When it comes to ObamaCare, should you pay the premium for buying health insurance on your state's exchange, or would you be better off skipping it and paying the "penalty" tax instead?
In two weeks time from this writing, you may find yourself having to answer that question, and the answer may not be what you think. In setting up the its system for mandating that all Americans have health insurance, the Patient Protection and Affordable Care Act (PPACA) actually creates some really perverse incentives that may make it more desirable for people to dump their health insurance coverage instead. At least, until they might actually need to have it.
You see, ObamaCare actually mandates that Americans who aren't covered by their employer's health insurance either choose to buy costly policies on their state's newly established health insurance exchanges and perhaps benefit from a tax credit subsidy to do so, or choose to "self-insure" and pay a potentially much less costly tax instead.
Here's how the self-insurance part of that works. Because the PPACA prohibits health insurance providers from denying coverage to people with pre-existing conditions, healthy people can choose to go without any coverage and only buy it when they actually need it. If the amount of any penalty tax they have is considerably less than the cost of the health insurance they might otherwise choose to buy, they might have a powerful incentive to do just that.
For healthy Americans, the self-insurance aspect of their choice would mean that they would simply pay out of pocket for the health care they actually consume - just the same as those covered by health insurance will do through the co-pays and deductibles for the coverage they have available to them. And while you might be surprised at how inexpensive medical care can be if health insurance is not involved, even for major surgical procedures, the real challenge would come if they suddenly find themselves faced with health care costs that are considerably higher than what they might be able to pay out of pocket using their income, savings and credit accounts.
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