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Wednesday, August 28, 2013

Hidden Horrors of The New ObamaCare Regulations

The new ObamaCare individual mandate regulations, just released Tuesday and available this morning, will lead to some really perverse gamesmanship as people try to shift the burden or shirk it altogether. Why pay for a meal if you can get it for free and stick someone else with the bill?

(1) HOPSCOTCH, or CATCH ME IF YOU CAN. As long as you are covered for one day in a month, you are in compliance with the mandate.  Even in year one, the mandate penalty is one percent of gross household income, so avoiding the . But you can have people play hopscotch (jump in, jump out) until and unless regulations are adopted or revised to deter this practice.  The result is that people in full-time, good faith compliance will bear a larger burden.

(2) WHO'S YO' DADDY? But not everyone has the burden.  Taxpayers with dependents (spouse + children) now face liability for the "shared responsibility payment," even if the taxpayer does not claim that person as a dependent.  Therefore, if a taxpayer may claim someone as a dependent, the taxpayer is on the hook for the dependent's mandate responsibility.  

The dependent child -- or lower-earning spouse -- can avoid all responsibility because there is still a primary taxpayer in the household. But imagine the horror when you have the acrimony of bitter child-parent relations (and remember, children are covered by their parents through age 26) or divorces and separations. Separating (or wayward spouses) and slacker children can stick the higher-earning spouse (or parent) with the mandate responsibility -- and the penalty -- even if the other taxpayer/parent does not have custody.  A wayward spouse can violate marital vows, fight any motions for divorce or separation, and all the while pass on the mandate responsiblity to the "innocent spouse."  Shockingly, this scenario is actually addressed -- and rejected -- in comments to the regulations.

In reality, this is an anti-man, anti-father provision in effect. While a short term effect will be to deter divorces because this is a new and heavy hammer on couples considering a divorce (and this observation presumes that financial considerations sometimes affect decisions involving marriage, divorce and custody), a dangerous long-term effect will be to strongly discourage responsible men from ever getting married. Those of us with daughters, granddaughters or sisters should be very concerned.  So, who's YOUR daddy?

(3) Another deterrent to productive behavior is contained in regulations including a child's income in the calculation of household income.  This has far-reaching consequences for a family's eligibility for government subsidies. The regulations allow a taxpayer to make an election to have a child's income treated as his own, so that the child is treated as having no gross income.  

But remember that in Bailout Nation and Slacker World, a child is now a child through age 26,  Perverse incentives abound. Slacker young adults in arrested development can now use the ObamaCare subsidy to justify sloth and avoid work, while families on the margin will be incentivized to throw onto the street their kids who -- horror of horrors -- produce income.  After all, extra income from young adults pushes a family to the subsidy ceiling.  This is a strong disincentive to work for any family getting a subsidy; worse, the income counts against the household income upon which the mandate penalty (which for anyone above the poverty level is calculated as a straight percentage of income, rising from one percent in 2014 to 2.75% of gross household income in 2016).

(4) Are you a foreign national and want to work in the U.S.? ObamaCare discourages you from working here, unless you get an American approved health care plan. Having foreign providers of "minimum essential health care" will not relieve you of the mandate penalty. The foreign provider may apply to be recognized as a provider of "minimum essential coverage," but pending that determination, foreign health insurance subjects the holder to the American penalty.

(5) Are you an American citizen or permanent resident living or working abroad? You are still subject to the ObamaCare penalty. Yes, even if you are abroad 365 days a year, your tax home is another country and you are a bonafide resident of that other country for an uninterrupted one year period. 

(6) If the American Commonwealth of Puerto Rico does not establish its own exchange, it appears that Puerto Ricans on the island will not have access to a compliant health care plan and should be subject to the mandate penalties.  ObamaCare requires all states to have exchanges, and states are defined as the 50 states plus the District of Columbia. This should spark a full-fledged run to the mainland -- Puerto Ricans are statutory American citizens -- and possibly a renewed move towards statehood.  The same calculus may be made by residents in the U.S. Virgin Islands and Guam.

(7) Religious exemptions are available, but only through a de facto government test to determine the validity of your faith. People "who are members of a recognized religious sect...and who are adherents of the established tenets or teachings of the sect or religion...are eligible to receive a religious conscience certification exemption from an exchange.  Just read this last sentence slowly. Furthermore, and interestingly, children may not apply for the religious exemption (although they can get abortions), only parents of children under the age of 21 may apply on behalf of the children, and after age 21 the children must apply themselves.  Yet the same children can stick their parents with the responsibility for their health care for another five years (as explained above).

(8) Finally, illegal aliens are exempt from the ObamaCare mandate and penalties. But there is a small victory. The IRS rejected some commentators' proposal to extend the illegal alien exemption to the entire family -- including legal residents and citizens!  Take your small victories for common sense where you can.


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