South Carolina Bill Tries to Skirt Coverage Penalty Under ObamaCare

Some South Carolina lawmakers are taking a stand against the president’s health-care reform and are working to nullify ObamaCare in the state.

The legislation, which has already passed the state’s House, would help taxpayers who choose not to comply with the federal law by giving a state tax deduction to residents hit with a penalty for not having health insurance.

One of the most controversial aspects of the Patient Protection and Affordable Care Act (PPACA) is the mandate that requires most everyone have health insurance, either purchasing it on their own, through an employer or from the newly-created health-care exchanges, by 2014 or face a fine.

South Carolina will not be offering health-care insurance via state exchanges, leaving residents to find coverage on their own or through federal exchanges. The ObamaCare nullification bill, H.3101 is up for Senate Special Order and must be heard by Thursday, May 6 at 5 p.m. ET, or it will be on the backburner until January.

State Senator Larry Martin, (R-Pickens), chairman of the Senate Judiciary Committee, says it’s entirely possible the bill will be heard and debated by the deadline, but doesn’t expect it to pass in its current form. The tax deduction for individuals will be based on the state’s tax rates, and would likely be between 3% and 5%, dependent on income.

“The problem I have with it, as a policy matter, is the idea to give someone a tax deduction [for] failing to follow the law…it is skirting the federal government,” Martin says. “I took an oath, and until [the law] is changed by Congress, we are stuck with it.”

States can choose to opt out of certain aspects of the health-care reform. So far, 34 states have decided not to create state-run health-care exchanges.

State Sen. Kevin Bryant, (R-Anderson), has high hopes the H.3101 will pass, and claims the federal government overstepped its constitutional authority with the Affordable Care Act.

Henry Aaron, Bruce and Virginia MacLaury senior fellow at the Brookings Institution, says that Congress enacts laws, and that until opponents of the ACA are able to elect enough members to Congress to repeal the law, everyone should obey it.

Aaron also says that individuals who choose not to purchase coverage, would only be harming themselves when it comes to taxes.

“If South Carolina residents fail to enroll in insurance for which they are eligible, South Carolina residents will still have to pay federal taxes to support subsidies paid to residents of other states where enrollment will proceed, while they fail to avail themselves of subsidies to which they are entitled,” Aaron says. “No elected official would came right out and explain that this is the policy that he or she endorses, but that would be the effect of this proposal should it become law.”

The fiscal impact of South Carolina’s tax deduction proposal would cost the state between $2 million and $3 million a year, according to Martin, which is tolerable within the budget. But it’s not the price tag he takes issue with.

“It’s negligible,” he says of the cost. “I am not comfortable supporting something like that, to provide an incentive in a state tax deduction to fail to comply with federal law. As a policy matter, it’s a slippery slope.”