiny fraction of permanently uninsured Americans, at the same time it provides subsidies for people making up to four times the federal poverty line (i.e. $46,680 for a single person, $62,920 for a family of two, and $95,400 for a family of four). Can you say overpriced? As a general rule, when a product or service is subsidized it’s being sold at a premium (i.e. the insurance is overpriced). But not to worry, the ACA’s premium tax credits turn out to be a load of bull as well.

According to the Washington Examiner as many as 3.4 million of the 6.8 million who received taxpayer subsidized health insurance may owe money back to the federal government. H&R Block estimates that as many as half of the 6.8 million people who received insurance premium subsidies under the ACA benefited from subsidies that were too large. Oh, for crying out loud!

At this point, if you’re a left-winger you’re probably thinking, “Yippee, we did it!” If you’re conservative you’re likely saying, “I told you so.” And if you find yourself in the cross hairs of the affordable excise tax, you’re probably muttering words you dare not convey in public.

To be continued…

Related:

Affordable Care Excise Tax, Part I

Affordable Care Excise Tax, Part II

Affordable Care Excise Tax, Part IV

#Healthcare

Affordable Care Excise Tax, Part II

Effing the Middle Class

:: By: Larry Walker II ::

In Part 1, we voiced concern that in constitutional law sense, an excise tax is usually an event tax as opposed to a “state of being” tax, the recent exception to this principle being the “minimum essential coverage” tax under Internal Revenue Code section 5000A as enacted by the Patient Protection and Affordable Care Act (Public Law 111–148), whereby an indirect tax is imposed on the condition of not having purchased health insurance coverage.

This is not the first time in history the United States has forced its middle class to pay a tax supposedly for our common good; Social Security and Medicare taxes come to mind. However, this is the first time the federal government has ordered its middle class to either engage in an act of commerce, or else hand over a percentage of its hard earned income.

Nearly 18 million state and local government employees as well as a few conscientious religious objectors are exempt from Social Security taxes, while the rest of us are bound to a sinking ship. Is it fair that millions of Americans get a better deal, while the masses are forced to contribute to the welfare of others?

Under the Affordable Care Act it’s worse. Those who voluntarily purchase private company health insurance plans, predetermined by the federal government as meeting their needs, and deemed affordable to them based on contrived criteria, are allowed to escape the new tax, while those in need (i.e. stuck in the middle and still uninsured) get screwed.

If the principle behind the affordable care tax were applied consistently across the board, then those participating in qualified retirement plans should be exempt from Social Security tax, and owners of long-term care insurance contracts should be excluded from Medicare tax. This would be fair and equitable, but as it stands the new tax represents a major departure from Americanism.

Under this latest departure from common sense, the poor receive free health care through state-run Medicaid programs, the rich can handily afford the best of insurance plans, and the middle class are either stuck with high premiums compounded by soaring deductibles, or slapped with an excise tax for not purchasing a government mandated plan.

Members of the middle class, and those once aspiring, who refuse on principle, or are for myriad reasons unable to purchase a government mandated health insurance plan, and not meeting one of several exemptions, are subject to this new “state of being” tax. In other words, the state of being stuck between a rock and a hard place makes the middle class a prime target for funding government subsidies to the poor.

If you and your family did not have minimum essential coverage in 2014, you will need to meet a specific exemption to avoid paying the new excise tax. If you would like to obtain coverage for 2015, the deadline for doing so is February 15, 2015. To obtain coverage, your options include:

  • Health insurance provided by your employer;

  • Health insurance purchased through the Federal website (healthcare.gov), or your State’s Marketplace;

  • Coverage provided under a government sponsored program (i.e. Medicare, Medicaid, Veterans Administration);

  • Health insurance purchased directly from an insurance company; or

  • Other health insurance coverage that is recognized by the Department of Health & Human Services.

Who is exempt?

The Affordable Care Act mandates individuals without health insurance to pay an excise tax on top of their regular federal tax obligation, however there are exemptions. If you are exempt from the requirement to maintain minimum essential coverage, the excise tax won’t apply when you file your 2014 federal tax return. An exemption may apply if you meet one of the following criteria:

  1. You have no affordable coverage options because the minimum amount you must pay in annual premiums is more than 8% of your household income; or

  2. You have a gap in coverage for less than three consecutive months; or

  3. You qualify for one of the hardship exemptions listed below, or belong to an exempt group (explained later).

Numbers 1 and 2 (above) may be claimed directly on your income tax return, but a hardship exemption (number 3) must be approved by a government bureaucrat. To claim a hardship exemption, you must complete and mail an application to what’s being called the Health Insurance Marketplace (i.e. the federal government). Upon approval, you will receive an “exemption certificate number” (ECN), which must be included on your tax return to receive the exemption.

