Topic: Health Care & Welfare

Slate Discovers Rising ObamaCare Premiums

Now that the coast is clear, Slate has an honest assessment of ObamaCare premiums. Helaine Olen writes

Under this assault [from ObamaCare opponents], all too many ACA defenders turned into fanboys and fangirls, dismissing any issue raised against the law as inconsequential and exaggerated…

But this strategy might well come back to bite the Democrats. The bill for the health care expansion is coming due, just as the recipients will be heading to the ballot box to vote in the first primaries for the 2016 election. More than a few are likely to be annoyed.

Last week Oregon’s insurance commissioner, Laura Cali, announced that the state had approved a 25 percent premium increase for the largest health insurer on the state’s exchanges. The second largest insurer did even better: It received permission to boost its monthly charge to consumers by 33 percent…

And that sounds like a relative bargain compared with Minnesota and New Mexico, where the BlueCross BlueShield family is looking for increases of more than 50 percent. Even if the final numbers are lower than the asks, it seems quite likely these states will approve substantive premium increases.

The problem is simple. As Trudy Lieberman reported this month in Harper’s, the ACA made a decent stab at solving the problem of Americans lacking insurance. Unfortunately, the bargain struck to get the bill to a point where lobbyists for the hospital, insurance, and pharmaceutical industries to sign on, or at least not fight it, did not adequately address the issue of overall medical costs.

And that’s where the consumer comes in. Someone is “it,” the party paying the bill. And that “it” is increasingly you, whether you receive insurance on the exchanges or from an employer.

Or as I like to put it, ObamaCare doesn’t make health insurance more affordable. It robs Peter to pay Paul. When selling ObamaCare, supporters told everyone, “Don’t worry, you’re Paul.” But as time goes by, more Americans are realizing they’re not Paul. They’re Peter.

The ACA Is Dead — Long Live ObamaCare

My first, but not remotely my last, oped on the Supreme Court’s ruling in King v. Burwell appears in today’s Washington Examiner. Excerpt:

Obamacare supporters are mistaken if they think the Supreme Court’s King v. Burwell ruling settles the issue. Even in defeat, King threatens Obamacare’s survival, because it exposes Obamacare as an illegitimate law…

By overriding the operative language of the statute, the Supreme Court colluded with the president to impose taxes and entitlements that no Congress ever approved; to deprive states of powers Congress granted them to block parts of the ACA; and to disenfranchise Republican and independent voters who swept ACA opponents into state office in 2009, 2010 and 2011 for the purpose of blocking the ACA.

The Supreme Court did not lose its legitimacy with King v. Burwell — it has made worse mistakes. Obamacare did. Having been rewritten over and over by the president and the Supreme Court rather than Congress, Obamacare cannot claim to be a legitimate law.

Read the whole thing.

The Obamacare Giveaway, Connecticut Edition: Earn $62k and Get Health Insurance for less than $58/Year

Several days ago, I pointed out that a married couple earning $62,000 in Wisconsin could get health insurance under Obamacare with no monthly premiums. Now it’s time to move onto Connecticut. Connecticut runs its own exchange, known as access health CT.

Among the 114,000 individuals aged 55 to 64 in Fairfield County, Connecticut, roughly two-thirds – or 77,000 people – rely on employer coverage, where the odds are high that they’re paying something out of their own pocket for monthly premiums.

Consider married couple earning $62,000. Each is 64-years-old, a non-smoker, and lives in Fairfield County, Connecticut. The structure of Obamacare subsidies means that many individuals who are not poor can find health plans with such large subsidies that they pay virtually nothing for premiums out of their own pocket. In this case, the couple would qualify for the HealthyCT Bronze Basic HSA 1 Plan for $4.79 per month in premium – or $2.40 per month for each person in that household. If the couple chooses this plan, it pays less than 0.1% of its total income towards health care premiums. That’s not a typo – and it doesn’t say one percent – the household would pay one-tenth of one percent of their income towards premiums. Subsidies pay for more than 99% of the monthly premium.

See the graphic below for this married couple:

The Obamacare Giveaway – It’s Better to Be 64 than 30 (sometimes)

Take a typical 30-year-old and 64-year-old, earning identical amounts of money, living in the same place, and choosing the same health plan. Who will pay more for that health care plan under Obamacare?

No one would dispute that 30-year-olds have much lower health care costs than 64-year-olds, on average. A compelling illustration comes from a highly cited article using the National Medical Expenditure Survey; the authors show that health care costs for 64-year-old women and men are approximately 2 to 4 times that their 30-year-old counterparts (Cutler and Gruber, 1996, p. 429). A natural implication is that groups with higher expected medical costs (such as older individuals), will tend to face higher health care premiums than those with lower expected medical costs (such as younger individuals).

A quick quiz:

  • First, take a 30-year-old and 64-year-old living in Florence, Wisconsin, each of whom is purchasing health insurance on the federal exchange. If they have the same income of $41,000, are non-smokers, and choose the exact same plan, which one faces higher premiums ignoring subsidies?
  • Second, who pays more out of their own pocket, once Obamacare subsidies are included?

The answer to the first question is easy. The 64-year-old faces higher premiums. For example, if the 64-year-old purchased the Molina Marketplace Bronze Plan, he or she would face nearly $7,400 in premiums without subsidies. A 30-year-old would pay around $2,800 for the same plan.

