Most see President Obama’s executive decision to delay the employer mandate in Obamacare as a gift to big business. Likely so, but it is also a massive, stealthy tax increase on individuals.
There are two major reasons why individually owned health insurance is much more expensive than employer-provided plans. First, premiums are generally less in group plans. There is a larger group to share the risk, and employed individuals are likely to be healthier.
Second and probably more important, employer-provided insurance is purchased with pre-tax dollars. Your health benefit is not subject to either payroll or income taxes. If you buy insurance yourself, though, it is with after-tax dollars. Depending on your tax bracket, this could double the effective cost.
If you lose your employment benefit and have to go to the individual market, your premium will probably increase — and you will have to earn about twice the value of the premium in order to pay it once Social Security, Medicare, federal income taxes, and state and local taxes extract their share.
Members of Congress eventually figured out what they had done to themselves and their staffs by agreeing to get their insurance through the exchanges. “They cut themselves off from the option of paying for health care with pretax dollars,” explained Sen. Ron Johnson, Wisconsin Republican, in a Jan. 6 article in The Wall Street Journal. “That’s when they went running to President Obama for relief.”
Evading the clear purpose of Obamacare, the Office of Personnel Management ruled that the federal government is a small business so that members of Congress can get their coverage purchased by their employer with tax-free dollars through the Small Business Health Options Program.
Mr. Johnson and a staff member have filed a lawsuit to challenge this instance of legislating from the White House.
The Association of American Physicians and Surgeons (AAPS) is also contesting a massive change in the law made by executive fiat. AAPS v. Koskinen, filed in federal district court in Wisconsin, challenges the Obama administration’s delay in enforcement of the employer mandate while continuing to enforce the individual mandate.
As with the above rule, the administration violated the separation of powers required by the U.S. Constitution.
Ironically, Mr. Obama and other Democrats are making “inequality” the focus of their 2014 campaign. Mr. Obama is also planning to meet with Pope Francis in an “inequality summit” in the Vatican in March.
Meanwhile, the administration’s implementation of Obamacare is rife with unequal treatment of citizens based on their apparent political influence.
The law exacerbates and highlights many inequities in the system — especially the tax treatment of health expenditures. Why should health insurance premiums get more favorable tax treatment than spending for other necessities of life? Why should insurance premiums be favored over direct payment of medical bills?
It is not coincidental that health spending is rising faster than spending for anything else (except possibly education). Third-party payment for those costs, even aside from the tax subsidy, is the primary cause of outrageous bills.
The lack of an incentive to save, huge administrative burdens, and opportunities for massive leakage in the system have at least doubled costs. It is simply absurd to funnel $100 through an “insurance” system to pay a claim that is worth less than $50.
Tax favoritism for employment benefits favors those with higher income, leads to job lock, and helped to create the pre-existing conditions problem. True reform would have tax equity as a leading feature. Instead, Obamacare forces individuals to shift more of their earnings into inflated insurance premiums and higher taxes.
Speaking of taxes, the health care law teaches us that insurance premiums are “unaffordable” if they exceed 9.5 percent of household income. What about a payroll tax that gobbles up about 15 percent of earnings (with half of the take hidden under the mask of the employer contribution)?
With Obamacare, one inequity leads to another in a massive, jerry-rigged system that vacuums money out of the economy and into the coffers of various favored stakeholders, and of course, the IRS. Maybe some will trickle down to those who actually provide care — if any survive.
Dr. Jane M. Orient practices internal medicine in Tucson, Ariz., and is executive director of the Association of American Physicians and Surgeons.