Here is the third installment of Jim Cole’s analysis of Sen. Max Baucus’ health care bill. The Senators are supposed to be voting on multiple pro-life amendments to the bill today. We will keep you posted.
Making All Americans Pay for Abortion Coverage
In the first two installments of this series, I described how the Baucus plan compels abortion coverage in new health care plans. Now we turn to the money and consider how the Baucus plan will compel everyone to pay for abortions in their new health care coverage.
Everyone realizes that insurance is a mechanism for customers to share risk. (Health care plans are another way of doing the same thing, so I use the terms “health insurance,” “policies,” and “health plans” interchangeably in this paper.) Everyone pays premiums for insurance coverage, but not everyone draws benefits at the same time. If the insurance company has forecast the payout of benefits correctly, then customers are charged a premium that will produce a pot of insurance money that is large enough at all times to pay the benefits of those who actually draw benefits, plus make a profit for the owners of the insurance company. The idea is that everyone may draw benefits, but not all at once, while everyone pays premiums all the time.
Now, if abortion is not the subject of a separate rider, then everyone’s premiums go into the pot of money that pays for health care (including abortions), and thus everyone pays for abortion benefits. However, if abortion is made the subject of a separate rider, and only those who desire abortion coverage are paying for it, then the other customers will not be contributing to abortion coverage. In this situation, those who do not want to subsidize abortions will not have to do so. Some states, such as Missouri, have required a separate rider for abortion coverage in private and employer health insurance plans for just this reason. (See section 376.805 of the Revised Statutes of Missouri.)
The Baucus plan does not appear to allow for a separate rider for specific services. Everything in the Baucus scheme points to having one premium for each of the four plan levels of coverage (bronze, silver, gold, & platinum), without the complications of riders and extra premiums. The exchanges are supposed to supply a standard application form for all health plans, compose a standard format of describing their benefits, enable consumers to sign up for insurance at drivers’ license offices, hospitals, schools, and other offices designated by the state, and operate just one “open enrollment” period every year. CM, pp. 15, 28. It would defeat the simplicity of having just four levels of plans and standardized formats to allow separate riders and separate premiums for particular services. To the extent that no separate rider for abortion is offered, that means that the risk and costs of abortion coverage are going to be shared among all the persons who buy a policy or plan, and everyone’s premiums will help cover abortion services. This is the first way that the Baucus plan makes people pay for abortion, whether they want to or not.
Involuntary enrollment in health coverage
By the way, purchasing health care coverage will no longer be optional under Senator Baucus’ legislation. On their tax returns for 2013 (i.e., the ones filed beginning in 2014), everyone will have to swear to having such coverage, and the government may demand evidence of such coverage at any time. CM, p. 27. Violators will be hit with an excise tax in one of two brackets: if the household income is less than 300% of the federal poverty level, then the tax is a maximum of $750 per person, up to $1,500 maximum per household; if household income exceeds 300% of the federal poverty level, then the excise tax will be up to $950 per person, up to a $3,800 maximum per household. CM, p. 28. If household income is below the poverty line, there is no penalty. CM, p. 29. Persons may also obtain a waiver of penalty if they can show that their share of the premium (that is, the premium less the subsidies described below) for the lowest level of insurance available in their exchange exceeds 10% of their income. Id. Certificates of such excess cost are to be provided upon satisfactory evidence. CM, p. 15. If the period without insurance is less than 90 days in the aggregate during the year, no excise tax will be assessed. If the period is over 90 days in the aggregate, the excise tax will be pro-rated according to the length of time without insurance.
Just as with all other taxes, failure to pay the excise tax will mean big trouble with the IRS, and all IRS enforcement mechanisms will be available, both civil and criminal.
The current health care plans and policies that people have will not terminate immediately, but the insurers will not be able to add anyone new to existing private policies, CM, p. 12. In regard to employers’ health plans, only new employees will be allowed to be added to existing plans. Id. With the natural attrition of policy holders, insurers will be compelled by economics to replace existing policies with new policies in a few years. People will want them, for there are no tax credits to be offered for existing plans, as there are with the new plans. Id. This will be an incentive for employers to switch to new plans.
