I realize you qualified your statement, but thought there should be more clarification. From the .gov website: “A time outside the yearly Open Enrollment Period when you can sign up for health insurance. You qualify for a Special Enrollment Period if you’ve had certain life events, including losing health coverage, moving, getting married, having a baby, or adopting a child.”
If someone gets really sick, they can quit their job or otherwise lose coverage, or move, etc. Or wait the rest of the current year and enroll in December. I suspect there is more than a little gamesmanship.
One thing I have noticed during all the machinations that having been going on with Obamacare is that somehow we have ended up in a situation where the Republicans have cut back on providing insurance while not changing the status quo on all the taxes in the program. Darn. Such a strange happenstance.
Oh, and they have been unable to remove the Medicaid functions of Obamacare. The functions that exactly benefit their rural base and the function that the Red states are saying is going to bankrupt them. But they are working on a complete Obamacare repeal. Promise. Now that their tax cut is in place, it won’t be as hard to justify cutting the taxes in Obamacare. If they can get around to it…
If I understand this correctly, the Republican Senate has violated its own nuclear option, i.e. it has exercised a “thermonuclear option.” Have we reached the point where this can happen with little outcry from the D’s, or from what’s left of responsible media?
This insurance board can’t repeal basic economic forces any more than the Soviets could prevent lines for bread when they underproduced bread vs the price they were charging. (even if “price” is a limited number of ration cards given to each comrade)
The basic economic force is that if large numbers of healthy people with no current medical conditions skip coverage, choosing to pay the penalty instead (it was already too cheap, much cheaper than buying insurance), this means the insurers have to raise rates a lot because most people buying the insurance will actually be needing medical care.
Raising the cost of insurance means that even more people will elect to skip coverage.
Which means higher rates.
And so on in a ratcheting cycle that essentially ends with insurance rates equaling the annual cost of care for an average person with a chronic illness. And zero people subscribing.
All this state board can do is say “no, get out of our state, we don’t accept this rate increase”. But no insurer can “comply” with the edicts by that board if they make it unaffordable for them, since each insurer must charge a rate greater than the average annual payouts they must make.
Which, in turn, would mean that the insurance companies would go out of business. And the only entity with the economic clout to be able to replace them would be the federal government, which would make a first-world health coverage system inevitable.
I’m OK with the end result here; I’d just like to see us get there with a lot less pain and suffering along the way.
I didn’t quite finish my analysis, there are a group of people who
(1) make a small enough amount of money that they qualify for premium subsidies
(2) aren’t currently chronically ill, but do have a modest need for medical care that is massively overpriced at the moment
For those people, if they pay for Obamacare at the subsidized rate on a silver plan, they get a reduced premium and even a reduced deductible.
Anyways, those people will continue to sign up for Obamacare each year. I was one of them until I started making too much money.
One nasty flaw with the way Obamacare is structured, by the way, is that as premiums continue to rise due to medical prices rising out of control, it appears that it’s going to create some absurd scenarios.
Let’s say premiums go to $2000 a month. Right now, for people in my age group and geographic area, they are up to $440 a month. Last year I didn’t make enough money and got a premium subsidy that brought the price way down.
For a single person, the point at which the premium subsidies abruptly become zero is at an income of 47k.
So if the premiums were $2000 a month, and I get a “pay raise” but no health insurance coverage from an employer and bring in 50k in a given year, as I understand it I’d suddenly be responsible for paying $24,000 a year just in health coverage. It’s not impossible since the health coverage comes out of pre-tax money, but I’d be making 50k a year but trying to scrape by on 25k minus taxes.
In practice this means that my spendable income, after required taxes, would be what, 18k a year? And from that, rent and the utilities and fuel to get to work and car repairs would have to be paid. I’d be making slightly above average income and be basically in poverty.
Is this how it is? Am I missing something or is it this grim? I’ve seen the argument that in socialist countries, their tax burden is less than most americans pay in a combination of taxes + health insurance premiums. In socialist countries, since their insurance is included with their taxes, effectively this means that most citizens are taxed less.
