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Individual mandate tax waived for individuals with cancelled insurance

It’s starting to look like the person most dissatisfied with Obamacare may be President Obama. The Associated Press reports that in another strategic move to sidestep his health care law, Health and Human Services Secretary Kathleen Sebelius announced, that “Obamacare’s individual mandate tax will be waived in 2014 for persons who had their policies canceled in 2013 due to Obamacare.”



Just months after Obamacare’s disastrous rollout, days before a major holiday, and weeks filled with pronouncements, delays, and exemptions, we have a new decision to waive the individual mandate tax that could threaten the president’s signature domestic legislation.

But this move to waive the individual mandate tax could infuriate Americans. According to a recent article by James C. Capretta in the Weekly Standard, this move could be seen as “blatantly unfair and arbitrary” to many Americans considering that many of them have already chosen their insurance policies based on the laws they thought would be in effect. This move to waive the individual mandate tax was also made after the Administration defended their legislation and argued that the individual mandate tax would not be waived for anyone.

Capretta also notes that the Administration will most likely argue they are doing the right thing and may suggest this move is nothing more than a “tactical retreat, executed with surgical precision, and intended to protect the law from more serious legislative threats in 2014.”

But most of us see this for what it really is: damage control. The truth is the exchanges are teetering, there are hundreds of thousands of people who have had their policies canceled who do not have coverage, enrollment in private plans is down and many who did sign up for insurance may decide their premiums are unaffordable.

What’s the upshot of the Individual mandate tax waiver?


 

According to Capretta, however, this delay is good for one group of Americans- the young and healthy- who don’t want to pay high premiums for Obamacare’s expensive benefit plans.

But unfortunately, the administration’s decision simply delays a problem that the Administration has yet to address: the penalties in place are not punitive enough to incentivize the young and health to ever purchase insurance.

The result will be risk pools which will be unbalanced with too few of the young and healthy to balance the old and sick.  Capretta argues, “There’s more reason than ever to expect the exchanges to resemble slightly enlarged versions of high-risk pools that have been in existence for years in the states.”

But this does not address another big issue. While the administration has waived the mandate for those who have lost their coverage due to Obamacare, they have not addressed those who remain subject to the mandate. Capretta argues that there will be no justification for waiving the mandate for those who could afford to pay premiums in 2013 (for policies that were forced to be canceled by Obamacare) but then retaining it for the millions of uninsured in 2014.

And what about 2015 when employers are forced to provide insurance coverage for employees or risk paying a penalty? Some employers, especially smaller companies, may decide to drop insurance coverage altogether. This could leave millions of more Americans looking for insurance in 2015. And what happens if they are unable to get insurance? Experts contend we can expect them to put additional pressure on the Obama administration to exempt them from the individual mandate tax too.