'ObamaCare' tax subsides will reduce the premium cost of health insurance

Posted by AzBlueMeanie:

There has been some seriously "craptacular" reporting by conservative media about the alleged premium "rate shock" in insurance rates under "ObamaCare." Every time you see one of these reports about premium “rate shock,” make certain you note whether the reporting accounts for tax subsidies or not.

Adrianna McIntyre from Project Millenial reports, Most young adults on the individual market today will qualify for subsidies in 2014:

The Kaiser Family Foundation has a new report out that examines how people currently in the individual market will be affected by the reforms taking effect in 2014. Premiums will change for  variety of reasons. You should read the whole issue brief, or Jon Cohn’s commentary here. As Kaiser acknowledges, premiums will go up for some people and down for others. They go a step further, though, and look at how many people in the current market will benefit from the premium tax subsidies.

About half (48%) of people now buying their own insurance would be eligible for a tax credit that would offset their premium. This does not include over one million adults buying individual insurance today who will be eligible for Medicaid starting in 2014 (i.e., they have family income up to 138% of the poverty level and are living in states that have decided to expand Medicaid under the ACA).

Now, that’s all adults, regardless of age. I was curious, how does that stack up against just young adults? I looked at these numbers a few months ago, but my analysis back then was limited to childless adults. Josh Fangmeier was kind enough recently to rereun the numbers for everyone, with or without kids (more related to that here). A predictable trend holds for those currently on the individual market: younger individuals tend to have lower incomes, so they’re going to benefit more than average from the exchange subsidies offered to those below 400% of the poverty line.

Bottom line? Just over 70% of young adults that hold individual plans today could qualify for subsidies in 2014. Even if you chop off the kiddos under 26—who might not need an individual plan, since they can take advantage of extended dependent coverage—the proportion of subsidy-eligible 26- to 35-year olds is 65%, still well over the 48% attributed to the whole market.

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But if you want to talk rate shock, make sure you also talk about the fact that young adults are more likely to receive subsidies than their older counterparts.

Jonathan Cohn’s commentary, The Big Savings Obamacare Critics Miss:

I know. You're getting tired of hearing about the subsidies. Bear with me, because today we have some new and important information, thanks to a new study from the Kaiser Family Foundation.

To review: Obamacare provides offers tax credits to offset the cost of insurance. If your income is less than four times the poverty line, and if you're buying through one of the new insurance exchanges, then the tax credit will operate like a discount. The less money you have, the bigger the discount. Nowadays, most Obamacare critics acknowledge that the subsidies exist. But they tend to dismiss them as trivial. “Some low-income people will get subsidies," Rich Lowry of the National Review wrote on Monday. "But that doesn’t change the essential facts.” 

Actually, it does change the essential facts—by quite a lot. The study, by Larry Levitt, Gary Claxton and Anthony Damico, shows it.

The authors start by figuring out what the initial, upfront cost of insurance will be for people buying coverage on the exchanges. Based on Congressional Budget Office projections, the average across all households—that is, individuals and families, of all ages—works out to $8,250 a year. That’s not a bad price for comprehensive coverage: It’s in the same ballpark as policies that employers provide employees. Still, it’s more than some families buying coverage on their own might pay today, because they have skimpy policies or benefit from preferential pricing for the healthy that Obamacare prohibits. That’s why conservatives insist people won’t want to sign up for Obamacare's insurance options.

But, again, those are the initial premiums. According to the Kaiser study, the subsidies on average will reduce premiums by $2,672, or about a third of the price. The averages mask a lot of variation, with more affluent people getting less assistance and less affluent people getting more assistance. People with incomes of more than four times the poverty line, or about $94,000 for a family of four, get no discount at all. That's one reason why some people really will pay more for their insurance next year.

Still, the number of people receiving discounts is a lot larger than even many analysts seem to realize. It turns out that about half the people who buy their own insurance today will be eligible for subsidies. For them, the subsidies will be worth an average of $5,548 per household, effectively discounting the price by two-thirds. The study defines the “typical” plan as the second cheapest silver option. (Silver plans cover about 70 percent of the average person’s expenses.) Keep in mind that people who choose less expensive options, like those that cover fewer expenses, will pay even less for their coverage.

"It makes sense to look at what people will pay for health insurance after taking tax credits into account, just like we do for things like 401(k) plans, child care, or educational expenses," Levitt told me. "The law provides a surprising amount of financial relief for people who are buying their own insurance today, not to mention the uninsured, who tend to have lower incomes." Len Nichols, a health economist at George Mason University, agrees. "In many ways, what the ACA is about is extending premium tax breaks to those without good employer offers today, and doing so through a sliding scale that provides the most help to those who need it most."

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For now, we should at least agree on the arithmetic, which the Kaiser Foundation study lays out nicely. A large portion of people who buy individual coverage through Obamacare are going to be eligible for subsidies. And those subsidies are going to be worth, on average, thousands of dollars per person.

Unfortunately, GOPropraganda doesn't do math.

UPDATE: Kaiser Family Foundation provides a Subsidy Calulator Premium Assistance for Coverage in Exchanges. http://kff.org/interactive/subsidy-calculator/

Comments

[Georgia]

Right this minute, I have a 25 year old niece, mother to 2 young children, just diagnosed with Stage IIB Cervical Cancer. Her husband earns $1900 a month. In South Dakota the govt. has chosen not to support the Medicaid increases and they are considered too rich for govt. help for the wife. It's a real problem, folks. Pay attention! This is a hard-working young Republican family.

[JC Higgins]

Georgia. If your niece's husband only makes $22,800.00/yr he is below the Federal Poverty Level for a family of 4 (23,550.00) & they qualify for Medicaid according to the Federal Government guidelines. Their political affiliation has NOTHING to do with this.

[AZ BlueMeanie]

My sympathy for your niece. Since she is in South Dakota, she should check out the South Dakota Department of Social Services medical eligibility page for assistance programs for which she may qualify. http://dss.sd.gov/sdmedx/includes/portal/verifyeligibility/index.aspx