Obama considers costly unilateral “fix” of Obamacare subsidies
POSTED AT 3:01 PM ON NOVEMBER 9, 2013 BY KARL
The Obama administration is considering a fix to the president’s health care law that would expand the universe of individuals who receive tax subsidies to help buy insurance, an administration source told The Huffington Post.***According to the administration source, the White House is “looking at an administrative fix for the population of people in the individual market who may have an increase in premiums, but don’t get subsidies.”
Of course, the debate about how premiums is just one piece of the story. The ultimate question is whether, under Obamacare, people buying insurance on their own think they are getting a good deal. And the answer to that question will depend on a bunch of factors—not just how much people pay up front in premiums, for example, but also what kind of out-of-pocket costs they face if and when they get sick. And what’s affordable to one person may not seem so affordable to another.
A single person making $22,980 per year would face a premium, net of subsidies, of $121 per month. That’s pretty good.However, the point most people have been missing is that same person would also face a $500 deductible and up to $2,250 in out-of-pocket costs for things like co-pays. If the individual were sick, that looks like a pretty good deal. If they were healthy, would they spend what is perhaps 10% of their monthly take home income for a plan with an upfront $500 deductible?***For so many individuals and families, 10% of their take home income is a huge issue. This is the marginal income left at the end of the month, after taxes, rent, and car payments that is so critically important to them. As purely an insurance value, it’s a good deal. But the notion that hard earned and important dollars would be spent for something they aren’t going to get any measureable short-term value for is another matter entirely.***A family at 300% of the federal poverty level will make $71,000 and have to pay out 9.5% of their income for premium, or $6,700 a year for that second-lowest cost Silver plan. How many families making even this much have an extra $558 a month in their budget to buy a plan with a $2,000 per person deductible?
The cost alone of these “low end” policies are producing sticker shock when people see them. It gets worse when people see what the insurance companies are actually offering for these premiums. That’s when they get the second shock.Many uninsured are finding that the bronze or lowest end policies are being priced in the range of $250 a month and up on average and that they come with $6,000 yearly deductibles(pdf) to be paid out of pocket before they get full coverage. Until then, they pay 40% in co-pays until the $6,000 out-of-pocket is reached in addition to the monthly premiums. And again, this is for the bottom tier polices for a single person, not a family. Costs to a family are higher.It doesn’t take Warren Buffet’s financial savvy to figure out that young, healthy uninsured Americans, who are largely uninsured because they cant afford health insurance in the first place, are not going to be flocking to buy these policies for the privilege of having a health insurance card in their wallets that requires another $6,000 out-of-pocket before their expenses are fully covered and includes co-pays of 40% of all initial costs until that $6,000 is reached. What most of them will do is what they have been doing – live without insurance and go to an emergency room if they need medical care where the law says they have to be treated whether they have insurance or not.