ACA/Obamacare: And About That Association You Joined to Obtain Health Insurance -Or- For Whom the Boot Tolls, It Tolls for Thee

Long standing insurance legislation requires that one can't create an association merely to buy insurance. But one can create an association for other reasons then offer ancillary benefits to one's members e.g. buying club membership, travel discounts, insurance, etc.

For example, James and Jane Goodfellow own the firm XYZ Builders with three employees. They join the local builders association that also offers health insurance as an ancillary benefit of membership. James and Jane purchase health insurance for themselves and their employees. Meanwhile, John Q. Carpenter, a sole proprietor, joins the local builders association as well. John purchases health insurance for himself through the association.

The local builders association, with many members, of which a portion purchase health insurance, is then a "group". Hence the group of associated people, with the main association for reasons other than buying insurance, comprise the group, consequently group insurance coverage.

Enter ACA/Obamacare:  

‘Businesses with fewer than 50 workers are exempt from the most stringent requirements for larger employers under the federal health-care law. But that doesn't mean they're off the hook entirely.

Smaller employers aren't required under the Affordable Care Act to offer coverage for their full-time workers—as larger firms must by 2016 or face penalties, for instance. But many owners of small ventures and startup entrepreneurs are nonetheless facing big changes to how they obtain their own health coverage, as well as to the benefits they're able to offer employees.

"It's a myth that smaller firms aren't being hit" by the health law, albeit in less obvious ways, says James Schutzer, president of the New York State Association of Health Underwriters, referring to employers with fewer than 50 workers.

Several thousand of the nation's smallest business owners—sole proprietors and the self-employed—were kicked off their small-business plans by carriers earlier this year. That is because new guidelines define "employers" as having at least two full-time employees, not including a spouse, in order to be eligible for group plans.

In all, more than 78% of the estimated 28 million small businesses in the U.S. have no employees, according to the Small Business Administration. These business owners must now seek coverage as individuals, or face fines.

Many consumers and small-business owners are finding affordable plans on the individual market, according to government health officials and insurance brokers. But at least some of the business owners who were excluded from group plans as a result of the health law are struggling with higher premiums, less robust benefits or uncertainty within a new, unfamiliar network, says Scott Lyon, vice president of the Small Business Association of Michigan.

In December, the association's own group plan, which currently has 4,000 small-business members and covers about 40,000 workers and their families, was forced to kick out 700 sole proprietors, he says.’ - Small Firms Hit by Big Changes in Health Coverage, WSJ, 08/06/2014

Link to the entire article appears below:

http://online.wsj.com/articles/kicked-off-group-health-plans-some-owners-face-a-tough-choice-1407367372

 

Roscoe Filburn, Wheat, The Supreme Court, and the “interstate commerce clause”

“When a 1942 Supreme Court decision that most people never heard of makes the front page of the New York Times in 2012, you know that something unusual is going on.

What makes that 1942 case -- Wickard v. Filburn -- important today is that it stretched the federal government's power so far that the Obama administration is using it as an argument to claim before today's Supreme Court that it has the legal authority to impose ObamaCare mandates on individuals.

Roscoe Filburn was an Ohio farmer who grew some wheat to feed his family and some farm animals. But the U.S. Department of Agriculture fined him for growing more wheat than he was allowed to grow under the Agricultural Adjustment Act of 1938, which was passed under Congress' power to regulate interstate commerce.

Filburn pointed out that his wheat wasn't sold, so that it didn't enter any commerce, interstate or otherwise. Therefore the federal government had no right to tell him how much wheat he grew on his own farm, and which never left his farm.

The Tenth Amendment to the Constitution says that all powers not explicitly given to the federal government belong to the states or to the people. So you might think that Filburn was right.

But the Supreme Court said otherwise. Even though the wheat on Filburn's farm never entered the market, just the fact that "it supplies a need of the man who grew it which would otherwise be reflected by purchases in the open market" meant that it affected interstate commerce. So did the fact that the home-grown wheat could potentially enter the market.

The implications of this kind of reasoning reached far beyond farmers and wheat. Once it was established that the federal government could regulate not only interstate commerce itself, but anything with any potential effect on interstate commerce, the Tenth Amendment's limitations on the powers of the federal government virtually disappeared.

Over the years, "interstate commerce" became magic words to justify almost any expansion of the federal government's power, in defiance of the Tenth Amendment. That is what the Obama administration is depending on to get today's Supreme Court to uphold its power to tell people that they have to buy the particular health insurance specified by the federal government.” - Thomas Sowell, Back to the Future, writing at Townhall.com, 03/28/2012.

