Halbig and the individual mandate

In what is perhaps the strangest rhetorical move in the Halbig litigation, the challengers maintain that they’re trying to protect people from the individual mandate. They point out that ACA exempts families from the mandate penalty if, after taking tax credits into account, they would have to spend more than 8% of their income to get health coverage. Eliminating tax credits in states with federal exchanges would mean that many more people would exceed that 8% figure.

For the challengers, that’s a good thing. In Michael Cannon’s words, “a victory for the Halbig plaintiffs would free more than 8.3 million residents” from the mandate. The pending Supreme Court petition makes the same point:

[B]y purporting to make a credit “allowable” in states served by HealthCare.Gov, the IRS Rule reduces the number of people in those states exempt from the individual mandate penalty. Now ineligible for exemptions, those individuals are no longer free to forgo coverage … .

The argument is tailor-made for Justice Kennedy, who cares so deeply about personal liberty that whole books have been written about it.

But it’s an odd argument. To see why, think about who would be exempt from the mandate penalty if Halbig is upheld. It wouldn’t be everyone. The average cost of a bronze plan is $3,468 per year. That’s more than 8% of income only for those families making less than $43,350 per year, which for a family of four is about 180% of the poverty line.

So in most states, for families making between about two and four times the poverty line, a victory in Halbig wouldn’t eliminate the mandate. It would just wipe out tax credits and effectively increase the price of insurance. That’s not exactly a blow for liberty.

What about those lucky people—those who make too much to go on Medicaid but still less than twice the poverty level—who would be exempt from the mandate penalty? To make it concrete, imagine for a minute that you don’t have coverage through your job and you’re trying to support your family on an annual income of $35,000 (about 150% of poverty). You want insurance, especially for your kids, but even a bronze plan costs almost $3,500 per year, or 10% of your total earnings. You just can’t afford it.

With a tax credit, however, coverage would be in reach. Your credit would be worth about $2,740, so you’d only have to pay $760 for a bronze plan—about 2% of your income, or $63 a month. (These figures aren’t outliers. CBO estimates that the average tax credit in 2014 will be $2,400.)

Would you really have more freedom if you lost the tax credit and, because you could no longer afford insurance, you were exempt from the mandate? No doubt, some people would say yes. They bristle at the mandate and don’t value insurance very much—even cut-rate insurance. They’re also pretty cavalier about asking the rest of us to pick up the tab if they fall ill or have an accident.

Many near-poor families, however, would find it liberating to get cheap coverage, even if they were required to do so. As Bill has eloquently observed, health insurance offers a kind of freedom, too. It’s the freedom to quit that stultifying desk job that you stay in only because of the health benefits. It’s the freedom not to have to choose between making rent and buying your kid’s asthma medication. And it’s the freedom not to fear that a car accident or a cancer diagnosis might bankrupt you.

Yes, if the Halbig challengers prevail, millions of people would be exempt from the mandate penalty. But that just means they’d be free to decline coverage that, without tax credits, they can’t afford anyhow. What kind of freedom is that?


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