The sudden announcement of a one-year delay of the Obamacare employer mandate confirms the fear expressed even by the law’s supporters that implementation will be a “train wreck.” Among other nervous actions, administration officials will likely double down on recruiting superstar athletes to their cause, hoping for the proverbial Hail Mary touchdown pass to save the program. Or at least delay its political fallout.
So far, the National Football League has rebuffed the administration’s requests to help promote Obamacare. And given the healthcare law’s unpopularity—recent polls show public opposition to it at a 49 percent plurality—it is likely that other athletic leagues, such as the National Basketball Association, will do the same. But the administration may still try for a buzzer-beating three-point shot by enlisting individual athletes to pitch the program. Among the names mentioned as possible Obamacare salesmen is Miami Heat forward LeBron James, who has visited President Obama at the White House.
But before James or other athletes suit up for Team Obamacare, they should jump back to see how Obamacare will hit the middle- and working-class families that are among their biggest fans. Many of them would likely be rooting not for Obamacare, but for the “refusenik” states that are resisting Obamacare’s implementation by attempting to free their residents and businesses from the law’s devastating mandates in two pending federal court cases—Oklahoma v. Sebelius and Halbig v. Sebelius.
In James’ Miami, as the Associated Press recently reported, many young adults are getting rate shock. The article noted that according to actuarial firm Oliver Wyman, “Premiums for people aged 21 to 29 with single coverage who are not eligible for government subsidies would increase by 42 percent under the law.” It then quoted Miamian Dan Lopez, who makes $48,000 a year working two-part time jobs, as saying “I shouldn’t be penalized for having good health.”
But it’s not just young singles that Obamacare will penalize, young families will be hurt as well. Let’s consider one hypothetical, but typical, family—the Garcias of Miami, who recently cheered James and his teammates on as they won their second consecutive NBA championship.
Jack Garcia is 35. With a high-school degree, some community college, and lots of hard work, he has been able to work up to a $50,000-a-year job as a front-end manager at a family restaurant in Miami’s Little Havana neighborhood. Jack’s wife Consuela is a homemaker taking care of their three boys, ages 11, seven, and three, all budding Miami Heat fans, like their father.
Jack’s restaurant does not currently offer major medical coverage, but it does offer up to $1,500 in premium reimbursements for its employees’ individual plans. Given that Jack and Consuela basically need to choose between saving money for the kids’ college education and major medical coverage, they have opted for a accidental injury and critical illness plan that covers up to $25,000 in medical expenses associated with injuries or new diagnoses of devastating diseases like cancer. Studies show that that the type of “bare-bones” plan families like the Garcias now purchase will cover about 70 percent of all events that would generate significant medical expenses. And his employer’s $1,500 reimbursement covers the total cost of the policy just described.
Unfortunately, the new health law will be very bad news for the Garcias. The policy that Jack and Consuela have chosen will not meet Obamacare’s individual mandate requirements, because it doesn’t qualify as a medical plan covering “essential benefits.” But that’s not all. Because of the new benefit mandates and the “community rating” requirement that prevents different pricing for individual health habits and characteristics, a $700-per-month high-deductible policy that he had looked at on the individual market is no longer available.
Meanwhile, due to Obamacare’s employer mandates—now delayed for a year but still looming—Jack’s restaurant faces penalties of $140,000 per year for not having comprehensive group policies for its 100 employees. It can start to offer the policies and continue to contribute $1,500 per employee, and thus avoid the employer mandate penalties. But then the Garcias would be paying a whopping $11,000 per year in premiums for the “bronze” plan required under Obamacare, according to estimates from the Kaiser Family Foundation.
And as long as Jack’s individual share of these premiums does not exceed 9.5 percent of his income, the Garcia family would not qualify for any subsidy, because Obamacare subsidies are not available for workers who have access to bronze coverage at work and can “afford” the employee-only coverage, even if they need to cover their entire family.
In other words, if the restaurant does exactly what Obamacare expects it to do, the Garcias will be on their own paying for the entire inflated cost of coverage for their family. For the Garcias and other families like them, medical coverage will then take up 20 percent of their gross income—a monumental blow to the family finances.
But there is one hope; that courts interpret the text of Obamacare correctly. The Garcias and the real-life young singles in the AP story live in Florida which, like many states, has declined to establish a state exchange. The Affordable Care Act unambiguously states that the law’s employer and individual mandates are triggered by its subsidies, and that subsidies are only available in states that have established their own exchanges.
As a resident of a state that hasn’t established an exchange, Jack would not qualify for subsidies, so neither he nor his employer should be subject to the purchase mandates. They can continue their current coverage and reimbursement plans, just as they prefer.
Unfortunately in May 2012, the Internal Revenue Service and Department of Health and Human Services rewrote the law and pushed through regulations that ignore the clear statutory distinctions between exchanges created by a state, and those created by the federal government in the absence of a state exchange. These agencies insist on showering states that have opted out of setting up exchanges with individual subsidies, thus seeking to trigger the individual and employer mandates for all states.
Fortunately for the Garcias and thousands of other families in non-exchange states, the two pending court cases could save them from unwarranted financial harm. They are Oklahoma v. Sebelius, a case brought by Oklahoma seeking to invalidate the IRS/HHS rule obliterating the law’s distinctions between state and federal exchanges, and Halbig v. Sebelius, a case seeking the same outcome filed by individuals like Jack Garcia and employers like his restaurant.
The stakes in these cases could not be higher—for middle- and working-class families, for small businesses, and for our system of federalism. If athletes really want their fans to have affordable, quality health care, a quick win for the plaintiffs in both of these cases is what they should all be rooting for. If the plain language of the Obamacare statute means what it says, these cases should be slam dunks.