Fun with Obamacare

Suspecting that I raised a few conservative eyebrows with this article’s title, let me clarify from the outset that I do not support Obamacare.  On the contrary, I fervently believe that this horrible new entitlement must – and will – be torn out by its roots, stomped to a bloody pulp and consigned forever to the legislative hell whence it came.

But that doesn’t mean one can’t exploit – and some fun – with the law in the meantime.  After all, it’s not often that one is gifted with a law so badly conceived, so convolutedly written, that one can use the law to one’s advantage and bring it down at the same time.

Unfortunately, the strategy I’m about to describe may not be available to those of you laboring in the land of employer-paid wages, W‑2 Forms and withholding, though I would love to be wrong, so talk to your accountant.  And of course, if you’re one of those folks who get insurance from your employer and for whom President Obama’s promise that “if you like your insurance you can keep it,” does not ring hollow, you’re fine, just where you are.  At least for now, anyway.

But those of you who, like me, are self-employed, will want to pay attention to what follows, with this caveat:  I am neither an accountant, nor a lawyer and I am not urging you to do anything without first consulting one or the other, or both.

Okay, confident that the above caveat sufficiently covers all the appropriate posteriors, including mine, here are the two key elements of Obamacare to consider:

  1. There is no punishment for refusing to pay the “Obamacare tax’ imposed on those who do not buy health insurance.
  2. No one can be refused health insurance coverage for a pre-existing condition;

The “Obamacare tax,” of course, is what was formerly called a penalty until Chief Justice John Roberts rechristened it a tax.  (By the way, for what it’s worth, and having read the opinion, I think the Chief got it right, but I digress.)  But whatever one calls it, the bottom line is, the federal government cannot punish anyone, in any way, for refusing to pay it.  It can only deduct the tax from your refund.   If you have one.

So… don’t have one.  Arrange your financial affairs so that you when you pay file your tax return, you’re not entitled to a refund.  Easier said than done, perhaps, for the average wage earner, who has a portion of his wages withheld from each paycheck before he receives it.  But for those of us lucky (to the extent that paying 15.3% Social Security tax can be considered “lucky”) enough to be self-employed and make quarterly estimated payments, it’s a piece of cake, or at least it is for me.  As a self-employed person, with variable income, I am not required magically to predict how much I will earn this year and prepay the tax; I am required to pay only 90% of what I earned last year.

The point being that unless I earn, in any year, less than 90% of what I earned in the preceding year (admittedly, not inconceivable while Obama is president), I will not get a refund.  Indeed, in all my self-employed years, I have never gotten a refund.  And if I do not get a refund, the IRS has no source from which to seize the tax.  Again, there is no punishment, criminal or otherwise, for failing to pay the Obamacare tax.  The government cannot prosecute me, it cannot jail me, it cannot seize my property; it cannot garnish my wages, it cannot do anything.

And the insurance companies cannot refuse to insure me for a pre-existing condition.  So if the government cannot punish me for not buying insurance today, and insurers cannot refuse to insure me tomorrow, why be a sap?

When 2014 rolls around and Obamacare fully takes effect, I intend to drop my current self-financed ($394/month as I write this, sure to increase at renewal) catastrophic health-care plan and redirect my monthly $350 Health Savings Account contributions (which will no longer be allowed after I drop my insurance) to my SEP or Roth IRA.  Or maybe I’ll just buy myself something nice.  Obama and Bernanke want me to spend, don’t they?

And if I ever do contract some really horrible, catastrophic disease that, say, causes me to lose all my senses or vote Democratic (pardon the redundancy), I can always, thanks to Obamacare, apply for health insurance then.  Heck, I might even get the insurance for free:  As I write this, I’m 61 years old, so depending on how sick I am, there’s at least a chance that I could be dead before any lawsuit for non-payment of medical bills could wind its way through the courts.  Come to think of it, by the same token, maybe the legal counsel would be free, too.  Might that money not be better spent on, say, a cute nurse to change my bedpan and perhaps provide a few… umm… ancillary end-of-life-enhancing services?

Or I could just save the money to do what I should be doing – and will be doing, once Obamacare is gone:  buying my own health insurance, with the services and from the firms that I choose, in a free market.  Though I must confess that the cute-nurse alternative does sound better – actually, a lot better.

In conclusion, (he said, covering his ass one last time), Let me repeat that I am not urging or even advising anyone to do any of the above.  I’m just hypothesizing a scenario, an example, what we call in the vernacular a “fer-instance”.

On the other hand, as fer-instances go, I think this one’s pretty good.

Comments 4

  1. jf wrote:

    You almost had me! As a student of economics, I am interested in incentives and rationality. You almost convinced me that, given your particular circumstances, your plan was sound. I don’t know the ins and outs of filing as a self-employed person, but it seemed as if you do, just as it seemed as if you generally knew what the hell was going on.