The second question’s answer may surprise you. Obamacare gives large subsidies for people with incomes between 100% and 400% of the federal poverty line. The more you make, the more you pay for a given plan. But Obamacare gives subsidies that are pegged to a generous benchmark plan (the second lowest cost silver plan). Costs, premiums and subsidies will all be higher for the generous benchmark plan for an older individual than a younger one. However, the subsidy amount can be applied to less generous plans, and this can lead to the surprising result that an older person actually pays less out of their own pocket.

The Obamacare Giveaway, Wisconsin Edition: Earn $62k and Get Free Insurance

The King v. Burwell decision last month highlighted the role of the premium tax credit (i.e. “subsidies”) in Obamacare. I have examined the structure of the subsidies quite carefully, and was shocked by their size. I’ll try to educate you about this, state-by-state. Today, I’m starting with Wisconsin, which has some of the largest giveaways on the federal exchange.

Among all individuals aged 55 to 64 in Wisconsin, approximately 70% – or 522,000 people – rely on employer coverage, where the odds are high that they’re paying something out of their own pocket for monthly premiums.

Consider either a single person earning $41,000, or a married couple earning $62,500. Each is 64-years-old, a non-smoker, and lives in Florence, Wisconsin (ZIP code 54121).  The structure of Obamacare subsidies means that many individuals who are not poor can find health plans with such large subsidies that they pay absolutely nothing for premiums out of their own pocket. In this case, the married couple or single person would qualify for the Molina Marketplace Bronze Plan with zero monthly premium.

See the graphic below for a married couple:

Married Couple, Earn $62,500, Florence, WI
Pay $0 per year for premiums

Although plenty of other plans exist – with higher premiums but less cost sharing– this plan is essentially a giveaway for those who didn’t want to purchase coverage, but were mandated to do so by the government. And if a near-elderly person (in the age range of 55 to 64) happens to get sick, they could always move into a plan with generous cost sharing provisions in future years, a problem that economist Martin Feldstein calls Obamacare’s fatal flaw.

King v. Burwell: Six Humpty Dumptys Playing Calvinball

My King v. Burwell recap is up at SCOTUSblog. Excerpt:

In King v. Burwell, all nine Supreme Court Justices agreed on one thing. The King challengers claimed the Patient Protection and Affordable Care Act (ACA) authorizes the Internal Revenue Service to issue tax credits and impose the related penalties only “through an Exchange established by the State,” and not through exchanges established by the federal government. “Petitioners’ arguments about the plain meaning of Section 36B are strong,” Chief Justice John Roberts wrote, and their interpretation is “the most natural reading of the pertinent statutory phrase.” Justice Antonin Scalia agreed, finding the meaning of that phrase “so obvious there would hardly be a need for the Supreme Court to hear a case about it.”

There was no dissent about the plain meaning of the phrase “through an Exchange established by the State.” All seven of the other Justices joined one of those two opinions. Nor was there dissent about the fact that that phrase, used repeatedly in the statute, is the only provision of the Act that speaks directly to the question presented. Not a single Justice lent credence to the government’s assertions that this was a meritless case, or one that the Court should never have accepted. Nor was there dissent about the consequences of that provision’s plain meaning in the face of broad state resistance to the ACA. All agreed that withholding tax credits in the thirty-four states with federal exchanges could lead to adverse selection in those states, with premiums climbing higher and higher in a “death spiral.”

Where disagreement emerged was over the question of whether the former should alter the latter – whether the potential for adverse consequences “compels” the Court to disregard the universally acknowledged meaning of the operative text. The Court split six to three in favor of rewriting plain text, and rendering the requirement “established by the State” a nullity…

Roberts managed to conclude that “by the State” could be read to mean “by the federal government,” even though he acknowledged Congress explicitly defined “State” in a way “that does not include the Federal Government.” So perhaps spending more time with the statute would not have helped.

The King ruling is actually much, much worse than this excerpt suggests. Read the whole thing. For a reference guide to King, click here.

One Consequence of King v. Burwell

Some say that today’s decision maintains business as usual for Obamacare, taxpayers and consumers. The Supreme Court upheld the subsidies (also known as the Premium Tax Credit) to consumers in the 34 states that rely on the federal exchange. Proponents of these subsidies argue they help keep health insurance affordable.

The subsidies lower the out-of-pocket cost to consumers who get them, but at what cost? Consider a 64-year-old consumer in Hialeah, Florida (one of the largest areas impacted by King v. Burwell) who is receiving the maximum subsidy of $7,488 per year. Of the 87 plans offered in the marketplace, 16 entail zero cost to the consumer. Premiums for these “free” plans range from $6,300 to $7,200. There is no incentive for the consumer to shop prudently from these 16 plans. The consumer does not get to keep any unused subsidy, creating incentives to choose health plans with additional features of only marginal value. The taxpayer – not the consumer – picks up the cost of the imprudent choices.

In addition to discouraging shopping based on plan value, the premium tax credit offers a set of perverse incentives, especially on the decision to earn more than 400% of the poverty line and on reporting your income for the upcoming year.

Today’s decision may very well mean business as usual, but there are serious economic issues with how the subsidy is set up.