Four Myths — and the Truth! — About the Individual Mandate

Obamacare Individual Mandate Penalty

Last week, the Obama administration announced that it was delaying the “employer mandate” in the Affordable Care Act, the part that requires large employers to provide health insurance to their employees. The employer mandate was supposed to take effect in 2014. Now, it’s scheduled to begin in 2015.

This week, Congressional Republicans have responded by demanding that the “individual mandate” be postponed a year as well. This proposal has prompted a debate filled with misunderstandings and misleading propaganda. Here’s the truth behind the myths…

Myth #1: Next year, everyone who doesn’t have health insurance will have to pay a $2,000 penalty.

The most basic problem with the individual mandate is that no one seems to know exactly what it is. I’ve heard people throw out all sorts of numbers, most of which make it sound more expensive than it really is.

Here’s what the ACA actually says: Next year, in 2014, every adult who doesn’t have health insurance will have to pay a $95 penalty. Every child will have to pay $47.50. If you file taxes as a family instead of an individual, the penalty is $285 or 1 percent of your family’s income, whichever is greater.

That’s a far cry from $2,000.

In 2015, the penalty goes up to $325 for adults, $162.50 for children, and $975 or 2 percent of income for families. In 2016, it reaches its peak of $695 for adults, $347.50 for children, and $2,085 or 2.5 percent of income for families. That’s probably where the $2,000 figure came from. As you can see, it’s not nearly as burdensome in the proper context.

Myth #2: The individual mandate can be postponed with little or no negative consequences.

Beginning on January 1, 2014, insurance companies will no longer be able to charge different premiums to different consumers based on health status, a.k.a. “pre-existing conditions.” The only factors they can consider in setting premiums are geography, age, tobacco use, and individual versus family plans.

They cannot charge women more than men. They cannot charge sick consumers more than healthy ones. They cannot charge you more if you work in an industry that happens to have higher health care costs. They cannot raise your premium if you’ve gotten sick while you’ve been on their plan.

This is one of the most popular parts of the ACA. It appeals to our sense of basic fairness. Most Americans consider it an outrage that insurers have been discriminating against women and the sick.

But there’s a problem with these new rules: If insurers charge the same premiums for healthy and sick people, the healthy ones can no longer pay the cheaper rates they’ve been used to. As a result, they won’t buy insurance, leaving only the sick people in the pool. Sick people are expensive for insurers. They receive more health care than they pay for. Insurers will have to raise premiums in what is known as a “death spiral,” making insurance unaffordable for everyone.

That’s why we need the individual mandate. In order for these new rules to work, everyone has to buy insurance, including healthy people. If Congressional Republicans get their way and postpone the individual mandate, we could be looking at astronomically high insurance premiums in 2014.

Myth #3: The individual mandate was first invented and proposed by Democrats.

In October 1989, the conservative Heritage Foundation, a leading Republican think tank, published the first policy paper proposing an individual mandate. In November 1993, Republican Senator John H. Chafee introduced the first bill in Congress that contained an individual mandate. The bill had 18 Republican co-sponsors.

The individual mandate was a Republican invention from a time when it was not yet heresy for a Republican politician to advocate providing affordable health insurance to every American without a government takeover of the industry.

Myth #4: The individual mandate is socialized insurance.

Why are we still talking about Canada and England? Just the other day, I received an email from a Republican reader reciting the problems with government-run health insurance. So what? ObamaCare is nothing like the Canadian or British system.

The individual mandate requires Americans to buy private insurance. That’s why insurance companies have posted double-digit gains on the stock market since the ACA became law. The values of Aetna and UnitedHealth have nearly doubled in only three years.

In fact, no major American politician is proposing a government-run system. Like it or not, private insurance will be around for a long time to come. The only question is, will everyone be able to afford it?


An abbreviated version of this op-ed was published in yesterday’s South Florida Sun-Sentinel.

Outsourcing Isn’t an Excuse to Abandon the Working Class

Barack Obama and Mitt Romney agree on one thing: Outsourcing is a problem.

Of course, they disagree on who’s to blame. To Obama, it’s private equity firms like Romney’s Bain Capital. To Romney, it’s deficit spending like Obama’s 2009 fiscal stimulus.

