Obamacare is over

obamacare-logo_fullA few weeks backs I said that Obamacare would go the way of Section 89, legislation that was passed in 1986 to to put a tax cap on health insurance benefits.  It was so confusing and the cost for an employer to calculate whether or not they were over the cap was so expensive, Section 89 was actually repealed and never went into effect.

Last week, the WSJ Journal had a story titled Obamacare’s Secret Mandate Exemption.   The most important part that a hardship to avoid the penalty being :

Now all you need to do is fill out a form attesting that your plan was cancelled and that you “believe that the plan options available in the [ObamaCare] Marketplace in your area are more expensive than your cancelled health insurance policy” or “you consider other available policies unaffordable.”

Let me ask you this what tax-payer facing a Federal penalty for not having health insurance will not complete this form and avoid the penalty?   Not to mention anyone who had their plan cancelled can avoid the penalty through 2016.

This seven page technical bulletin just cancelled the Federal Individual Mandate penalty.  You have to understand that without a penalty, healthy people that do not have health insurance will not sign up.  Even a $100 fine this year has not convinced healthy people to enroll.

Why is that so important?  The whole key to the “success” of Obamacare is that healthy people need to sign up for health insurance.  If they do not then the only subscribers in the pool will be unhealthy people, who get immediate immediate coverage Day 1 covering all pre-existing conditions:

  • The claims ratio in comparison to premiums collected will go through the roof.
  • Premiums will sky rocket at renewal.
  • The healthier people remaining in the pool will cancel due to the high rates.  Leaving only the unhealthy who are incurring claims.
  • The claims ratio will get even worse.
  • Premiums go up even more

I have heard this referred to as the “death spiral”, but it is is true.

Not only does Obamacare need a Individual Mandate penalty to succeed, but theoretically it needs to be in the $3,000 range for singles and $9,000 range for families.  Don’t get me wrong, I am not advocating for this but that is what it needs to be for Obamacare to be a “success”.

If the penalties were this high then healthy people would actually sign up, claims to premiums loss ratio would go down and premiums would stay competitive.  We all know politically this will never happen. Instead not only are the penalties not going up, but are being cancelled.

Bottom the no Federal Mandate puts Obamacare into a death spiral that it simply can not recover from. Unlike Section 89, Obamacare has gone into effect but it will be gone in two years.   There simply is no other possibility without a penalty to not have health insurance.

Individual mandate, Obamacare

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