Please be aware, that if you do not qualify for exemption numbers 1 and 2 (above), and think you may qualify for one of the following hardship exemptions, the time to submit an application is now. If you wait until tax season, the filing of your tax return may be delayed (awaiting receipt of an ECN), or you may have to file without an exemption and amend your return later. Choosing the latter will affect the amount of your refund or balance owed.

If any of the following hardships apply to you, you must submit an application for exemption as discussed in Part 1:

  1. You were homeless.

  2. You were evicted in the past 6 months or were facing eviction or foreclosure.

  3. You received a shut-off notice from a utility company.

  4. You recently experienced domestic violence.

  5. You recently experienced the death of a close family member.

  6. You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.

  7. You filed for bankruptcy in the last 6 months.

  8. You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt.

  9. You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.

  10. You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child.

  11. As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace.

  12. You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.

  13. Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.

  14. You experienced another hardship in obtaining health insurance.

If any of the 14 hardships (above) apply to you, and you wish to be excluded from the affordable excise tax, then you must submit a hardship application, along with proper documentation supporting your claim. If approved, you will be granted an ECN to enter on your tax return. Good luck with that. If denied, you may need to pay the tax, or if you are expecting a refund the IRS will conveniently subtract it out.

Exempt Groups: The following individuals are exempt from coverage:

  1. Religious conscience. Any member of a religious sect that is recognized as conscientiously opposed to accepting insurance benefits. The Social Security Administration administers a similar process allowing exemption from Social Security and Medicare taxes. You must submit an application to claim this exemption.

  2. Health care sharing ministry. Any member of a recognized health care sharing ministry. Health care sharing ministries (HCSM) provide health care cost sharing arrangements among persons of similar and sincerely held beliefs. HCSMs are operated by not-for-profit religious organizations acting as a clearinghouse for those who have medical expenses and those who desire to share the burden of those medical expenses. You may claim this exemption directly on your tax return through self-attestation.

  3. Indian tribes. Any member of a federally recognized Indian tribe. You may claim this exemption directly on your tax return through self-attestation.

  4. No filing requirement. An individual whose household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on filing status, age, and types and amounts of income. If you are not required to file a return, then no other action is required.

  5. Incarceration. Any individual in jail, prison, or a similar penal institution or correctional facility. You may claim this exemption through self-attestation when you fill out your federal tax return.

  6. Not lawfully present. Any individual who is neither a U.S. citizen, U.S. national, nor an alien lawfully present in the U.S. If you are in the U.S. illegally, then according to the law you are exempt. Well, imagine that.

You’ve Been Grubered

The affordable excise tax maxes out at 1% of household income (above the filing threshold) in 2014, increases to 2% in 2015 (i.e. a 100% increase), then to 2.5% in 2016 (i.e. an additional 25% hike) and is automatically adjusted for inflation thereafter. What’s the rationale behind the dramatic rate of increase? Is inflation expected to rise by 100% in 2015 and by another 25% in 2016? Are middle class wages expected to grow at anywhere near this clip?

You’ve got to give it up for the Grubers (i.e. Democrats), for pulling the wool over our eyes and sneaking this baloney into law. As if their deception wasn’t bad enough on its own, what’s even more disturbing is their blatant persistence in calling this “state of being” excise tax a fee or penalty, even after the Supreme Court ruled it to be a tax. One has to wonder just who they are trying to fool at this point? Certainly members of the middle class, who are beginning to feel the pinch, are not fooled.

If the affordable care tax is indeed a fee, doesn’t the act of paying a fee normally correspond with the receipt of some good or service? Sure, but in the matter at hand, what does the middle class get in return for this so-called fee? Do we receive health insurance? Nope.

All the middle class winds up with is less money to cover its uninsured, out-of-pocket, health care expenses, and less to put towards compliance with the nefarious Act. So how exactly does this help the uninsured? Well, it doesn’t help this group.

If the affordable care tax is a penalty, doesn’t the assessment of a penalty normally succeed an act of wrongdoing? Yes, but in this matter, what wrong has been committed? Is the act of paying one’s own health care expenses out-of-pocket (without the benefit of health insurance) a crime? Since the statute waives criminal penalties for non-compliance with the requirement to maintain minimum essential coverage, it’s not a crime.