Link to the entire essay appears below:

http://townhall.com/columnists/thomassowell/2012/03/28/back_to_the_future

　



　

SCOTUS and ObamaCare: this week’s schedule of arguments

‘ “Hans von Spakovksy, senior legal fellow and manager of the Civil Justice Reform Initiative at The Heritage Foundation, explains what is in store this week.”

　

"There's three days of hearings, and the Court has very specifically laid out which issues it wants discussed each day," says Spakovsky. "So on Monday at 10 a.m. [Eastern] they're going to start off with 90 minutes of argument about this 145-year-old federal law called the Anti-Injunction Act, and it's a law that basically says that you can't sue to get an injunction to stop a tax from being imposed. The only thing you can do is file suit after you've paid a tax or after you've paid a tax penalty, and then you can sue to try to get your money back."


Spakovsky says arguments on Tuesday and Wednesday will be about the unconstitutionality of the individual insurance mandate.

"The third day is going to be arguing about severability," he adds. "In other words, if the Court finds one or more provisions unconstitutional, does that mean they have to throw out the entire law?"

On Wednesday afternoon, the Court will hear arguments about the claim being made by 26 states that the expansion of Medicaid as called for by ObamaCare is unconstitutional.

The arguments will not be televised, as the Supreme Court decided against that idea -- although Spakosvky says they have never allowed cameras in the courtroom.

"They do release the audio recordings of arguments," he says. "But no, the Court has always been pretty firm, most of the Justices, on not wanting cameras in the courtroom because they believe that that would change the arguments made before them because it would mean that lawyers might be playing to an outside audience, rather than dealing with the specific issues in their cases, and addressing those to the Justices." (Editor's note: According to Associated Press, the court will release audio recordings of proceedings at the end of each day of legal arguments.)

Spakovksy thinks there might be a ruling by the end of the term.

"Well, the term of the Supreme Court ends at the end of June, and normally they issue all of the decisions in their cases that they've heard in the Spring by then," he says. "I suspect we will get a decision by then, but then they could put it off and say We're not going to issue a decision until we come back at the end of Summer. I think that would actually be unusual." ’ - Kickoff at SCOTUS: Legality of ObamaCare, Chris Woodward, Onenewsnow.com, 03/25/2012

　

　

ObamaCare: the tax aspect

Clearly ObamaCare is under assault from many directions. The current assault surrounds court actions regarding the mandate of required coverage. The court actions now enjoined by a majority of the individual states. The recent court ruling in Virginia declaring the failure to abide by the mandate to buy coverage is a penalty and not a tax and further declaring the mandate unconstitutional. (1)

Hence a judicial ruling states the cost charged for failure to abide by the mandate is a penalty and not a tax. Then what taxes are true taxes within the plan?

Cadillac tax

Many people are familiar with the term Cadillac Tax but what does it really mean and how many people will be affected now and in the future? The Cadillac tax is a 40% excise tax imposed on employer-provided insurance plans beginning in 2018. The tax is levied against the insurer or the employer if the employer has elected a self-insured plan. The tax is applied to the amounts in excess of the threshold as follow: the actuarial value in excess of $10,200 for individuals and $27,500 for families.

The initial amount of workers estimated to fall under the excise tax is 12%. However, the initial figures of $10,200 and $27,500 mentioned above are indexed to inflation as measured by the consumer price index (CPI). That's good right? Wrong. Medical-care inflation and subsequently medical insurance costs are rising much faster than the CPI. Hence the adjustment of the above figures will generally grow slower than the rate of premium increase hence more and more people will fall under the excise tax as time goes by.

Payroll tax

Medicare payroll taxes will increase from 2.9% to 3.8% for individuals earning over $200,000 and couples earning over $250,000.

Tax levied against investment income

Investment income of capital gains, interest, and dividend income will become subject to the 3.8% medicare tax beginning in 2013. The tax is levied on incomes in excess of $200,000 for individuals and $250,000 for couples.

Its important to remember that capital gains also include real estate. See the following post for additional details:

ObamaCare: Imposes a 3.8 percent tax on real estate sales‏

http://thelastembassy.blogspot.com/2010/05/obamacare-imposes-38-percent-tax-on.html

Tax on prescription drugs

A tax will be levied against pharmaceutical manufacturers on named brand prescriptions. The tax is based on a target revenue that needs raised according to the ObamaCare legislation. The target is $2.5 billion in tax revenue in 2011 moving up to $4.2 billion in 2018 then moving to a constant target of $2.8 billion thereafter.

