The Koyal Group
Note: a shorter version of this appeared in August 5 print issue of The Weekly Standard released on July 26 and is still available on-line. The author is grateful for the publisher’s permission to reproduce an annotated version here. While I have added links and footnotes that do not appear in the on-line version, the text and figure is reproduced nearly verbatim. Any additions to the substance have been inserted as footnotes.
Let me stipulate that I do not condone fraud in any form. Moreover, I assume all Apothecary readers are law-abiding citizens who would neither commit fraud themselves nor encourage others to do so. My purpose is to inform such readers just how tempting fraud on the Obamacare health insurance exchanges will be in light of the recently announced delays in employer reporting and employer mandates.
There are three types of fraud worth considering, each reflecting different motivations and degrees of risk tolerance among the hypothetical individuals considered.
Mistreated Mike:
Low-income, full-time worker in a large firm offering health coverage.
Mike’s situation: Let’s start with Mistreated Mike, a $14.00-per-hour janitor in a 200-person law firm already offering health coverage. He works 40 hours a week, 50 weeks a year, making his total wage income $28,000. At 116 percent of the federal poverty level, it’s tough to provide for his stay-at-home spouse caring for two toddlers, but he gets $6,026 in Earned Income Tax Credit (EITC) that helps out. Mike’s proud that he’s managed to provide health insurance for his family for years, but it’s expensive. For 2014, he’s selected the most affordable plan his company offers, but he’s crossing his fingers that his family’s out-of-pocket spending won’t reach the average level expected for those who select such a plan: $5,000. Mike’s employer pays much of the $14,100 family premium and fortunately has set up a Section 125 plan so that every penny of Mike’s $3,241 contribution is tax-deductible. Still, that’s a hefty 11.6 percent of his wage income, which might make it appear that Mike’s coverage meets Obama-care’s definition of “unaffordable.”
In that case, he would qualify for subsidized coverage on the exchange. Unfortun