The Supreme Court agrees, its Chief Justice having stated that, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax…” Had the court deemed it a penalty, the entire law could have been ruled unconstitutional. Face it, the affordable excise tax is just that, a tax. It’s not a fee, nor is it a penalty, so it’s high time you Grubers cut the B.S. and start calling it what it is. Hopefully, the new Congress will bring an expeditious end to this looming catastrophic nightmare.

To be continued…

Related:

Affordable Care Excise Tax, Part I

Affordable Care Excise Tax, Part III

Affordable Care Excise Tax, Part IV

#Healthcare

Affordable Care Excise Tax, Part I

What the Individual Mandate means for you and your family

:: By: Larry Walker II ::

Under the Affordable Care Act, beginning in 2014, State governments, insurers, employers, and selected individuals are supposed to share in the responsibility of providing health insurance coverage.

The Act’s shared responsibility provision, also known as the individual mandate, requires you and each member of your family to either:

  • Have minimum essential coverage; or
  • An exemption from the responsibility to have minimum essential coverage; or
  • Pay an Excise Tax.

You will report minimum essential coverage, claim an exemption therefrom, or make an excise tax payment when you file your 2014 federal income tax return in 2015.

Now let’s stop and think about what this means. What it means for me, since I chose not to purchase health insurance this year, instead choosing to pay my own health care expenses out-of-pocket, is that on top of what I have already paid this year (which incidentally comes to less than 10% of my income so none of it will be tax deductible), I am also being punished by way of an excise tax. An excise tax for what exactly? For not purchasing a service which I deem to be worth less than its cost, due to high deductibles coupled with premiums?

‘State of Being’ Tax

In the United States, an Excise tax is an indirect tax on listed items. In constitutional law sense, an excise tax is usually an event tax (as opposed to a state of being tax). A recent exception to this “state of being” principle is the “minimum essential coverage” tax under Internal Revenue Code section 5000A as enacted by the Patient Protection and Affordable Care Act (Public Law 111–148), whereby an indirect tax is imposed on the condition of not having health insurance coverage.

In case you didn’t catch that, excise taxes are usually assessed on events, such as the purchase of a quantity of a particular item like gasoline, diesel fuel, liquor, wine, cigarettes, airline tickets, tires, trucks, etc. Such a tax is usually included in the price of the item—not listed separately like sales taxes. To minimize tax accounting complications, excise taxes are generally imposed on quantities like gallons of fuel, gallons of wine or liquor, packets of cigarettes, etc. and are usually paid by the manufacturer or retailer.

Other examples of excise taxes imposed in the U.S. relate to such things as luxury passenger automobiles, heavy trucks and trailers, “gas guzzler” vehicles, tires, petroleum products, coal, vaccines, medical devices, recreational equipment, firearms (see National Firearms Act), communications services (see Telephone federal excise tax), air transportation, policies issued by foreign insurance companies, wagering, water transportation, removal of hard mineral resources from deep seabeds, chemicals, certain imported substances, non-deductible contributions to certain employer plans, and many other subjects.

Excise taxes are normally passed on to the consumer who eventually consumes the product. The price for which the item is eventually sold is usually not considered in calculating the amount of the excise tax. Income taxes, value added taxes (VATs), sales taxes, and transfer taxes are examples of other excise taxes but are typically not called such (in the United States) because of the different ways they are imposed. In the U.S. the only taxes called excise taxes are essentially taxes on quantities of enumerated items (whiskey, wine, tobacco, gasoline, tires, etc.). Other taxes on certain events may technically be considered excise taxes, but may or may not be collected under the name “excise tax.”

Virtually every excise tax levied since the founding of this nation (perhaps since the dawn of time) has been levied for actively participating in some event. If you buy gasoline, you pay an excise tax on each gallon purchased, but if you don’t own a vehicle and don’t purchase gasoline, the tax is not levied. If you use a land-based or mobile telephone service, you pay an excise tax, but if you don’t have a phone, you don’t get charged. If you legally purchase tobacco, you pay an excise tax, but if you don’t smoke, you are spared. And I might add, if you are caught bootlegging a couple of loose cigarettes (loosies) on a street corner, you’re liable to get choked by a corybantic cop, and left to die on a New York sidewalk.