Its very important to remember that taxes levied against firms are merely passed onto consumers in the form of higher prices.

Tax on medical devices

Basically all durable devices used by doctors, hospitals, outpatient clinics, general clinics, etc. will be subject to a 2.9% tax. Once again taxes levied against firms are merely passed onto consumers in the form of higher prices.

Tax (additional tax) on insurers

A tax will be assessed upon health insurers based on their particular market share. The assessment begins at $8 billion and moves up to $14.3 billion by 2018. Yes, you got it, taxes levied against firms are merely passed onto consumers in the form of higher prices.

Tanning bed tax

A 10% tax has been imposed on tanning salons and of course that tax is passed onto the consumer.

Tax deduction of uninsured medical expenses

If you suffer a casualty loss regarding uninsured medical expenses the deductible threshold has been raised from 7.5% of adjusted gross income to 10%. (2)

The world of ObamaCare taxes

Rather than merely adding up the taxes and coming up with a figure that might seem outrageous, maybe its better to seek insight about the many and several taxes using Thomas Sowell's observation that a tax is a tax on an economy. That is to say, a tax reduces economic activity hence it effects the greater economy of which you are a participant.

Starting at the beginning and concentrating on the advent of government and the advent of redistribution (tax) to create the protective society, ultra minimal state, minimal state…….at what point does the redistribution notion, at a very low level of redistribution (tax) required for the formation of the minimal state, become morphed into hyper-redistribution (hyper-tax) on the way to creating state and utopia/dystopian? Its when the side constraints of a minimal state “constitution” are circumnavigated. (3)

Moving forward in time to hyper-tax associated with the creation of the hyper-state, affairs regarding politicos propositions and associates taxes is explained by Thomas Sowell explains as follows:


(a) the propositions and associated tax employed/championed by politicos is based on first stage economic consequences,

(b) that first stage economic consequences of a proposition can generate favorable political attributes which the politico wants because short term first stage economic consequences match the short term political time horizon of the politico e.g. next election,

(c) however as time goes by second, third and so on down the line economic consequence occur. We end up labeling these consequences of the initial proposition and associated tax as cascading unintended consequences. These long term cascading unintended consequences are not a problem for the politico as he/she is long gone yet the public is stuck dealing with the long term cascading unintended consequences. (4)

Politicos have no interest in economics as their interest lies in a very short term political time horizon e.g. next election.

Politicos make for the very worst economists:

“There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.” - Frédéric Bastiat

Taking a look at the taxes associated with ObamaCare one can quickly see that the class warfare argument of collectivists is at work. That somehow the class of folks earning over $200,000 as an individual or $250,000 as a couple are clearly singled out. A particular class has been identified to tax and this class is associated with a greater class warfare argument put forth by collectivists.

However the "middle class", the mantra of the collectivist, is suppose to be focused on the class warfare associated tax of the higher income earners. However the middle class is duped as the many taxes levied against firms (as mentioned above) are merely passed on as higher prices to middle class consumers.

Further, the "middle class" which are generally employees of firms find less jobs available as rising taxes on upper income earners stifles private capital formation which is the engine behind long term private sector job creation.

In other words, the collectivist wants the middle class to view the tax as a redistribution technique (which it is) and that the redistribution is "beneficial" to the middle class. However the distributional nature of the tax misses the central point of stifled private capital formation leading to less jobs for the middle class. All the while the middle class ends up paying higher prices due to the taxes levied against firms merely resulting in higher prices.

Summary

The recent court ruling in Virginia states the fee charged for not adhering to the ObamaCare mandate is a "penalty" and not a tax. That the penalty is associated with the unconstitutionality of the mandate. However taxes in fact abound within ObamaCare.

The taxes within ObamaCare are framed as soaking the rich (class warfare argument) but in effect directly affect costs and job creation availability for the middle class.


Notes

(1) http://hotair.com/archives/2010/12/13/breaking-federal-judge-rules-obamacare-unconstitutional/

(2) Bad Medicine, a guide to the real costs and consequences of the new health care law, Michael D. Tanner, Cato Institute, 2010

(3) Anarchy, State, and Utopia, Robert Nozick

(4) Applied Economics, Thomas Sowell

ObamaCare mandate, Wickard v. Filburn, and the auto insurance argument

Wheat and the ObamaCare mandate?

