Individual mandates cause headaches.

A recent study by the Urban Institute, a prominent liberal think tank, lists “the biggest losers” should congressional health care legislation fail to become law.  Interestingly enough, this is oddly similar to an earlier Heritage Foundation assessment of the “biggest losers”—if the liberal bills  do become law.  Here, we outline how Urban’s biggest losers would actually be worse off under Obamacare than under the current system:

Self-employed people – Because the self-employed are at a significant disadvantage due to current regulations preventing them from buying group health insurance, one might think the ability to buy at controlled prices through the “exchanges” set up under the Senate bill would be of great benefit.  However, the self-employed would lose many options currently available, such as low-priced catastrophic insurance, and health savings accounts paired with high-deductible, low-premium insurance. Furthermore, moderate-income self-employed people who can’t afford the high-priced comprehensive health plans offered through the exchanges and aren’t eligible for subsidies would not only lose their insurance, but would pay a penalty for remaining uninsured.

Workers in small firms, including those offered employer-sponsored insurance (ESI) – Several million workers currently receiving insurance through an employer would lose their coverage under the Senate bill. Faced with increasing insurance premiums, plus the elimination of “no-frills” health plans as “acceptable coverage”, many employers will find it cheaper to pay the tax penalty than to provide insurance.  This is especially so for those with less than 50 employees, who will be exempt from the penalty but not from the new regulations on insurance if they choose to provide it.  The result will leave workers with the legal obligation to either buy the government mandated high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the new penalty for remaining uninsured.

Non-elderly people working part-time and people working full-time but for only part of the year – Employers of people in these categories will be exempt from providing them insurance, but the people themselves will not be exempt from the requirement to obtain the government-specific comprehensive insurance on their own.  Lower-premium catastrophic insurance will not satisfy the requirement.  Persons in these categories will be required to either buy the government specified high-premium comprehensive insurance out of their own pockets using after-tax dollars, or pay the penalty for remaining uninsured.

People who have or had significant health problems – In order to raise revenue, the Senate health bill includes a tax on medical devices, prescription drugs, and high-cost insurance plans.  Though these taxes are aimed at the companies that provide high-cost medical necessities, as economists know, these taxes would be passed along to the patients, increasing expenses for those with costly illness and the premiums of health plans that cover them.  What is more, the Senate bill, as well as the President’s latest proposal, combines an individual mandate with a guaranteed issue requirement, meaning that companies cannot turn people away from enrollment. The powerful economic incentives that are hardwired into this flawed arrangement will encourage the young and healthy to avoid purchasing insurance until they “need” it, paying the “cheaper” mandate penalty instead. There would be even greater risk segmentation in the insurance markets than we have today, as the insurance pools would attract disproportionately larger numbers of older and sicker enrollees. This would further raise premiums for those who need insurance to pay for significant health problems.

Older working-age adults and early retirees – Heritage analysis shows that older working age adults and early retirees, specifically those aged 45-64, will be hit with new taxes despite President Obama’s promise not to raise taxes on households earning less than $250,000 per year. Households headed by individuals aged 45-64 who deduct medical expenses on their 1040 tax form, those who ought to be helped by a health care reform bill, would see a tax increase of about $200 on average. The higher the medical expenses faced by these families the higher the tax increase they would face. While some would face a very small increase, others would be hit with a heavy new penalty for having medical expenses.

People with low incomes – Low-income families are uniquely vulnerable under the Senate health bill.  Heritage research shows that the Senate bill creates incentives for employers to avoid hiring members of low-income families.  The employer mandate would require employers with 50 or more employees to offer insurance to all employees or pay a penalty of $750 per worker.  However, if the employer does offer insurance, they would still pay a fine – but only if they hire workers from low-income families!  If the employee’s portion of the cost exceeds 9.8 percent of the employee’s family income, and that employee is eligible to receive a premium subsidy (“affordability credit”), the employer would be slapped with a $3,000 penalty.  This is based on family income, so employers would be better off hiring workers with few dependents or with other sources of income, rather than those with a single source of income and several dependents.  In other words, employers would be punished for hiring the members of society who need jobs the most.

Kathryn Nix and Guinevere Nell contributed to this post.