I agree and didn’t mean to imply that states can control prices, just that between states and ACA requirements, insurers do have some checks and balances.
They can and will refuse to sell policies. In WA state in the nineties we had insurance reform with no preexisting exclusions and no mandate. End result after a few years was no insurance for sale.
So how exactly do the subsidies work? That was my thought over this claim… that it simply turns Obamacare into a subsidized medical insurance for low-income individuals. Is the size of the subsidy fixed, is it a percentage of the plan and income? So no matter how the premiums skyrocket, certain income groups will still have relatively cheap insurance? Or does a person get $X and no more, so any increase hits them not the government?
Basically expecting the insurance premiums to skyrocket while still subsidizing almost all the amount is certainly in the category of “increasing the deficit”.
I am not in the insurance industry, and don’t hold myself out as an expert. But I have bought health insurance for my family on the ACA exchange for the past three years. I do so because I am self-employed, and so is my wife, so we have no employer-provided insurance available. People with employer-provided insurance really have no idea how complex the ACA system is. But here’s how it works, as I understand it.
There are two types of subsidies incorporated into the ACA. Both are calculated based on the second-lowest Silver plan available in each county. So, you can’t simply talk about insurance rates and subsidies on a national basis, or even a statewide basis. It varies by county, and insurance companies decide which plans they offer on a county-by-county basis. The subsidies are based on income, with larger subsidies for families making lower incomes between 100 and 400 percent of the poverty level, which varies depending on family size.
The first subsidy is a Cost Sharing Reduction (CSR), which you get if your family income is between 100 and 250 percent of the poverty level. So, this subsidy directly pays part of the premium. To get the CSR, you have to buy a Silver plan, and this subsidy pays most of the premium.
The second subsidy is the Premium Tax Credit (PTC), which you get if your family income is between 100 and 400 percent of the poverty level. As the name implies, this is a tax credit that you get when you file your taxes. You can reduce your monthly premium during the year, but final reconciliation happens when you file your taxes. For example, if you thought your family income was going to be $50k, and you used the PTC to lower your monthly premium, you would owe more taxes when you file if your income was actually $55k. You can choose a Bronze, Silver, Gold or Platinum plan, but the PTC is the same, as it is based on the second lowest silver plan in your county.
The ACA Cliff is the extremely important. If you make one dollar more than the 400% income limit, you get zero subsidy. Using Healthsherpa.com, I see that if my wife and I keep our MAGI (modified adjusted gross income) under $64,960 (the family of 2 income limit), we qualify for pretty significant tax credits. But if our MAGI is one dollar over $64,960, we get nothing. At $64,950, the tax credit will be $678 a month, totaling $8,136 for the year. That reduces the Gold plan from $1,425 down to $747 a month, and the Bronze plan from $1,029 down to $351 per month. If we make $20 more and have a MAGI of $64,970, we lose ALL of that $8,136 and have to pay the full premium amount.
I chose the Bronze plan, which has a deductible of $13,900 and a maximum out of pocket of $14,300. If our MAGI stays under $64,960, we will definitely pay $4,212 in premiums, plus whatever medical expenses we incur. Basically, we pay most doctor and hospital fees until we hit our deductible. So, we are on the hook for $4,212 in premiums plus up to $14,300 in medical expenses, totaling $18,512. This would be 29 percent of $64,950.
If our MAGI is $20 higher at $64,970, we get no tax credit and will pay $12,348 in premiums, and could pay up to $14,300 in medical expenses, totaling $26,648. This would be 41 percent of $64,970. So, there is an enormous income cliff that means paying an extra $8,136 in taxes, and increasing the cost of health insurance by 13 percent of income at the income limit. I plan to keep my income below $64,960. It simply isn’t worth earning an additional few thousand dollars, or even ten or twenty thousand dollars, just to pay it in taxes and health insurance premiums.
If you make under 100% of the poverty level, you go on Medicaid, I believe. I am not familiar with that program or requirements.
Feel free to correct anything I posted here, but this is how I understand it.
