The Nightmare that is the PPACA
The PPACA has nothing to do with citizens’ health or reform of the broken systems of medical delivery. This current law is totally a matter of control by government of all means and costs of public health. Recognizing this, HR 5424 was introduced May 27 and has 47 co-sponsors. Simply, this bill would repeal the PPACA. House leadership will, of course, not allow HR 5424 a hearing, and if it did, only when it had enough votes to ensure defeat. But there is another Congress after November elections, and it will undoubtedly not be far-left like the current majorities.
The PPACA is enormously complex and cannot be analyzed on one page. But we can evaluate and summarize its effects on readers of this journal, especially regulatory and tax implications. A primary issue with the PPACA is a requirement that every American have health insurance meeting government’s approval, a mandate raising constitutional questions that have already been challenged in referendum (Missouri Proposition C, early August, where three of four voters rejected the idea) and in various court or in-process rulings (in seven states at last count) that prevent federal imposition of health insurance buying.
The existence of the PPACA raises dispute over the government’s ability to enforce the laws and taxes/penalties for failure to comply. Nonetheless, the PPACA does authorize the IRS to collect. The Congressional Budget Office (CBO) estimates that 4 million Americans will be faced with penalties averaging $1,000 by 2016. There is also an employer mandate imposing tax/penalty of $2,000 per full-time employee for failure to meet the mandate (including employees already insured) by 2014. The CBO estimates this will affect two-thirds of companies and 80% of small-business owners.
A net result is likely to be dramatic adjustments to compensation packages to account for costs, reduced hiring to avoid new costs and reduced “future compensation” options. The CBO estimates that 10-12 million U.S. workers could lose current employer-provided health insurance and that 8-9 million of those will have to resort to Medicaid. Remember the law of unintended consequences? Or is this intended?
The PPACA bans recissions (insurers dropping coverage), lifetime limits on benefits and places limits on policy-holder deductibles – all really focused on control of private insurers’ conduct of business and not on benefits for the insured. For example, only 5,000 recissions happened nationwide last year, and a substantial portion of these were based on fraud; 40% of issued policies have no lifetime caps, and 99% of those with caps have limits so impractically high as to have no effect. Part-time, low-wage seasonal workers who use limited benefit plans are dramatically injured by this restraint on deductibles. As a result, 1 million U.S. workers currently with health insurance will lose coverage. For industrial firms, the PPACA inhibits ability to select or assist employees obtaining health insurance that they and the company can afford.
The impacts of the PPACA on state budgets are another (un)intended consequence. The new law requires states to cover Medicaid occurrences for the poor, an unfunded liability that typically ranges from 0.5% to 2% per state. For example, Texas is required to support $746 billion, or 1.9%, of the state’s general fund over the next decade; Pennsylvania is required to support $140 billion (0.5%); Illinois is required to support $225 billion (0.83%). What states are required to pay based on federal direction becomes an added tax paid by employers.
This is another federal infringement into territory that is not allowed by the Constitution – unfunded mandates and direction of state prerogatives is patently unconstitutional. If left as law, every state will be forced to tax businesses to cover these obligations. The PPACA requires establishment and business participation in “Exchanges,” the left’s federally controlled clearing-house to match consumers with products and providers. This idea is not one of assisting citizens or businesses but of government injection into a control position.
The plethora of new taxes is staggering. A 40% excise tax will be applied to an employer-provided insurance plan with an actuarial value exceeding $10,200 (individual) or $27,500 (family). The Medicare payroll tax will increase from 2.9% to 3.8% for high earners ($200,000). The threshold for medical tax deduction will rise from 7.5% to 10% of AGI for everybody. The PPACA imposes a tax on insurance firms based on market share. So, as costs of their operation rise, their customers pay for it. As a final example, the new law provides that Form 1099 be issued and filed with the IRS for virtually every purchase or payment of record, regardless of business size.
The PPACA is a regulatory and tax nightmare. Even Senate Budget Committee Chairman Kent Conrad (D-ND), who actually voted for the law, said it is “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.” IH