Anyway, will someone please explain to me why a person choosing not to engage in an event should be taxed? In effect, I’m damned if I do, and damned if I don’t. If I pay the premiums for the least expensive health insurance policy that the government insists I can afford (without so much as bothering to check my balance sheet), won’t I still have to pay the first $6,300, or more, in medical expenses to meet its annual deductible? Yes. And, if my out-of-pocket expenses turn out to be less than the deductible, barring some major catastrophe, won’t I have needlessly wasted my money? Yes. So what’s the point?

If it was up to me, and by the way it should be, I would purchase a low-cost catastrophic health care plan, just in case something happens down the road. The only thing standing in my way is the federal government. That’s because under the misnamed Patient Protection and Affordable Care Act, catastrophic plans are only allowed to persons either under the age of 30, or to those over 30 who wish to go through the torture of completing an eleven, or more, page hardship exemption application, which must then be approved by a nameless, faceless government bureaucrat.

Catastrophe in the Making

My first problem with having to complete a hardship application is that I shouldn’t have to. If I want to buy a catastrophic plan, I should have the freedom to do so. Secondly, after looking over the application and all the information my government wants from me, my initial thoughts are as follows: Why don’t they know most of this already? Followed by, it’s none of your damned business. Here are just a few examples from the requisite exemption application.

  1. Tell us about yourself (name, address, county, phone numbers, and email address). – [Okay.]

  2. Tell us about members of your household (your spouse and dependents). – [Okay.]

  3. Provide everyone in your household’s name, date of birth, sex, social security number. – [Incidentally, just beneath the space where your SSN is entered, it says in bold type: You are not required to have an SSN to get this exemption. Really, but if I don’t have a social security number, why would I need an exemption? Duh!]

  4. Are you pregnant? – [Not that I’m aware of.]

  5. Were you in foster care at age 18 or older? – [Uh, what does this have to do with anything?]

  6. Have you used tobacco in the last 6 months? – [If I did will my request be denied?]

  7. Are you a U.S. Citizen or U.S. national? – [Shouldn’t you wizards know this by my name, date of birth, and social security number entered at the top? Don’t tell me you didn’t bother to add citizenship status to your Master-File database.]

  8. Are you a naturalized or derived citizen? – [Uh, what perchance is a derived citizen? And again, if you don’t know this by the information entered above, then you have serious yet solvable problems.]

  9. Optional: What is your race? – [Do I have a better shot if I’m a person of color?]

  10. Are you enrolled in health care coverage? – [If I was enrolled in health care coverage, then I wouldn’t be wasting my time?]

  11. Are you offered health coverage from a job? – [I’m self-employed, and haven’t offered myself coverage.]

  12. What company do you work for? – [Does it really matter?]

  13. How much money do you make and how often are you paid? – [Ah, now we’re getting down to brass tacks.]

  14. How many hours do you work each week? – [Too many, but since I’m not paid by the hour, does it really matter?]

  15. When did you start this job, and when will it end? – [When will it end? Perhaps sooner than it should, due to this lousy law.]

  16. What months do you expect to have income from this job this year and next? – [Who knows? Hopefully all of them.]

  17. Are you self-employed? If so, what type of work do you do, and how much is your net income? – [Yes. Why does it matter what I do? And I’m not sure what my net income is yet, because you guys are still working out the final details of the 2014 tax law. However, I’m pretty sure I’m not making much headway burning valuable time and energy reading all of your rules and regulations, and filling out this application.]

  18. When did you start this self-employment and when will it end? – [When will it end? Why don’t you tell me, since you’re mucking up the works, and have predetermined that I can afford your prescribed coverage?]

  19. What month’s do you expect income from self-employment over the next two years? – [Two years? I’m not sure, but at this pace my prospects are dimming.]

  20. Tell us about your other income (unemployment, retirement, pension, farming/fishing, rental/royalty, alimony, social security, etc…) – [Gross, or after expenses, principal debt repayments and taxes?]

  21. Now tell us about deductions you claim on your tax return (alimony paid, IRA deduction, student loan interest, and other…) – [What about my out-of-pocket medical expenses, mortgage interest, property taxes, state income taxes, employee business expenses and other itemized deductions? I guess these don’t count.]

  22. Now do the same for your spouse and any dependents you claim on your tax return. – [Damn it. Oh, I almost forgot; good thing I’m still technically single.]

