Paul Krugman: Only a handful of people will be hurt by Obamacare … chances are you are one of them. Think 40% excise tax among other things




Paul Krugman, Laureate of the Sveriges Riksban...

Writing in the May 26, 2013 New York Times, the ultimate optimistic liberal Paul Krugman writes about the success of Obamacare based on the proposed premiums for the health insurance exchange in California.

A handful of healthy people may find themselves paying more for coverage …

Obamacare closes this gap with a three-part approach. First, community rating everywhere — no more exclusion based on pre-existing conditions. Second, the “mandate” — you must buy insurance even if you’re currently healthy. Third, subsidies to make insurance affordable for those with lower incomes…

Only a relative handful of people will be hurt at all …

How can such a smart man be so naive? It’s like, I mean it’s no big deal this adverse selection thing; everyone will comply with the mandate and subsidizing an unaffordable cost makes it affordable … 20130322-093910.jpgto whom? And about that handful of people hurt. In one way or another that handful includes tens of millions of Americans who already have employer-based coverage, including a few million retirees.

Let’s just look at one of many examples.

With a few exceptions, effective January 2018 the Affordable Care Act imposes a new 40% excise tax on High-Cost insurers of employer-sponsored health plans (or self-insured employer plans) with aggregate expenses that exceed $10,200 for individual coverage and $27,500 for family coverage.

The CBO has already substantially lowered its estimate of the revenue to be generated by this tax. Why you may ask, ok, ask. The reason is that employers and unions with such plans are going to, in fact have already started to, adjust their plans to lower the value in order to not pay the tax. Anyone who does pay this tax is likely a fool and if they work for a large employer also likely to be unemployed come 2018.

So, allow me to translate “lower the value.” Simply put, you as an employee will become one of Krugman’s “handful of people hurt” by the health care reform law. Your benefits are going down and your out-of-pocket costs are going up so that your employer or union plan does not exceed the value limit under the law thereby avoiding the 40% excise tax.

No plan sponsor in its right mind is going to maintain a generous health benefits plan and pay a 40% tax on top of it.


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