Patient Protection and Affordable Care Act (PPACA)

Karl Denninger, Market-Ticker, had a great post today about the infamous "Patient Protection and Affordable Care Act," or simply ObamaCare.  I have re-posted with some minor editing and comments from yours truly.

"Patient Protection and Affordable Care Act (PPACA) sets forth a tax of $2,000 per employee for a business that has 50 or more and does not provide "at least" the minimum "insurance" to all. Ok, there is no health care plan I'm aware of that a business can buy today that costs less than $2,000 per employee per year and which also meets the requirements in the law.  None. Therefore, the incentive is for all businesses to drop health care and pay the tax. Period!

Now, your choices are to either buy health insurance or pay a tax of 1% of income (increasing to 2.5% of Adjusted Gross Income in 2016.)  The minimum "fine" is $95 starting in 2013, rising to $695 in 2016.  The average family income is about $50,000/year, which means that the tax will be $1,250 in 2016. You cannot buy health insurance at their "minimum level" for anything approaching $1,250 a year no matter how healthy you are at any age. Therefore, like businesses, you will pay the tax. Why? The question always comes up that I cannot be without health insurance. Well, that was under the old “normal.” The new “normal is completely different. Why? The law prohibits insurance companies from charging you more if you're sick, or refusing to cover you at all.  They must accept everyone on equal terms.

What are the potential consequences? First, businesses will drop coverage; it's cheaper (by far) for them to pay the fine and, for those under 133% of the federal poverty level, those employees can go onto Medicaid.  This is a "family of four" income of $31,900 (as of today; it will go up of course.)  Second, individuals will drop coverage and pay the fine, since it's far cheaper than to buy the insurance."

Now, what is going to happen to insurance costs when everyone only buys it when they need it, since they cannot be denied?  This question, of course, is rhetorical, which does not need a rhetorical response. Just ponder what health care will be like in five or ten years from now.  Pretty scary, isn't it?