Don’t Settle for One-Year Individual Mandate Delay

Let’s get one thing straight: Any compromise on the CR that fails to block the ObamaCare exchange subsidies is unacceptable.

On Saturday afternoon, Speaker Boehner and the House Republican leadership issued a joint statement indicating their intent to vote on two amendments to the Senate CR that was denuded of its key provisions to defund ObamaCare:

“The first amendment delays the president’s health care law by one year. And the second permanently repeals ObamaCare’s medical device tax that is sending jobs overseas.”

Early Sunday, the House Republicans followed through on the plan. The key amendment is the first one referred to above, which delays most of ObamaCare’s core 2014 provisions, including the exchange subsidies and individual mandate, for one year.

The amendment is the product of Rep. Marsha Blackburn (R-TN).  You can read the full text of the Blackburn Amendment on, and you can view her floor speech offering the amendment on YouTube.

Following Democratic Senator Joe Manchin’s (D-WV) statement on Thursday supporting a one-year individual mandate delay, a number of commentators have suggested that if we will not succeed in the full defunding campaign, we should compromise by settling for a one-year delay of the individual mandate with Democratic support.  This individual mandate-only approach may be well-intentioned, but it’s ultimately just a shinier version of surrender.  The Blackburn Amendment, while not the ideal full defunding, is far better than a mere individual mandate delay because it also blocks the ObamaCare exchange subsidies.

Individual Mandate’s Tax Penalty Only $95 or 1% of Income in 2014

ObamaCare’s enforcement structure for failure to satisfy the individual mandate (now generally referred to as a “tax penalty” after the infamous Chief Justice John Roberts’ two-step) is phased in incrementally from 2014-2016.

PPACA Section 1501:
2014 - Greater of $95 or 1% of family income;
2015 - Greater of $325 or 2% of family income;
2016 - Greater of $695 or 2.5% of family income.

A one-year delay of the individual mandate would affect only the minimal 2014 penalties.  Furthermore, as many have noted, the IRS is very limited in its ability to collect the fine.  The most recent CBO score estimates that the IRS would collect a paltry (in federal budget terms) $2 billion in 2015 from individual mandate penalties incurred in 2014.

Compare that to the employer mandate penalties, which were set to go into full effect cold turkey on January 1, 2014 before President Obama unilaterally (and unconstitutionally) delayed the provision until 2015.  Depending on the nature of the infraction, those penalties are $2,000 multiplied by all full-time employees (minus the first 30) or $3,000 multiplied by the number of full-time employees receiving subsidized coverage on the ObamaCare exchanges.  That’s serious business.

ObamaCare Exchange Subsidies Would Entrench the Law

Absent a delay, if you purchase a so-called Qualified Health Plan (QHP) on an ObamaCare exchange in 2014, there’s a good chance you will be treated to the defining ObamaCare entitlement: The refundable premium tax credit.  These tax credits under Internal Revenue Code Section 36B are available for individuals earning up to 400% of the federal poverty level.  That’s $94,200 for a family of four.  There are also cost-sharing subsidies available for families earning up to 250% of the federal poverty level.

This means that January 1, 2014 is the ObamaCare ultimatum. As Sen. Ted Cruz (R-TX) stated: “On Jan. 1, the exchanges kick in and the subsidies kick in.  Once those kick in, it’s going to prove almost impossible to undo Obamacare. The administration’s plan is very simple: Get everyone addicted to the sugar so that Obamacare remains a permanent feature of our society.”

To add insult to injury, the IRS has issued regulations that unconstitutionally extend these ObamaCare exchange subsidies to states that have refused to establish an exchange.  PPACA is clear that the subsidies are available only in state-run exchanges.  Then something unexpected happened, only 17 states agreed to play along.  The IRS responded by issuing regulations that disregard these statutory limitations to ensure that ObamaCare’s subsidies reach Americans from sea to shining sea.

Fortunately, the Blackburn Amendment passed by the House early Sunday addresses these problems by explicitly delaying the subsidies and numerous other ObamaCare tax provisions, including a proper statutory delay of the employer mandate, until 2015 (see Section 131(b)(1)(B) on page 13).  (Note: Strangely, there does not appear to be any specific reference to delaying the individual mandate’s provisions contained in Internal Revenue Code Section 5000A.  In Rep. Blackburn’s floor speech, she stated her belief that the amendment would delay the individual mandate, presumably as part of the broad delay language in Section 131(a) of the amendment.)

The CBO scoring of the cost of the ObamaCare exchange subsidies continues to increase with every estimate.  The most recent numbers put the cost at over a trillion dollars ($1,075 billion) in the first ten years (2014-2023).  These subsidies are the ObamaCare budget buster, and they will be virtually impossible to remove once available.

The Next Stage

Majority Leader Reid has already indicated that the Senate will reject the Blackburn Amendment and continue to insist on a CR that fully implements ObamaCare.  President Obama has also pledged to veto the bill if it manages to pass the Senate with the Blackburn Amendment intact.

It’s a standoff that appears destined to end with Speaker Boehner forcing a watered down compromise measure on the Republican ranks to avoid a lengthy shutdown.  If that is the case, the House cannot accept a clean CR that only delays the individual mandate.  That would have no meaningful effect on preventing the implementation of ObamaCare.

The House should have stood its ground with the original full defunding measure.  However, the Blackburn Amendment is still a strong substitute because it effectively defunds the ObamaCare exchange subsidies in the form of a one-year delay, and it delays numerous other damaging provisions in the law.  Majority Leader Reid and the Senate will likely continue their game of chicken by sending another CR that fully implements ObamaCare back to the House.  There will be incredible pressure on Republicans to compromise at that point.  When that happens, don’t settle for a one-year delay of the individual mandate.  Any meaningful compromise must also delay the ObamaCare exchange subsidies.

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