Margins of Obamacare Avoidance

Obamacare goes into full effect in less than 12 months. Any social scientist wondering how the law will affect the markets for health care or labor needs to know the degree to which the policy will be implemented and enforced.

Large groups of people don't like Obamacare, so one cannot forecast reasonably based on a model that assumes 100 percent implementation and enforcement. Obamacare would by no means be the first federal law that millions of people disobeyed. But then what's the alternative forecasting approach?

To begin working toward an answer, I offer a list of possible ways in which individuals, states, and businesses may undermine the spirit and/or letter of law. I ask readers of this blog to add to this list, in particular as regards to the employer taxes, individual taxes, employer subsidies, and individual subsidies.

1. People who put little value on health insurance and are able to obtain waivers or find other loopholes in the individual mandate will be ineligible for the subsidies and have less reason than compliant workers to change their behavior in response to the ACA's subsidies.
2. Part of the population may not value the insurance options offered by the insurance exchanges, and therefore forgo participation in those plans and thereby forgo the ACA subsidies.
3. The individual mandate is to be enforced as part of the federal personal income tax return.  Parts of the population may:
1. fail to file a return,
2. file a return that falsifies their health insurance participation,
3. or refuse to make payments pursuant to the individual mandate,
4. and the Internal Revenue Service may lack authority (or otherwise not devote resources) to enforce it.
4. States may fail to set up insurance exchanges, and perhaps thereby make their residents ineligible for premium support and cost sharing subsidies, even those residents who comply with the individual mandate.
5. If the ACA's administration does not come on-line soon enough, even supporters of the ACA may want to see its 2014 provisions delayed for a year. Due to its tight links with personal income tax returns and their basis in calendar years, I expect that a delay of less than 12 months would be undesirable.

I am not recommending that people do these things, but rather trying to understand what will actually happen.

Margins 1, 3, and 4 relate to the insurance death spiral in which high health insurance premiums urge healthy people to avoid the individual mandate, which raises insurance premiums, which urges people to avoid ....