  23. Proof of yearly income: Submit proof of each type of income listed for each person on this application (copy of your most recent tax return, original W-2 and 1099 Forms, one or more pay stubs, financial statements, Schedule C, Form 1120S, lease agreements, court documents for alimony, etc.) – [Are you kidding me? Anything else before we get to the long-awaited catastrophic health plan?]

  24. Just one more question before you sign. Is anyone listed on this application incarcerated? – [WTH? Not yet anyway.]

  25. Now just sign, date and wait. – [Well alrighty then, but since this statement is not sworn under penalties of perjury, does that mean it can be a complete fabrication without consequence? And since this is a pseudo-government agency, how long before I get an answer — months or years?]

After assessing the prospect of completing and submitting the requisite hardship application along with supporting documents, and awaiting approval or denial from a faceless, faraway bureaucrat; solely to obtain permission to purchase a catastrophic health care plan, which is all I really want and need; I’m seriously leaning towards just forking over the 1% excise tax next year, another 2% in 2016, and 2.5% in 2017. What a catastrophe! So not only am I paying my actual out-of-pocket health care expenses, some of which already include excise taxes, but on top of that I’m being unfairly taxed (based on a percentage of gross income above the filing threshold) for the privilege of doing so. This is a travesty of justice.

The bottom line: An “event tax” should not be imposed on anyone who chooses not to participate in the event. The Affordable Care Excise Tax, being levied against Americans for not purchasing health insurance, is thus immoral. No American should be subject to an excise tax for choosing to take personal responsibility for his or her own health care expenses, without insurance. And, no American, desiring to do so, should be denied, or forced to jump through hoops for the right to purchase a catastrophic health care policy. You may proceed with this unjust confiscation of my money (if you will), and then go blank yourselves, or you can do what only true Americans would do. Open the damned “marketplace” so that health insurance plans available to selected Americans are available to all Americans.

Related:

Affordable Care Excise Tax, Part II

Affordable Care Excise Tax, Part III

Affordable Care Excise Tax, Part IV

#Healthcare

Obamacare’s Effect on Small Business

Unaffordable Care Act | Jobless, Unshared, and Irresponsible –

By: Larry Walker, Jr. –

“An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation.” ~ Daniel Webster in M’CULLOCH v. STATE, 17 U.S. 316 (1819) –

Although Barack Obama boasts of having implemented 17 tax cuts for small business during his one-term proposition, as I pointed out in Why Congress Shouldn’t Just Pass Obama’s Jobs Bill, Again, not one item on the list actually meets the definition of a tax cut. #1 on the list was the Small Employer Health Insurance Tax Credit, which is found in Internal Revenue Code Section 45R. The goals of the Section 45R credit are supposedly as follows: (1) to help offset the cost to small businesses that offer employee health insurance coverage, and (2) to encourage small businesses not providing health insurance to start offering coverage.

But unfortunately, the overall effect of the Patient Protection and Affordable Care Act, will be to encourage large employers, those with 50 or more full-time employees, to drop health insurance coverage, reduce the number of employees, or cut weekly work hours to less than 30 in order to avoid paying the so-called shared responsibility penalty. Neither will the new legislation encourage smaller companies, those with fewer than 50 full-time employees, to offer health insurance, as it merely provides a six-year subsidy for those with fewer than 25 employees, encouraging them to limit their growth to 24 or fewer full-time employees, and it does absolutely nothing for companies with between 25 and 49 full-time equivalent employees.

Code Section 45R – Small Employer Health Insurance Tax Credit

The tax credit is available from 2010 through 2015. For 2010 – 2013 the maximum credit is 35% of qualified premium costs paid by for-profit companies, and 25% for non-profits. The maximum credit is only available to employers with no more than 10 full-time equivalent employees (FTE’s), who are paid average annual wages of $25,000 or less. A reduced credit is available on a phase-out basis for employers with between 10 and 25 FTE’s, who are paid average wages of $25,000 to $50,000. In effect, the credit is reduced by 6.667% for each FTE in excess of 10, and by 4% for each $1,000 in average annual wages paid above $25,000. For example, an employer with 13 full-time equivalent employees who are paid average annual wages of $45,000 will not receive a tax credit. No tax credit is available for employers with 25 or more FTE’s, or who pay average annual wages of $50,000 or more.

