President George Washington warned in his Farewell Address that “The alternate domination of one faction over another, sharpened by the spirit of revenge…leads at length to a more …permanent despotism. The disorders … which result gradually incline … men to seek security and repose in the absolute power of …the chief of some prevailing faction...on the ruins of public liberty.”
As James Madison pointed out in Federalist No. 10, an enlightened statesman may be able to achieve consensus for the general public good, but “Enlightened statesmen will not always be at the helm.”
The history of the Affordable Care Act (“ACA” or “Obamacare”), a major change affecting everyone adopted on a narrow majority vote with all Republicans and a number of House Democrats opposed, illustrates the Founders’ concerns.
The IRS administers and enforces the penalties for noncompliance with ACA health insurance requirements. Exercising the “power of the purse,” the now dominant Republican alternate faction has cut the IRS budget by about 17 percent since 2010. In a recent report to Congress, the IRS’s National Taxpayer Advocate, Nina E. Olson, notes that customer service foundered in 2015 due to budget cuts and in large measure due to Obamacare tasks.
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She writes, “millions of taxpayers were unable to reach the IRS by phone; millions did not receive a timely response (if any) to their correspondence; and many more may have had to pay a tax preparer or professional for answers to tax law questions or for assistance they could previously have obtained from the IRS for free.”
This year the IRS hung-up on customers 8.8 million times compared with 544,000 last year. Tax professionals could reach the IRS only 45% of the time on their priority service line and then only after an average hold of 45 minutes. IRS printed publications and forms were not available at taxpayer assistance centers, libraries and post offices until February 28 and then ran out. Olson states she is “deeply concerned” that the “profound” impact on taxpayers may cause some frustrated taxpayers to stop paying taxes.
Olson also writes, “The new work caused by the ACA will likely exacerbate the IRS’s already low level of service on its phone lines, as well as the backlog of correspondence from taxpayers.” Much of that new work will arise from the Jan. 1, 2016 full implementation of the employer mandate. With limited exceptions, on Jan. 1, employers with an average of 50 or more “full-time” employees and “equivalents” on business days during the preceding calendar year must offer a group health insurance plan that meets the act’s requirements for “minimum essential coverage” that is “affordable” and meets “minimum value.”
Complex rules define the terms and prescribe full and part-time status for seasonal and variable hour employees, employees with breaks in service, and other situations. Employees of related employers will be aggregated under enormously complex rules to determine if all of the related employers must comply. Detailed employer reporting is required.
If the employer fails to offer “minimum essential coverage” to at least 95% of its full-time employees and their dependent children to age 26, and a single full-time employee obtains subsidized coverage on the exchange, the base penalty is approximately $167 per month times the number of full-time employees over 30. If an employer has 80 full-time employees, the penalty is about $8,350 per month ($100,200 annual).
If an employer makes the offer, but it is not “affordable,” fails to meet “minimum value,” or an employee lands in the 4.9% who did not receive an offer of coverage, the penalty is $250 per month times the number of employees who obtain subsidized coverage on the exchange. Penalties increase for inflation beginning in years The Congressional Budget Office in 2014 estimated that penalties on employers from the Jan. 1 full implementation of the employer mandate will raise $139 billion over 10 years. Employers may face aggressive IRS enforcement and poor service in the short term and potentially the long term.
President Washington, our most enlightened statesman, forewarned of today’s disorder. Major change requires broader consensus.
Daniel O. Jamison is an attorney and chair of the health law section at Dowling Aaron Inc. in Fresno. He can be reached at firstname.lastname@example.org.