U.S. District Judge George Caram Steeh ruled on 10/07/2010 that Congress has the authority, in regards to ObamaCare, to mandate that individuals carry health insurance. The decision was based in part on a 1942 court decision:

"Steeh invoked the New Deal era case of Wickard v. Filburn (1942), which substantially broadened the authority of Congress to regulate under the Commerce Clause. The high court agreed with the federal government that Roscoe Filburn’s decision to grow excess wheat for himself would affect interstate commerce, because the farmer would not be forced to buy extra wheat under a New Deal regulatory scheme designed to increase wheat prices during the Great Depression. "(1)

Expressed alternatively:

"So the Supreme Court has allowed Congress to prohibit a farmer from growing wheat for his own use and a sick woman from growing her own medical marijuana. The Court majorities have reasoned that the restrictions on intrastate activities are necessary and proper for Congress to be able to control the interstate markets in wheat or marijuana. (Wickard v. Filburn; Gonzales v. Raich)."(2)

Another observation is:

"In just a few perfunctory pages, Judge Steeh dismisses this argument on the theory that the Commerce Clause allows Congress to regulate economic decisions, and not just economic activity. Thus, the decision not to purchase health insurance is ripe for regulation. As Professor Barnett points out, "Judge Steeh offers no limiting principle to the “economic decisions” theory," and does not even acknowledge the profound implications of government regulation of all "decisions" that might in some way affect economic activity." (3)

More court challenges

The Michigan case is merely the first of a long line of court decisions to come as the ObamaCare mandate is being challenged on many fronts. Matter of fact, the Obama Administration has attempted to block courts from even considering the constitutionality of the mandate. "So far, the Obama administration is 0 for 3 in its efforts to block courts from considering the constitutional merits of the health control law." (4)

Debating the mandate and auto insurance?

Needless to say the debate over the ObamaCare mandate will resurface as the Steeh ruling is further discussed and the remaining court rulings come to fruition. Along the way you are going to hear a debate point that the ObamaCare mandate is nothing more than the same mandate as owning auto insurance. The rebuttal to this debate point will be that you have the ability to avoid owning auto insurance by merely not owning a vehicle. These debate points have already surfaced on CNBC'S The Kudlow Report on Friday 10/08/2010 as articulated by Matt Miller and Betsy McCaughey. (5) You can view the debate by going to this link:


http://www.cnbc.com/id/15840232?video=1610828961&play=1

The debate point regarding ObamaCare mandate and auto insurance

In the coming months, when you hear the debate point put forward that the ObamaCare mandate is akin to owning auto insurance, you should consider the following: that the debate point has a major flaw which is based on "obligation". The debate point makes the implicit assumption that you have an obligation to own auto insurance and hence that same "obligation" exists in the ObamaCare mandate. (6) (7)

The fatal debate flaw is the implicit assumption of obligation. In other words, the debater is hanging their debating hat on auto insurance and the ObamaCare mandate as being equivalent obligations of the buyer. That each buyer of auto insurance has the same obligation as each buyer of health insurance hence "obligation" is being presented by the debater as equivalent obligations regarding auto insurance and health insurance.

What is your obligation to own auto insurance? Your obligation is that of liability to another party, a third party obligation. What is your obligation to own health insurance? Your obligation is to yourself, a first party obligation. Hence one obligation is to a third party whereas the other obligation is to a first party (you). In other words, the debater is comparing obligations that are not equivalent. That is to say, the debater defeats himself/herself by presenting "obligation" as a focal point of the debate then making the incorrect obligation comparison which then negates their own argument.


For further information regarding the "obligation" aspect please visit these two links:

http://thelastembassy.blogspot.com/2009/10/socialized-medicine-scheme-compulsory.html


http://thelastembassy.blogspot.com/2009/09/socialized-medicine-scheme-now-its-like.html

Notes

(1)http://www.lifesitenews.com/ldn/2010/oct/10100715.html

(2) http://dailycaller.com/2010/10/08/the-obamacare-mandate-is-unconstitutional/

(3) http://ricochet.com/conversations/Slippery-Slope-Watch-ObamaCare-Upheld-on-Dangerous-Grounds

(4) http://dailycaller.com/2010/10/08/the-obamacare-mandate-is-unconstitutional/

(5) http://www.cnbc.com/id/15840232?video=1610828961&play=1

(6) http://thelastembassy.blogspot.com/2009/09/socialized-medicine-scheme-now-its-like.html

(7) http://thelastembassy.blogspot.com/2009/10/socialized-medicine-scheme-compulsory.html