WASHINGTON, September 26, 2013 – The Obama administration has released a report detailing the premiums that will be available to consumers through the federal health insurance exchanges starting on October 1st. While the report paints a rosy picture for some, it left most Americans in the dark over how much they will actually be forced to pay for coverage.
Further confusing Americans, the report only applies to the 36 states in which the federal government will assume all or partial responsibility for running the insurance “marketplaces”, or government-controlled programs through which consumers must purchase approved healthcare plans.
The prices of those plans will now be tied to an individual’s or family’s income, as well as the usual criteria of age and health status. The Department of Health and Human Services (HHS) uses two examples in their report to illustrate potential insurance costs: a healthy 27-year-old and a Texas family of four making $50,000.
Their premiums may both be lower than HHS projected, but everyone else will apparently have to wait to find out what sort of monthly costs they’ll face in the exchanges.
The report also fails to compare its estimated premiums with what Americans are paying today. However, that type of juxtaposition is a tall order given the way the insurance market is about to fundamentally change. Third-party groups have still managed to muster up a few examples; a healthy man under 30 in Tennessee can pay as little as $41 a month today, but under the new law, the least he will be able to shell out for healthcare is $114.
That’s a cost increase of 178%.
So what exactly can Americans expect in the next few days?
Only consumers without “affordable” health insurance from their employer will be eligible to shop in the exchanges next week. The law specifies what types of plans are considered “affordable” as only those which cost employees less than 9.5% of their household income.
If a company’s plan is more expensive, HHS will lay on the penalties, which will leave employers either paying more of the employees health care costs or dropping coverage, funnelling more people into the state exchanges to purchase individual plans.
Coverage for those who enroll next week won’t kick in until January 1st. At that point, the government (read hard-working Americans) will begin subsidizing insurance premiums for people making up to 400% of the federal poverty line, which amounts to roughly $45,000 a year.
Americans whose incomes fall below that bar will pay little or nothing for their coverage after tax credits, while the rates for those who earn more will presumably go up.
Obamacare’s plans are organized under a four-tier metal system consisting of bronze, silver, gold, and platinum, with the bronze level offering the most basic level of coverage and the platinum level offering the frills.
Most people who will purchase insurance through the exchanges next week will likely sign up for the bare-bones bronze plans. While these plans will help pay the bills in catastrophic events, people covered by bronze plans could still be forced to pay thousands in deductibles or co-insurance. And although out-of-pocket expenses are supposed to be capped at $6,350 for bronze individuals, the Obama administration decided to push that requirement back to 2015.
Americans who are poor enough to require government subsidies just to get on the cheapest plans will not be able to afford their deductibles, leaving the healthcare sector holding the bag just like it was before Obamacare.
If individuals do not sign up for healthcare coverage by the March 31st, 2014 deadline, they will be hit with a heavy non-compliance tax. That penalty will grow every year they fail to enroll in Obamacare. There are a few exempted groups, like prisoners and illegal immigrants.
Those who pay no income taxes because they don’t earn enough will also be free from the
individual mandate—and that is not a negligible number of people.
One of the most infamous sound bites from the 2012 election, the 47% quip, is an accurate figure of how many households don’t pay income tax.
That cuts the number of people eligible for healthcare coverage down even further, and still leaves America with a huge pocket of uninsured and vulnerable citizens.
Also on October 1st, employees of small businesses should receive a notice from their companies stating whether their bosses will be offering health insurance. Businesses with fewer than 50 full-time workers aren’t required to provide coverage, and larger companies that are have already begun to wiggle their way around the law.
In a stunning move this summer, the Obama administration delayed the employer mandate until 2015, safely behind the midterm election. With the individual and employer mandates out of synch, people working for larger companies that don’t yet offer insurance could be punished for waiting to buy a plan on the exchange website, even though their employer will by law provide coverage next year.
The rates will be higher for everyone due to a deadly combination of subsidy structure and mandatory coverage items. People who earn more will pay more into the system, helping to close the gap for those who don’t have to pay anything.
All carriers must now cover the “10 essential health benefits”, which include maternity services and rehab for drug addictions. Men will have to pay the same rates as women despite the fact that they will never incur the high costs women do when pregnant.
Obamacare will also cap the higher rates that older people pay: a 64-year-old can’t be charged more than three times what a 21-year-old would pay, even though they put seven times the burden on the system than do 21-year-olds.
The crush of people who will pour into the exchanges next week will be at risk for identity theft and fraud. In California alone, 21,000 so-called “Navigators” have been hired to assist the uninsured with finding a plan under the complicated new rules.
These counselors will have access to Social Security numbers, financial records, and even medical histories; few have been properly screened. The exchanges have no safeguards in place to combat identity theft—which means that if an individual suspects his information has been compromised, he will have virtually no options for recourse.
What’s worse, software glitches are already threatening the online exchanges, days before supposedly heavy traffic hits the servers. Two states-Colorado and Oregon- will curb their residents’ ability to enroll online due to issues with their program. People in those states will have to travel to designated spots to enroll in person or try to sign up over the phone. The federal program is having its own share of challenges— the biggest being a technical glitch that threatens the online calculator’s ability to give people an accurate prediction of how much they’ll end up paying.
In 33 states, the federal exchanges won’t be able to sign eligible applicants up for Medicaid. And the local exchange in Washington, D.C. will not be able to calculate the tax credits people will receive, the premiums they’ll have to pay, or even if they’re eligible for Medicaid.
That means, on October 1st, D.C. residents won’t be able to purchase insurance coverage like the administration promised.
Expect to see a whole lot of confusion next week as latent problems within the system reveal themselves. Of course, the fatally flawed legislation won’t really show its hand until January, when benefits begin to kick in.
At that point, a skewed doctor-patient ratio will cause delays in care and a steep drop in quality. The last vestiges of Obamacare’s promise will crumble when the employer mandate hits the following year, triggering mass layoffs, work-week reductions, and stunted economic growth.
Obamacare’s piecemeal implementation will allow its major shortcomings to remain shrouded for the near future, but the day is coming when its true weakness will be exposed.
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