(As I pointed out two weeks ago, there’s plenty of evidence that the 2009 stimulus created millions of jobs right here in America. But never mind.)

“Countries around the world are…giving their workers and companies every advantage possible,” says Obama, but “we can win that competition.”

On Romney’s website, you can find the same language. He says our tax code “needs to be more competitive and business friendly.” We need to create a “level playing field for American products in foreign markets.”

This rhetoric is more dangerous than it seems.

It’s true that many of our exports are at a disadvantage. In countries that we trade with, the average manufacturing wage is 65 percent of the American average. In Mexico, manufacturing workers earn 11 percent of what their U.S. counterparts make. In China, they earn 3 percent.

So, the question is: Just how “level” does Mitt Romney want the “playing field” to be?

When it comes to outsourcing, Romney has a solution, but he won’t say it…because you won’t like it: The easiest way to create a “level playing field” is to lower American wages.

The dirty secret about Republican economics is that it’s all about cheap labor.

While most of the industrialized world (and much of the developing world) has experienced rising real wages in the past thirty years, American wages have stagnated.

Union membership has plummeted. The minimum wage has failed to keep up with inflation. Taxes and regulations that previously restricted the rich from siphoning the wealth of the middle class have been eviscerated.

In short, Mitt Romney’s game plan has already been put to the test.

We were told that it was a new era. We were told that we needed to sacrifice our job security, our wage increases, our retirement benefits — all in the name of globalization. We were told that America couldn’t compete with those costs around its neck. We were told that the manufacturing sector was deadweight. We were told that the working class was pulling us down. We were promised a better world filled with high-tech jobs and rapid innovation, low taxes and rising asset prices, cheap imports and even cheaper investments.

We did everything we were told. We gave up our protections and our power. And, in return, we got lower economic growth, higher inequality, productivity growth that went almost entirely to the top 1 percent, and — irony of all ironies — even bigger trade deficits.

All that cheap labor didn’t make us “competitive” after all.

All it did was line corporate coffers with more profits than ever before.

But not everyone made that mistake. According to the conservative Heritage Foundation, U.S. tax revenue is currently 27 percent of GDP. In Denmark, it’s a whopping 49 percent. They have the world’s highest minimum wage and arguably the lowest level of income inequality. Yet their unemployment rate (7.7 percent) is currently lower than ours (8.1 percent), and their economy grew at the same rate as ours from 1979 to 2007.

For another comparison, look at Sweden, where tax revenue is 48 percent of GDP. They consistently battle Denmark for the world’s lowest level of income inequality, yet they’re also ranked as the second most competitive country in the world (after Switzerland). Their unemployment rate (7.8 percent) is also lower than ours, and their economy grew faster than ours from 1979 to 2007.

Needless to say, unions are more prevalent and powerful in both of these countries than in the U.S. But arguably the most heavily unionized country is Germany, where employee representatives sit on corporate boards and have a say in industry-wide decisions. Germany’s unemployment rate (5.6 percent) is way lower than ours, and they boast a large trade surplus.

Clearly, we can raise wages and compete in the global economy at the same time. We don’t need a “level playing field” to beat outsourcing. We just need a proactive government.


This op-ed was published in today’s South Florida Sun-Sentinel.

Just Another Demagogue?

by Norman Horowitz

I joined CBS in 1968. Shortly after I arrived, the corporation decided to reduce its headcount by 7.5%. Management assigned me to be the enterprise’s representative at the “division” to discuss how we would go about accomplishing the task.

There were about 20 people in the meeting. Because I was “new,” I was asked for my opinion. I said that, if it were up to me, I would first fire the managers who allowed the overhead to get to a point that we could cut 7.5% of the staff without hurting our operation.

(Actually, we could’ve reduced our head count by 50% without hurting our business, but that’s for another time.)

Of course, I was never invited back to another such meeting. CBS was making so much money that the reductions mattered very little.

Congressman Paul Ryan has been in Congress for more than a decade, yet he talks about cutting the budget as though it were the first time in his “historical context” that we’re spending more than we take in. Cuts must be made…what a discovery!   Continue reading “Just Another Demagogue?”