Young people are not stupid.
Most are not flush with money.
They also have different priorities than a 40-year-old.
Those are three reasons why the deck of cards dubbed ObamaCare will likely end up making the financial outcome of the Enron business model seem fiscally prudent in comparison.
Most young adults who are healthy aren’t Wall Street brokers, genius code writers, or rock stars. They plod along putting in a hard day’s work in blue and white collar jobs that typically pay less than $37,000 a year.
Government statistics show that a healthy young adult spends $854 a year on health care related expenses, whether it is a dentist or doctor’s visit, eyeglasses, or medicine.
ObamaCare is requiring them to buy health insurance policies that are now expected to come in at around $5,800 a year.
A vast majority of young, healthy people need to do that so they can essentially subsidize older people who use a lot of health care.
If young adults don’t buy the insurance they will be subject to a penalty when they pay their income taxes starting in 2014. The penalty will ultimately reach $695 a year by 2016 and then increase at the rate of inflation on an annual basis.
So what do you think a young adult who is healthy is going to do? Pay $5,800 for insurance or subject themselves to a $695 penalty and leave themselves with $5,105 a year they can spend on housing, gas, clothes, food, entertainment, and the latest iPhone?
Even if they were driven to “do the right thing” it is pretty tough if you live in California where the cost of housing is a good 20 percent higher, not to mention costlier other day-to-day expenses such as gasoline. ObamaCare penalties aren’t indexed based on where you live. Given the wild variance of basic healthcare procedures between locales such as California and Alabama, it is virtually impossible for healthy young adults to do “the right thing” if they live in high-cost states.
Not helping things is the natural instinct of those 25 and under to believe they are bullet proof.
Collecting the penalty will be another issue. Those making under $9,500 a year who do not buy insurance won’t be subjected to the penalty that will be levied by the Internal Revenue Service at tax time. The penalty is $695 for those making between $9,501 and $37,000. A sliding scale from there makes the penalty $1,000 for a taxpayer earning $50,000; $1,600 for those earning $75,000, and $2,250 for those earning $100,000.
So if you’re making $15,000 as a young adult and living with two friends the only way you can avoid paying a third of your income for insurance you rationalize that you won’t use is simply not to buy insurance.
If you’re honest, you’ll pay the $695 fine. If not, you won’t.
How the IRS enforces the penalty should get pretty interesting.
And when they do, just imagine the legion of anti-government sentiment they’ll be creating among young people who are used to getting tax refunds every year. They may find themselves getting nothing back or else have a “tax” bill that is due.
Politicians riding the ObamaCare implementation bandwagon in the 2014 election cycle will have an interesting time securing the young healthy adult vote.
Young adults may not have paid much attention to the ObamaCare debate, but then apparently neither did Congress. Two-thirds of Congress acts shocked each time a new detail they voted on gets ready for implementation.
When the pocketbooks of young healthy adults take a seismic hit that they can see instead of being spirited away in withholding and stealth taxes, they will not be happy campers.
No one likes waking up one day and realizing they are being forced to cut their standard of living.
This column is the opinion of Dennis Wyatt and does not necessarily represent the opinion of The Journal or Morris Newspaper Corp. of CA. He can be contacted at firstname.lastname@example.org or 209-249-3519.