Six reasons Obamacare will only get worse for Democrats:
#5 on the list will be the source of ongoing bad news.
The Navigators are generally poorly trained and incompetent to advise clients on insurance. There training is focused only on how to get people through the signup process. To a significant extent their compensation will be based on successfully completed enrollments. This creates an incentive to advise clients to enter information that minimizes the out-of-pocket cost for enrollment, typically by underestimating income to maximize the subsidy. In other words, just opposite of the no doc mortgage loan, the Navigators will encourage no doc ObamaCare clients to understate income.
In 2015, when 2014 tax time rolls around, a large number of ObamaCare clients are going to be shocked at their income tax liability. That’s because at the income levels around 400% of the poverty line, which is not too far off median income, marginal income tax rates can be as high as 740,000%. (Not a typo. If I earn $1 over the $62040 hurdle, my income tax liability goes up $7400. 740,000% marginal income tax.)
Of course, a similar situation exists at 138% of poverty line. The Medicare enrollees potentially face an even higher marginal tax rate.
Marginal tax rates influence behavior once they are understood. Few understand the perverse incentives created by ObamaCare, but they will eventually become clear. ObamaCare has huge potential to destroy the work ethic and individual aspiration that once created a great economy.
#5 on the list will be the source of ongoing bad news.
The Navigators are generally poorly trained and incompetent to advise clients on insurance. There training is focused only on how to get people through the signup process. To a significant extent their compensation will be based on successfully completed enrollments. This creates an incentive to advise clients to enter information that minimizes the out-of-pocket cost for enrollment, typically by underestimating income to maximize the subsidy. In other words, just opposite of the no doc mortgage loan, the Navigators will encourage no doc ObamaCare clients to understate income.
In 2015, when 2014 tax time rolls around, a large number of ObamaCare clients are going to be shocked at their income tax liability. That’s because at the income levels around 400% of the poverty line, which is not too far off median income, marginal income tax rates can be as high as 740,000%. (Not a typo. If I earn $1 over the $62040 hurdle, my income tax liability goes up $7400. 740,000% marginal income tax.)
Of course, a similar situation exists at 138% of poverty line. The Medicare enrollees potentially face an even higher marginal tax rate.
Marginal tax rates influence behavior once they are understood. Few understand the perverse incentives created by ObamaCare, but they will eventually become clear. ObamaCare has huge potential to destroy the work ethic and individual aspiration that once created a great economy.