From Unaffordable Care Act

In 2014 through 2015, the credit increases to 50% of the amount of qualified premium costs paid by for-profits, and 35% for non-profits, however by then, the employer must participate in a state insurance exchange in order to obtain the credit. [Note: Each state is required to create an insurance exchange by January 1, 2014 which must include an American Health Benefit Exchange, as well as a Small Business Health Options Program (SHOP) Exchange.]

Full-Time Equivalent Employees (FTE’s) – For purposes of the Code Section 45R Credit, the number of FTE’s is determined by dividing the total number of hours worked by each employee (but not more than 2,080 per employee) by 2,080. This is based on a 40 hour work-week for all 52 weeks of a calendar year. The result is rounded down to the nearest whole number. An employer with 25 or more employees may still qualify for the credit if it employs part-time or seasonal workers. Seasonal workers are disregarded in determining the number of FTE’s as long as they work for less than 120 days during the tax year, however the amount of health insurance premiums paid on their behalf is still counted in determining the amount of the Section 45R credit. The number of FTE’s is calculated by totaling all hours worked by each full-time employee, each part-time employee, and each seasonal employee (working more than 120 days) and then dividing the total hours worked by 2,080.

Example: TEA Corporation has 7 employees who worked 2,000 hours each, and 5 who worked 1,500 hours each, during the tax year. The number of FTE’s is calculated by totaling all the hours worked, and dividing the result by 2,080. In this case, TEA Corporation has 10 full-time equivalent employees.

Average Annual Wages – Average annual wages is calculated by dividing the total amount of wages paid for the year by the number of FTE’s. However, certain employees are excluded from both the FTE and average annual wage calculations as follows: sole proprietors, partners in partnerships, greater than 2% owners of S-Corporations, greater than 5% owners of C-Corporations or other entities, and most family members (including children, step-children, siblings, step-siblings, parents, step-parents, nieces or nephews, aunts or uncles, and in-laws).

Example: TEA Corporation paid total annual wages of $250,000, not including the wages paid to its owner. Since TEA Corporation has 10 FTE’s, its average annual wages are $25,000 ($250,000 / 10).

Premiums – Only health insurance premiums paid by the employer under a qualifying arrangement are counted in calculating the Code Section 45R tax credit. For 2010, employers were allowed to count the total amount of premiums paid for the entire year, even though the health reform plan wasn’t passed until March 23, 2010. However, in order to qualify, the employer must pay at least 50% of the total premium costs. Employers are only allowed to count the amount the company pays and not the amounts paid by employees. Health insurance coverage also includes amounts employers pay for dental, vision, long-term care, nursing home care, home health care, community based care or any combination thereof.

The amount of an employer’s premium payments that counts is capped by the amount of average premiums for the small group market in the state (or an area within a state) in which the employer offers coverage. The average premium for the small group market in a state or area is determined by the Department of Health and Human Services (HHS). The IRS released the average premium for the small group market in each state for 2010 in Revenue Rule 2010-13 (table at left-hand). For example, in 2010, the limits in Georgia were $4,612 for self-only coverage, and $10,598 for family coverage.

Carry Back and Carry Forward – The Section 45R credit is not refundable to for-profit companies. Any unused portion may be carried back 1 year and carried forward for 20 years, however a credit earned in 2010 may only be carried forward. Note: Companies with no tax liability will not receive any immediate assistance from the Section 45R credit. So for example, a company taking advantage of the 100% bonus depreciation provision, or other tax benefits, and the Section 45R credit in the same year may not gain any immediate benefit from the health care credit.

Health Insurance Deduction and Tax Credit – Under Internal Revenue Code Section 162, long before health care reform, employers have generally been allowed to deduct the cost of providing health insurance coverage for employees. However, going forward the IRS has interpreted that the amount that may be deducted must now be reduced by the amount of any Code Section 45R credit.

Example: A Georgia Based Small Business

TEA Corporation is a Georgia based company with a single owner and 10 full-time equivalent employees, average annual wages of $25,000 per year, and it provides self-only health insurance coverage. TEA Corporation pays 50% of the total premium for each employee. These figures were chosen specifically; since in order to qualify for the maximum Section 45R credit an employer can have no more than 10 FTE’s, average wages of no more than $25,000, and must pay at least 50% of its employee’s insurance premiums.

Because the total amount of premiums cannot exceed $4,612 for self-only coverage within the State of Georgia, the total amount of premiums paid by TEA Corporation, for purposes of the tax credit, is limited to be $23,060 (2,306 X 10). Assuming the company is in a 34% income tax bracket (i.e. taxable income is between $75,000 and $100,000 per the table below); the Section 162 deduction would normally save the company $7,840 (23,060 X 34%) in taxes.

