CBO: Six Million Americans Will Be Hit By Obama’s Mandate Tax

Published October 23, 2012

New estimates by the Congressional Budget Office find two million more Americans than initially expected will be forced to pay President Obama’s individual mandate tax, and more Americans than previously predicted will lack health insurance in 2016.

The CBO reported in late September 2012 that a total of 6 million Americans will pay the individual mandate tax when Obama’s health care law goes into full effect. CBO also estimates 30 million Americans will be without health insurance in 2016, an increase of nine million over prior estimates.

Estimate Includes More Dependents

In its updated estimate, CBO found that of the 24 million people who are uninsured but do not pay the mandate tax, 18 to 19 million have too little income to file a tax return, belong to an Indian tribe, or health insurance is found not to be affordable for them. Alyene Senger, a health care policy researcher for the Heritage Foundation, notes the Secretary of Health and Human Services (HHS) has wide latitude to exempt the uninsured from the mandate for economic reasons.

“For the remaining 11 to 12 million,” said Senger, “some will receive hardship exemptions, determined by the Secretary of HHS, and others will be exempt because of religious beliefs. Thus, CBO has concluded that 6 million people will not fall into an exemption and will be forced to pay the tax.”

Senger notes the CBO also included an increased number of dependents, such as unemployed older children, who will have the penalty paid on their behalf.

“Six million Americans will pay the penalty,” Senger said. “Nearly 70 percent of those who pay the penalty will be below 400 percent of the federal poverty level, including 10 percent of payers who will actually be below the federal poverty level.”

Lackluster Economy Behind Estimates

Ryan Ellis, tax policy director at Americans for Tax Reform, says the CBO’s estimates are due to multiple factors, particularly an economy which continues to underperform prior assumptions.

“There are a couple of different tests here, so you have to separate them in your mind to even make sense of it,” Ellis said. “The first is how they came up with 30 million people who are not going to be insured.”

According to Ellis, the government’s assessment of affordability overrides any citizen’s wishes regarding how their money is spent.

“The government has made the decision for your household that you must spend up to 9.5 percent of your income, plus any assistance we give you, on the purchase of qualifying health insurance, and we deem that reasonable,” Ellis said. “Because we deem that reasonable, we’re going to mandate that you do it.”

Ellis notes that under Obama’s law, if the insurance offered by your employer costs less than 9.5 percent of your adjusted gross income, “it is automatically deemed affordable, and you must buy it.”

“Now, if you have a disagreement with that, that you want to in fact not spend up to 9.5 percent of your income on insurance, less assistance we give you, but instead you’d rather save for a home, or for retirement, or build up a small business, then that decision is deemed ‘ungood thinking’ as they might say in 1984,” Ellis said. “We are going to punish you for that, because you have not complied with this mandate, and we are going to make you pay the tax penalty, instead.”

Redefining Affordability

This is about government redefining what is affordable, and what households ought to spend money on, says Devon Herrick, a senior fellow with the National Center for Policy Analysis.

“You could say that everyone who doesn’t have insurance has already decided it’s not affordable,” said Herrick, “especially those who have income at the median. Essentially they’ve either decided they can’t afford it, and sometimes that is them really saying that health insurance is not a good value.

“Everyone has their own budgets, their own incomes, their own risk aversion,” he added. “Health insurance and other forms of insurance are merely asset protection for people with assets to protect. Someone who has a fair amount of assets would naturally have a higher demand for insurance than someone without that. The same is true for all types of insurance, really.”

Herrick says the Obama administration has created these penalties out of an interest in redefining social priorities.

“They assume if someone has a dollar to spare, they suddenly want to spend it on a prepaid, comprehensive health plan. But in many cases they may prefer a high-deductible plan or a limited benefit plan. But we’re taking that choice away from them,” Herrick said. “We’re telling them what we think they should have, regardless of what their budget is, or their income, or their preferences for risk, lifestyle, and so forth.”

Reordering Government’s Role

Senger says this alters the relationship of the government to the individual and the family, forcing them to purchase insurance at a certain level and of a certain kind, lest they face a financial penalty.

“Obamacare spends $1.68 trillion on coverage expansion provisions alone, yet still leaves 30 million Americans uninsured. Whether foregoing insurance is a financial or personal decision for these Americans, it is not the government’s role to force them to either purchase health insurance or pay a fine,” said Senger. “Individuals and families are better able to determine whether or not health insurance is affordable for their particular situation, not Congress or the provisions in Obamacare.”


Internet Resources:

Congressional Budget Office: “Payment of Penalties for Being Uninsured Under the Affordable Care Act”: http://www.cbo.gov/sites/default/files/cbofiles/attachments/Indiv_Mandate_Penalty_One-Col.pdf