ObamaCare (Affordable Care Act) Is Not An Insurance Or Healthcare Problem

ObamaCare is coming and the world is ending!  I’ve heard this for the last 3 years from Republicans and Democrats alike as universal healthcare comes into full affect.  Universal healthcare is not the problem.  Tax administration is the ObamaCare or Patient Protection and Affordable Care Act’s (“ACA”) problem.  More importantly, it’s a problem that the IRS never wanted.  Logically, why would anyone want a “tax agency” or the “IRS” to be responsible for “enforcing” universal healthcare!

Politics has shifted the focus away from what’s important in ObamaCare.  Universal healthcare is generally a good idea because people should be able to live without choosing between their lives and a giant medical bill.  The Affordable Care Act is causing a lot of uncertainty because politics is impeding the process.  The first thing to discuss are the myths or misconceptions that are constantly being passed around.

Myths & Misconceptions:

ObamaCare

• ObamaCare is actually called the “Patient Protection and Affordable Care Act.”  Its most commonly referred to as ObamaCare or the Affordable Care Act.  I will refer to it as ObamaCare in the article for simplicity.  But, it’s interesting that Americans are unclear about the proper name for a law that will affect everyone.

ObamaCare is Free

• ObamaCare is not free.  A lot of people think that ObamaCare is free because their concept of universal healthcare is “free healthcare.”  Universal healthcare is a term that politicians use because they sound better than “a compulsory insurance mandate.”  Universal healthcare is different in every country and it’s not very well understood by Americans, but the important thing to understand or know is that ObamaCare is a “compulsory insurance act.”  Healthcare is not free.  Everyone is required to have (buy) insurance, so everyone is supposed to have “affordable healthcare coverage.”
• ObamaCare is a law that requires compulsory or mandatory insurance – not healthcare.  We are all required to buy insurance that is subsidized by our employers and/or possibly the government.  Employers are only required to pay up to 60% of the cost of insurance premiums.  Thus, you’re still going to need to pay for the rest of the insurance cost.
• ObamaCare is subsidized for those qualified!  This means that the government is helping individuals and families cover substantial portions of their income.  If you earn less than $46,000 dollars a year as a family household (4x the American Poverty Line), then you’d likely qualify for a subsidy.  The median household income for the United States is about 52,100 dollars, so this means that most Americans are going to be able to have at least some help paying their insurance.

All Employers Refuse to Provide Insurance to You (Employees) Without the ACA

• Shockingly, most employers provide insurance to their employees.  I, like most of you, was under the assumption that employers would only provide insurance, if they were forced to by the government.  To my surprise, most employers already provide insurance options to their employees (you).  Zane Tankel, CEO of Apple -Metro an Applebees franchise owner, has been vocal about his position against ObamaCare and taken a lot of fire for it.  Even so, he provided health insurance to his employees three-years before ObamaCare was enacted and does his best as an employer.
• I’ve also heard arguments that businesses or employers only provide “sub-standard” insurance options.  Paul J. Sarvadi, CEO of Insperity, Inc explains, “ObamaCare establishes the standards for insurance plans to satisfy and most employers offer insurance plans that provide coverage better than the bronze, silver, gold and platinum plans.”
• This was probably the biggest surprise I found while researching ObamaCare.  I honestly thought that ObamaCare would raise the quality of health insurance or effectively require employers to provide something better.  Chris Costello, President of CBG Benefits explains, “Companies that are going to provide healthcare generally do their best to provide good healthcare.”  Companies that aren’t planning on providing healthcare still won’t even after ObamaCare.

Everyone (Employees) Loves the ACA Insurance Requirement

• A lot of people are under the impression that they want ObamaCare because it’s free or somehow better.  We know that there’s an insurance requirement and that there’s a penalty, but for some reason we just don’t feel like it applies to us – until it does.
• Surveying a local Starbucks in NYC to hear how an average coffee drinking American thought ObamaCare would affect them.  Joey Pan like most Americans “thought ObamaCare was giving me free healthcare.”
• I asked James King, if he would be willing to pay $1,000 dollars per year for insurance?  King is a healthy 26 years old, so he wasn’t in love with the idea of spending a thousand dollars for something he might not need.  I asked King, if he would rather pay the $95 dollars tax penalty for not having insurance or the $1,440 dollars per year.  King said, “I’d pay the $95 dollars.”  King admitted that he liked ObamaCare, but that the cost was a little steep for him.

The Truth:

ObamaCare is A Really Complicated Tax Problem

• Karen Field, Principal at KPMG’s Washington Tax Practice, took over an hour to explain ObamaCare’s “general rules” to a seasoned tax professional.  There are two tests that you need to apply before you can even begin to determine your ObamaCare reporting requirements to the IRS.  Karen explains, “Many small businesses assume that they have less than 50 employees, but that’s because they misunderstand how the number of employees is calculated under the law.  This is particularly common when dealing with part-time employees.”  Once a company knows that it has 50 employees and is subject to the employer shared responsibility rules, Karen explains that hiring “variable employees” or employees with irregular schedules can be very complicated and expensive for ObamaCare determinations because these employees may switch in and out of eligibility based on their average hours during each testing period.

The IRS Never Wanted This Problem

• IRS Inspector General J. Russell George explained that,” it will require significant resources, particularly customer service resources as taxpayers turn to the IRS with questions and issues about the ACA and their tax and health insurance requirements.  Customer service has been declining in recent years, with fewer taxpayers being served at the local offices and the IRS answering fewer telephone calls.  The ACA will further stretch these already limited resources.”  A subcommittee member commented that, “It is unprecedented in recent history, the amount of responsibility the IRS is being given in an area that most people don’t think of as an IRS function.” The IRS Inspector General answered, “This is going to lead to problems, sir.”

ObamaCare is One-Size That Doesn’t Fit All

• A real problem with ObamaCare is that the law applies to everyone “the same.”  The United States is a nation with about 314 million citizens.  It’s impossible to create a single law that takes into account the rights of 314 million individuals.  An example is the contraception insurance requirement in health plans without “cost-sharing” under the law’s market reforms.  This posed a serious issue for religious companies.  The Department of Treasury, Labor and Health and Human Services recently provided an exception for non-profit religious employers.  Unfortunately, this exception does not extend to for-profit employers.  This is one example of how an exception was required.  I’m sure that over the years, we are going to see an outstanding number of exceptions become law in order to meet the needs of every American.

Conclusion:

This is an insanely long article about how our healthcare problem became a tax problem.  There’s a ton of misconceptions out there about ObamaCare because of politics.  There are problems with ObamaCare, but the idea that everyone should have healthcare is right.  A lot of employers care about their employees.  Most have provided their employees with great healthcare options before ObamaCare because they feel the same way.  ObamaCare is here to stay and it’s going to be a bumpy ride adjusting to the tax changes.  Cutting through the politics and focusing on how to make it all work is what we should worrying about.  The first step is probably providing the IRS with more funding, so that they can clarify a lot of the questions.  Ultimately, we’ll all be better off with a little more healthcare.