Now, since the company qualifies for the maximum Section 45R credit of 35%, it will receive a tax credit of $8,071 (23,060 X 35%), however it will only be allowed to deduct health insurance expenses under Section 162 of $14,989 (23,060 – 8,071). So the Section 162 deduction of $14,989 saves the company $5,096 (14,989 X 34%), in addition to the Section 45R credit of $8,071, for total tax savings of $13,167 (5,096 + 8,071). So in effect, the new tax credit benefits the company by an additional $5,327 (13,167 – 7,840), or by $532 per employee, because the company would have already saved $7,840 (23,060 X 34%) prior to Obamacare.

From Unaffordable Care Act

If in the example above, TEA Corporation was not able to afford health insurance prior to Obamacare, then how does the Section 45R credit change things? Won’t the company still have to shell out an additional $23,060 to cover the employer’s share of health insurance costs? Yes. And although it will be eligible for the Section 45R credit, it won’t realize the $13,167 in tax savings until its tax return is filed in the subsequent year. So in effect, the company’s cost per employee will have risen by $2,306. Adding to the dilemma is the fact that the amount each employee must contribute also increases by $2,306. So both the company and its employees will be poorer at the end of the year, although the employer may have a chance to recoup about 57% (13,167 / 23,060) of its costs through subsequent year tax savings, and its employees will receive health insurance.

Problems: (1) In tax years 2010 through 2013, the federal government is going to somehow magically come up with $13,167 to cover 57% of TEA Corporation’s health insurance premiums, and do the same for potentially thousands of other similar small businesses, but who’s going to pay for this? Won’t the tab simply be added to the seemingly unlimited national debt balance? (2) And since employees will have to pay for potentially half of their own health insurance costs, each one who wasn’t previously covered by health insurance, and more specifically those making less than $25,000 per year, will have to figure out how to live off of approximately $2,306 less in disposable income. Does this sound like a good deal for those making under $25,000 per year, or even $50,000?

More Problems: (1) Of course, if any of the 10 employees in this example require family coverage, the costs for both the employer and employee will go up dramatically, as will the government’s cost of the subsidized tax credit. In the example above, the employer and employee obligation rises from $2,306 to $5,299 per year, or half of the average premium for small group family plans of $10,598. (2) Then in 2014 and 2015, as the Section 45R Credit increases to a maximum of 50%, the federal government’s (i.e. taxpayers) share increases by even more. This additional federal spending, though tax expenditures, will only add to the federal government’s current national debt balance of $14.7 trillion and ticking, until the tax credit well runs dry in 2016. (3) If small companies can’t afford it now, how will those who employ fewer than 25 workers be able to afford health insurance after 2015?

Exempt Organizations – Meanwhile, tax-exempt organizations will receive a “refundable tax credit” of up to 25% of the amount of health insurance premiums paid between 2010 and 2013, and 35% in 2014 and 2015. This refundable tax credit is limited to the amount of federal tax withheld from employees’ paychecks, the amount of Medicare tax withheld from employees, and the amount of Medicare tax matched by the employer.

Problem: Since exempt organizations don’t pay income taxes, the cost of the refundable Section 45R tax credit will never be recovered. In effect, individual and for-profit business taxpayers are subsidizing the tax credits granted to small non-profit organizations. Non-profit organizations, which are not even subject to the income tax, are being allowed to receive refundable income tax credits based on the amount of payroll taxes paid essentially by their employees. So in this respect, all Obamacare does is to giveaway more tax expenditures to folks who don’t pay any federal income tax. Wasn’t this already a major problem prior to Obamacare?

Large Employers – “Play or Pay”

Although Obamacare doesn’t mandate small employers to offer health insurance coverage to their employees, it does include play or pay rules which apply after 2013. The provision is intended to encourage employers to offer coverage or to pay a shared responsibility penalty. The play or pay rules only apply to large employers, those with 50 or more full-time employees. [Note: Employers who offer free choice vouchers to qualified employees were supposed to have been exempt from the penalty, but this provision was repealed in 2011.]

Problem: Employers who employ 25 or fewer employees are given an incentive to begin or to continue health insurance coverage, but are not required to provide it; while those with 25 to 49 employees are given no incentive, and are not required to provide insurance; and those with 50 or more employees are given no incentive, but face penalties for not offering adequate and affordable coverage by 2014.