It is quite complicated but you have a good grasp of it.
The subsidy is based on your income and the price of a mid-level coverage plan. You can use the subsidy to purchase any plan, making the lowest level plans quite cheap.
The subsidy is also quite perverse $1 over the income limit and you lose it all.
You are probably correct - increasing premiums = increasing subsidies = increasing deficit.
It’s more complicated than that. The majority of health insurance providers are also in the business of offering other insurance. A state insurance board can’t force an insurer to offer coverage at loss-making premiums, but it can - for example - force it to do so as a condition of doing other business in the state.
Florida does this with homeowners’ insurance, since rates in hurricane-prone areas would otherwise be astronomical.
This is always horrible; color me baffled that legislation like this passes. Is it due to innumeracy? Or sabotage inflicted as part of the “Make Americans hate their government” agenda?
Any means-tested subsidy of the form Every person with income less than $A is entitled to a subsidy of $B.should be replaced with something like Every person with income $X (where $X < 1.2 times $A) is entitled to a subsidy of 1.2 times $B minus (B/A) times $X.
(In many cases eliminating the means testing altogether would be even better.)
What gets me is that people complain endlessly about that effect with taxes… where it doesn’t actually occur. “If I get a raise that puts me into the next tax bracket, I’ll end up taking home less, because of the higher taxes I’ll be paying! Taxes are evil! GRR!”. Except that tax rates are marginal, so if you’re a dollar above the cutoff for the 35% rate, you’re only paying 35% on that one dollar, and the same rate you were before on all the rest.
And yet, nobody complains about all of the great many aid programs which have a hard cutoff, where a person who makes too much really will have significantly less takehome pay. It’s a system that works to keep the poor poor, because unless you can suddenly increase your income by a very large amount, there’s no incentive to work harder. If we really want “welfare reform”, then that’s what we should be targeting.
Sometimes it does work where people earn themselves into net losses. As mentioned above, it absolutely works like that with the ACA subsidies. You make $1 over the limit, it costs you thousands of dollars. Taxes also work like that for certain deductions, exemptions and tax credits. It’s absolutely possible to end up with less money if you make just a dollar more.
Who doesn’t complain about this? I agree completely with you. Welfare should be phased out gradually as an incentive to work, advance and get raises. As indicated by the ACA, tax code and welfare systems, the government apparently has no idea how things work, or how to write laws and regulations. Only the government could come up with such disincentives and penalties.
Jesus. So what’s your net tax rate in terms you can compare to another first world country with socialized medicine? That is, 29 percent + 15 percent FICA tax + X income tax + Y state income tax?
They talk about these other countries having high taxes, but for you, you’re already at 44% tax and you haven’t paid the income taxes…
(side note : the reason the FICA tax is 15% is there’s a hidden employer “payroll” portion that has the same economic effect as a total tax of 15%)
Don’t forget to add an inflation correction factor. Computer programmers, not lawyers, should write laws, in my biased opinion. Sure, our code tends to crash a lot but at least we try to do better over time in response to bug reports. “Basic competency” for lawmaking over the last century has been (1) add an inflation correction factor, hard dollar amounts make the law’s effect change over time (2) write the law in clear, unambiguous language with lots of comments (3) don’t leave “impulse” responses in your code, those are bugs…
It’s only 44% if we have substantial medical expenses. I get funny looks in some circles, but I’ve come around to thinking that a single-payer/socialized health care system isn’t such a bad idea. And I say that as a libertarian who believes in small government, and that the government can’t do much efficiently or effectively. But the system we have now is so messed up, opaque and inefficient, single-payer has to be better.
Even if we don’t get to socialized medicine, I think that health insurance should be divorced from employment. Let all of you who work for the government and large corporations see how bad it is, and perhaps something would change. There’s no reason that health insurance should be an employment benefit.
Let me point out that due to the MILLIONS insurance companies paid to block Colorado’s initiative for a single-payer system it lost 30% to 70%. I don’t see a lot of states replacing the ACA with their own SPS.