EDITORIAL: Health insurance mandate gets costlier

Today marks the start of a new open enrollment period for Nevada's health insurance exchange. The process promises to be smoother than either of Nevada Health Link's previous two signup periods, which were among the worst Obamacare debacles in the country — no small feat for a law that has caused chaos throughout the health insurance marketplace and canceled millions of policies.

Xerox, the contractor responsible for butchering the Nevada Health Link website and exchange system operations, is long gone. So are most of the horror stories of website failures and paying customers being told they lack coverage.

But finally having a functional exchange doesn't mean obtaining health insurance will be painless. Far from it. In fact, this year's enrollment period will hurt Nevadans' wallets worse than any other. Not only are 2016 premiums for exchange plans about 9 percent higher than current rates, the IRS penalty tax for individuals who do not obtain coverage goes up, too.

Those who decided to forgo health insurance coverage in 2015 will pay a penalty tax of 2 percent of household income beyond the $10,150 filing threshold or $325 per person, whichever is higher. For 2016 — the current enrollment period — the penalties are 2.5 percent of household income or $695 per person, whichever is higher.

The much-steeper tax penalty changes the calculus for individuals who lack job-based coverage and don't qualify for Medicaid. Nevada Health Link's plans, like so many in the Obamacare era, cost thousands of dollars and have deductibles that run into the thousands of dollars. That means huge out-of-pocket costs before insurance starts paying a portion of nonpreventive medical care.

The vast majority of people who purchase health insurance through the Silver State Health Insurance Exchange qualify for federal premium subsidies — almost 90 percent of its customers, according to executive director Bruce Gilbert. Indeed, the awarding of income-based subsidies is the reason Obamacare exchanges exist. Mr. Gilbert told the Review-Journal's editorial board last week that a typical plan purchased through Nevada Health Link (www.nevadahealthlink.com) costs about $350 per month, and that an average subsidy covers about two-thirds of that bill. About 80 percent of the 60,000 Nevadans covered through the exchange pay premiums of less than $100 per month, he said.

When facing a minimum tax of $695 for going uninsured in 2016, the decision to purchase subsidized coverage is much easier. Not so for those who earn too much to qualify for a subsidy and must pay full freight for overpriced, mandate-heavy, high-deductible coverage. Is it worth paying cash for health care, hoping to avoid a catastrophe that requires hospitalization, and paying the penalty tax? About 7.5 million Americans paid $1.5 billion in penalty taxes to the IRS this year for going uninsured in 2014, about $200 per uninsured taxpayer, primarily because Affordable Care Act coverage wasn't affordable at all. But that was when the penalty tax was 1 percent of household income or $95 per person.

Now millions of households won't be able to afford health insurance or the higher penalty tax. That means unwanted sacrifice and economic harm.

Exchange officials believe they have a responsibility to educate consumers, particularly millennials, about the importance of purchasing health insurance. But do they feel obliged to inform consumers about potential tax penalties and the hard cost of being insured vs. uninsured? Not so much.

"I don't like that approach," Mr. Gilbert said. "It shouldn't be a purely economic decision."

But buying health insurance is a purely economic decision — and an unnecessarily expensive and coercive one, thanks to Obamacare. The law needs to be substantially reformed or repealed.

States and their exchanges should take a more active role in educating consumers about rising Obamacare taxes and helping people learn how to calculate their potential penalties. Americans deserve to know every cost of Obamacare before they're stuck with the bill.