Shared Responsibility Penalty The shared responsibility penalty will apply to two groups of employers after 2013: (1) Large employers that do not offer health insurance coverage. (2) Large employers that offer coverage but have one or more employees receiving premium assistance tax credits or cost-sharing because the coverage is deemed unaffordable. If even one employee receives premium assistance tax credits through a state insurance exchange, then the penalty will be $2,000 per full-time employee (not including the first 30 workers). And if the employer offers what is deemed to be unaffordable coverage, then the penalty will be $3,000 for any employee who receives premium assistance tax credits through a state insurance exchange up to a cap of $2,000 for every full-time employee.

[Note: Unaffordable coverage is defined as when the premium required to be paid by the employee is more than 9.5% of the employees’ household income. In such cases the employee is eligible for a premium assistance tax credit and cost-sharing reductions, but only if the employee declines to enroll in the employer’s coverage and purchases coverage through a state insurance exchange.]

Large Employer Problems:

(1) Large employers need to know how much household income each employee has including all working adults within their households.

(2) For purposes of the shared responsibility penalty, a Large Employer is an employer which employed an average of at least 50 full-time employees during the preceding calendar year. In other words, those with an average of 50 or more full-time equivalent employees in 2013 will be subject to the penalty in 2014, even if they have reduced the number of employees by that time.

(3) Full-Time Equivalent Employees for Large Employers – Unlike the definition of full-time equivalent employee for small employers, for purposes of the shared responsibility penalty, a full-time employee is defined as one who works an average of 30 hours per week. Employers who think they won’t be affected by the penalty or the employer mandate need to read the fine print.

Conclusions

  1. By offering incentives to micro-sized businesses, those with 25 or fewer full-time employees with average wages of less than $50,000, and no incentives to larger companies, Obamacare discriminates against job creators.

  2. Since employers with fewer than 25 employees are not required to provide health insurance coverage, and are not penalized for not providing coverage, most employers who qualify for the tax credit are not taking the bait. Let’s face it, health insurance plans drive up business costs even with a generous tax credit. And since the tax credit expires at the end of 2015, what is the catalyst which will make health insurance more affordable in the future? Will businesses and their customers have more money in their pockets as a result of Obamacare?

  3. Employers with more than 25 full-time employees and fewer than 50 fall between the cracks. For them, there is no incentive to provide health insurance coverage and no penalty for failing to provide it. It’s as if they don’t exist, which clearly displays the discriminatory aspect which Obamacare casts upon job creators.

  4. Meanwhile, large employers, those with 50 or more employees working at least 30 hours per week, receive no incentive to provide coverage, yet will be punished for not providing it. In the end, some large employers are encouraged to reduce the number of full-time equivalent employees to below 50 before 2013, to reduce the number of hours worked for some employees to below 30 per week, or to simply pay the shared responsibility penalty of $2,000 on each employee (excluding the first 30), rather than commit to even more costly health insurance contracts.

If TEA Corporation, in the example above, had 100 employees requiring self-only coverage, and paid 50% of the premiums, then its health insurance expense would be roughly $230,600. However, if TEA Corporation simply opted to pay the shared responsibility penalty of $2,000, on the 70 applicable employees, it would have to pay the IRS a penalty of just $140,000, in lieu of the $230,600 cost of insurance. But, if TEA Corporation is not able to afford $230,600, to pay for health insurance on its employees, it is compelled by the rule of law to hand over $140,000, money that it may or may not have, to the federal government under the play or pay rules. Is this fair?

The way things stand today, if by the year 2014 a large employer can’t afford health insurance, in spite of Obamacare – which does nothing to make it more affordable, or if providing health insurance would jeopardize its ability to continue as a going concern – in the Obama economy, then it still must pay the shared responsibility penalty, even if it means laying off workers, shuttering operations, or filing for bankruptcy. In other words, America’s job creators will either play, pay or be destroyed. If this job killing law is not repealed by 12/31/2012, the unemployment rate will continue to soar, because the companies which will be most affected are compelled to take action before then. In fact, in order to ensure that they are not blindsided by the one year look-back rule which begins on 01/01/2013, many companies are already taking action.

In my humble opinion, the Patient Protection and Affordable Care Act cannot be repealed fast enough. Be sure to sign the White House Petition to Repeal Obamacare. You must cast your Vote by 10/22/11.