    Seemed, that is, until you said that you could imagine a world in which health insurance could be bought in a free market, like a commodity. You see, Mr Schwimmer, in my discipline, we refer to something called ‘asymmetric information.’ Imagine if you wanted to buy a bunch of wheat, say, seven tons. I offer you my seven tons at the market rate, and you’re inclined to take the deal, except you don’t know if my wheat is rotten. Worse yet, you have no way of knowing. So, to hedge, you say you’ll only pay, say, 90% of the market rate, just in case. Then I only want to sell my crappiest wheat to you. Then you want to pay even less. This spiral will continue until there is no market for wheat. Asymmetric information sucks that way. Thankfully, the wheat market can solve this information problem. Presale inspections cover buyers beforehand, and tort law covers them afterwards.

    The market for health insurance has no such natural corrective to its information problem. Physical exams and questionnaires can weed out some undisclosed conditions. But insurers never really know what the hell sort of lives their customers and potential customers lead. Insurers would rather lump a bunch of folks together and let the actuaries figure out how many of each expensive procedure they should plan to pay for each year. This is why group plans are manageable for most folks.

    If an individual wants normal health insurance, outside of a group (such as through an employer), the insurer has really only one meaningful question: ‘Why? Are you sick?’ Since the cost of individual coverage is automatically going to be at least a little higher due to higher fixed costs, the insurer thinks ‘This guy must really be sick, if he’s willing to pay that much for insurance. We’d better charge him even more, just in case.’ Since the insurer is always going to imagine that anyone willing to pay the higher price is expecting to need more coverage than the amount of the premium, the premiums creep up.

    If there was only a way to get everyone into one big pool… Wait! There is! And my guy Mitt came up with it! I didn’t even know back when I voted for him that he had such a good idea! In fact, it worked so well that I resolved to vote for the next guy who wanted to try it. Along came my guy Barack! I’ve gotta admit, it got a little hairy there when my two guys were up against each other! Mitt made that really easy when he pretended not to remember that good idea he had way back when.

    Anyway, Mr Schwimmer, enough laughs. A lot of people yell and scream about ‘free markets,’ thinking that ‘free market’ is an antonym for ‘government intervention.’ You should read up on what ‘free market’ really means. I’m talking about many buyers and sellers, low entry costs for sellers, perfect information, reasonably balanced market power. Every one of these is violated by the ‘free market for health insurance’ you imagine. Now if you hate the ACA just because you want to hate it, or because you hate the President, or just because you have government in general, that’s your right. Just don’t pretend like there is some sort of economics argument behind it.

    Posted 15 May 2013 at 12:32 am
  2. Tad wrote:

    Gene … You likely can execute your intention without a problem, if you wish.

    The problem that you will have, however, is in May of 2014 (by example) when you are diagnosed with MS or Cancer (God forbid) or you fall down the stairs and spend a week or two in Intensive Care. You seem to believe that as you are wheeled into the hospital, you can fill out the application form for health insurance. You can only apply/enroll into a health insurance plan during open enrollment (Oct 1 – Dec 7, 2014) and your health insurance will not go into effect until Jan 1, 2015 — a full eight months from your catastrophic health turn-for-the-worse (above examples).

    Emergencies from accidents and major surgeries get real expensive, real quick. You can probably self insure the small stuff simply by keeping your premiums, but if you get upward of $50K in bills, you’ll start to feel it. And if you catch sight of $250K – $1M in medical expenses, you are likely to be seeing a bankruptcy lawyer so that you can keep your house.

    Should we expect that you’ll forgo Medicare Part B in a few years as well?

    Posted 18 Jun 2013 at 11:47 pm
  3. AT wrote:

    Here’s an easy answer for Tad: Liquidate your non-protected assets into physical gold and cash. If you run up significant medical bills before you can sign up for insurance simply declare bankruptcy and refuse to pay. Easy as pie. Liberals don’t understand that they started a war with Obamacare. The war won’t end until it’s repealed or blood is running in the streets.

    Posted 30 Sep 2013 at 7:06 pm
  4. NW Girl wrote:

    I’m W-2 but adjusting my withholding to prevent a refund. I have already had this train running through my thought process, and it’s nice to see I’m not the only one!

    Posted 01 Oct 2013 at 8:12 pm

Trackbacks & Pingbacks 1

  1. From Readers ask, we answer! What happens if you don’t pay Obamacare’s tax penalty? on 13 May 2013 at 5:49 pm

    [...] is a self-employed New Yorker  who currently purchases his own health insurance. He also is a strong opponent of Obamacare. And starting next year, Gene plans to drop his health coverage in express protest of [...]

Post a Comment

Your email is never published nor shared. Required fields are marked *

seven × 9 =