Also buried in the Baucus plan is one provision that is barely mentioned but could have enormous implications for personal liberty: States may “auto-enroll” individuals and families in health insurance policies. CM, p. 29. The HHS will have to approve whatever procedures states will propose for this purpose. Id. There is no restriction on the power of “auto-enrollment” as it is described in the Chairman’s Mark. If one can be “auto-enrolled,” that would imply the state may put you into a plan at its convenience, and you will be stuck with the coverages and premiums associated with that plan. My first reaction is, “Surely not,” but the Chairman’s Mark contains nothing to indicate otherwise. Without any restrictions on the power to “auto-enroll” folks into health coverage, the Baucus scheme is taking a gigantic leap into greater government intrusion and control of our personal lives.
But liberty interests aside, it is clear that no one will escape participation in the new health care plans. Therefore, unless separate abortion riders are offered for premiums that fully cover pay-outs for abortions, no one will escape paying for abortions in their premiums.
The second way that everyone pays for abortions in the Baucus plan is through new federal subsidies for health care premiums that will transfer tax money into the insurance pot and thus pay for abortions. There are at least three new subsidies.
The first one is called the “premium credit.” CM, pp. 20-21. That credit is a cash payment from the federal treasury to a health insurer to subsidize the cost of insurance for families (including dependents) who earn up to 300% of the federal poverty level as a family. Id. (At this time, the federal poverty level for a household of four is $22,050. Dept. of Health & Human Services (HHS), 74 Fed. Reg. 4199 (Jan. 23, 2009). Three times that number is $66,150, which means that under Baucus, premium credits would be paid by the Federal Treasury for any household of four that earns less than that amount in a year.) The premium credit will be paid to the insurance company up front, at the time an individual signs up for insurance. CM, pp. 20-21. The individual will submit proof of eligibility to the state exchange or employer and then pay only the net portion of the premium left after the federal premium credit is computed. Id. If an individual is not eligible for the premium credit when he or she first signs up but becomes eligible later, he or she may then apply for the credit. CM, p. 21.
The second new subsidy is a tax credit. Beginning in 2013, if a family’s household income falls between 133% and 300% of the federal poverty level and the net premium for the household exceeds a percentage of annual income to be set by the government (13% or less), then a credit on their taxes will be available to the family. CM, p. 21. (For a family of four, the bracket of 133-300% of FPL is $29,400-$66,150.) The Chairman’s Mark does not make it clear, but presumably if the credit was larger than the taxes on their aggregate incomes, a family could obtain the difference as a refund, similar to the way the earned income credit is paid under current law. Also, this tax credit will be available for those whose household income is between 300-400% of the federal poverty level (for a family of four, $66,150-$88,200) and whose health plan costs more than 13% of their income.
The third subsidy is called a “cost-sharing subsidy.” CM, p. 22. The subsidy is described as buying out any difference between insurance purchased by individuals and the actuarial value that is specified for that insurance. Id. The concept is somewhat murky to us laymen, but for present purposes, it is sufficient to note that whatever the amount turns out to be, this subsidy is paid by the federal government directly to insurers on behalf of the individual customer. It is dependent on the cost of the policy and counts toward the “out-of-pocket limit” of that policy. Id.
All of these subsidies will depend on the amount of the premium or the cost of the insurance as a basis for computing the amounts to be granted. All three subsidies permit an individual to purchase a policy or plan that otherwise would be unfairly beyond his means, as the Baucus proposal assesses people’s means. Therefore, if an individual buys a plan that offers abortion coverage (and they all will under the Baucus proposal, even if it is just the minimum required abortion coverage) and the individual qualifies for a subsidy, then federal tax dollars subsidize that purchase and help pay for abortion coverage. The two subsidies that go directly to the insurers–the premium credit and the cost-sharing subsidy–obviously will help pay for abortions, because they go into the same pot of money as the premiums that pay for abortions. The remaining subsidy that is refunded to the individual taxpayer does so, too, in that it repays the individual for money that he or she has already spent on the purchase of insurance that covers abortions. This is the second major way in which all Americans would have to pay for abortions in Senator Baucus’ brave new health care world.
The Baucus plan contains additional language that appears to be designed to calm the anxieties of citizens who do not want their tax dollars to subsidize coverage of abortions. The final part of this series will describe how that language is merely a “head fake,” as Douglas Johnson of NRLC so well described it.