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Unintended consequences of the ObamaCare tax

The big ObamaCare ruling from the Supreme Court might have an impact on Mitt Romney‚??s choice of running mate, as two candidates often mentioned for the position have distinguished themselves with passionate and thoughtful responses to the ruling: Senator Rand Paul of Kentucky, and Rep. Paul Ryan of Wisconsin.

Senator Paul‚??s initial response was to say that ‚??just because a majority of the Supreme Court declares something to be ‚??constitutional‚?? does not make it so.‚?̬† He elaborated on this point in an op-ed for National Review on Thursday night.¬† Far from backing down, Paul wheeled out the heavy artillery, going so far as to introduce the Stamp Act into the discussion.

Paul doesn‚??t go so far as to encourage dumping tea into Boston Harbor‚?¶ although we do have all those leftover tea leaves we spent all week trying to read, before the Supreme Court announced its decision, and we‚??ve got to dispose of them somewhere.

Rather, Paul sees the decision as a ‚??call to action‚?Ě for the American people, whose recourse can be found at the ballot box in November: ‚??Today the Supreme Court – the ruling body that our Founding Fathers created to protect citizens from tyranny – decided to uphold ObamaCare and thus stripped Americans of their personal liberties and freedoms. ¬†We have heard the Court‚??s opinion loud and clear, but now it‚??s time for them to hear us. ¬†It is up to us to reclaim our constitutional rights. ¬†It is up to the American people to end President Obama‚??s political agenda. ¬†ObamaCare is wrong for Americans and it will destroy our health-care system. ¬†This now means that we must fight every hour, every day until November to elect a new president and a new Senate to repeal ObamaCare.‚?Ě

Whatever else may transpire in the wake of this decision, Paul has the first step exactly right: win the 2012 election.  We the People retain the power to fill our government will people who will not use the dangerous weapons the Supreme Court just handed them.

Meanwhile, Rep. Ryan appeared on ‚??Fox & Friends‚?Ě Friday morning, and made a fascinating point about the ‚??unintended consequences‚?Ě of America‚??s freshly minted ‚??tax penalty‚?Ě hybrid.

‚??A lot of healthy people are going to say, you know what, it just makes more sense to pay this tax or not do anything, instead of buying this insurance,‚?Ě Ryan suggested.¬† This would mean ‚??sicker people will buy the insurance, raising everybody‚??s premiums.‚?Ě

In other words, ObamaCare imposes a number of mandates upon the health insurance industry, forcing them to abandon ‚??bare-bones‚?Ě low-cost plans‚?¶ and, most significantly, to cover people with pre-existing conditions, in defiance of actuarial logic.¬† (It‚??s not ‚??insurance‚?Ě if the underwriter knows the buyer will be making claims far in excess of the premiums he pays.)

The only way for insurance companies to survive this financial meat grinder is for healthy Americans to be compelled to purchase insurance.¬† Otherwise, since pre-existing conditions must be covered, it would make far more sense to wait until they get sick, then buy an ‚??insurance‚?Ě plan, and immediately begin filing claims.

However, the ObamaCare tax penalty weighs in at a bit over $600 per year, for the failure to buy insurance, while the other mandates will push the price of insurance far beyond $600 per year, while also destroying the incentives for businesses to provide insurance plans as part of employee compensation.¬† In fact, small businesses have already been dropping those plans in droves ‚?? causing ‚??up to 20 million Americans to lose their health-insurance policies,‚?Ě as Senator Paul pointed out in his editorial.

Therefore, it may still make financial sense for a large number of healthy people to pay the ObamaCare tax instead of buying insurance, until they actually get sick.¬† This will have the net effect of increasing the general level of sickness ‚?? meaning cost ‚?? among the population that does purchase insurance.¬† And that will lead even more healthy people, particularly in the lower income brackets, to conclude that it‚??s cheaper to pay the tax penalty.

The correct term for this is ‚??death spiral.‚?̬† Only Mitt Romney, and whoever he chooses as a running mate, along with Republican reinforcements in the House and Senate, have a chance of breaking us out of it.¬† Fortunately, Romney has a number of fine choices available for his vice-president.

Written By

John Hayward began his blogging career as a guest writer at Hot Air under the pen name "Doctor Zero," producing a collection of essays entitled Doctor Zero: Year One. He is a great admirer of free-market thinkers such as Arthur Laffer, Milton Friedman, and Thomas Sowell. He writes both political and cultural commentary, including book and movie reviews. An avid fan of horror and fantasy fiction, he has produced an e-book collection of short horror stories entitled Persistent Dread. John is a former staff writer for Human Events. He is a regular guest on the Rusty Humphries radio show, and has appeared on numerous other local and national radio programs, including G. Gordon Liddy, BattleLine, and Dennis Miller.

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