EDITORIAL: Obamacare’s perverse incentives expose flaws

How do you know when a law is especially awful? When it creates a perverse incentive to divorce your spouse. Such is the case with the Affordable Care Act. The law’s real name is suddenly all the rage within the Obama administration and Democrats in general, now that the term “Obamacare” has become a political liability.

As the Review-Journal’s Jennifer Robison reported Sunday, the Affordable Care Act is the law of the land, but that won’t stop Las Vegans from trying to get around it. The window is all but closed for the best tactic: early renewal. Ms. Robison noted that many businesses and consumers whose policies were to expire in the first quarter of 2014 instead renewed in advance, generally between Oct. 1 and Dec. 1, giving them an additional 12 months of coverage under old federal and state standards.

Frank Nolimal, an employee benefits adviser at Assurance Ltd. in Las Vegas, told Ms. Robison that those who renewed early saw premium increases in the 10 to 12 percent range. Had they waited until Jan. 1 or later to renew, as people generally would in the past, the increase would have been a whopping 40 to 60 percent. The downside: That big increase has merely been delayed to late next year, when renewals come up again.

Companies are also offering “skinny” plans that don’t comply with Obamacare’s expensive coverage mandates but are more attractive to employees because exchange premiums are far higher.

Then there’s Obamacare’s marriage penalty. The law has a steep subsidy “cliff,” where earning just $1 over the eligibility threshold completely cuts off government premium assistance, costing middle-class individuals and families thousands of dollars more per year for coverage. Married couples have a way out. Mr. Nolimal said that if a couple earn too much together to qualify for subsidized coverage, but one spouse has relatively low annual earnings — especially below $35,000 — divorce could allow that person to qualify for fully subsidized coverage.

Keep in mind that when one person qualifies for “free” insurance, somebody else is paying the bill through huge increases in premiums and deductibles. And a Tuesday report from J. Russell George, the Treasury Department’s inspector general for tax administration, says subsidies are vulnerable to fraud. Income verification is a joke.

Local insurance brokers told Ms. Robison they expect even more loopholes to be exposed as the Obamacare rollout continues into next year.

On Tuesday, President Barack Obama gave another half-hearted speech touting the virtues of the Affordable Care Act, at one point saying, “The product is good.” The product is good? This isn’t a bowl of Campbell’s soup; it’s the largest, most complex government-imposed program in decades. The product is good? Almost everything about this law indicates otherwise. How can the product be good when no one can afford it?

Meanwhile, countless families — facing canceled policies, huge premium increases, jumps in out-of-pocket costs and the disappearance of trusted family doctors from scaled-back provider networks — contemplate the worst decision of all: Do they blow up their household budgets to purchase worse medical coverage at a substantially higher price, or do they pay cash for their medical care, assume the risk of being uninsured and pay the law’s penalty tax?

Obamacare was supposed to increase the number of insured and make medical coverage more affordable. That was the promise upon its passage. It has accomplished precisely the opposite while sending Americans scrambling to avoid the law’s punishing requirements. And the president says the product is good?

The only way to prevent such maneuvering around a really bad law is to get rid of the really bad law. Repeal and replace.