Whom Will Obamacare Burden?

Jun 6 2013 @ 1:33pm

Subsidies Graph

Chait is unconvinced by the most recent ACA “victim” put forth by opponents of the law:

It is true — and nobody has ever denied this — that the hypothetical 25-year-old male will pay higher insurance premiums under Obamacare. Now, this 25-year-old male probably won’t pay higher premiums under Obamacare if he does smoke, or have any potentially worrisome medical history, or have family members with any potential medical history, or even if he’s a perfectly healthy non-smoker from a perfectly healthy family but has a low enough income to qualify for tax credits to cover his premium costs. And of course he’d be unaffected if he already gets insurance through his employer.

Will Wilkinson assesses the claim that the young and healthy will be forced into the insurance pool by the individual mandate, using a hypothetical 25-year-old freelancer named Nicole who makes $30K a year:

Over the next two years, as the penalty scales up, it’s pretty clear that Nicole would be smartest to pay the initially meagre fine and not sign up for insurance unless she comes down with something expensive. (No exclusions for pre-existing conditions!) But what about in 2016, when the non-compliance penalty is finally fully unfurled? That will be the greater of $695 per uninsured person, or 2.5% of household income over the filing threshold, which is not yet set, but this year was about $10,000 for individuals. So in Nicole’s case, that’s 2.5% of $20,000, which is only $500. So she’s on the hook for $695. For Nicole in 2016, then, the difference between going uninsured and getting a Bronze plan is $1,224, which is just a touch more than I recently paid for a cheap catastrophic plan. If America’s Nicoles are going without insurance due to cost, they’re not going to be induced to get it under Obamacare. If the programme is going to bring down the cost of an average policy by goading the likes of Nicole into the risk pool, it needs a bigger carrot, stick or both.

Sarah Kliff adds some important context:

Young Americans tend to have lower incomes than their older counterparts. That means they’re more likely to qualify for subsidies than their parents. In a new analysis released Wednesday, consulting firm Avalere Health estimates that “approximately two-thirds of young adults (30 and under) who are currently uninsured or enrolled in non-group coverage and who will not qualify for Medicaid—the population most likely to experience rate shock— have incomes between 133 and 400 percent of the federal poverty line (FPL), making them eligible for premium tax credits.”

To translate that out of health wonk speak: The federal government will help most young, uninsured people buy coverage under Obamacare. But, there’s also a significant contingent who won’t receive help–and those are the ones most likely to see their rates increase.

Cohn, who flags the above chart, goes into more detail:

A 25-year-old single man, making $35,000 a year, can expect to pay the full price of a bronze policy: About $2,511 a year in 2014. We can argue whether that constitutes true “shock,” given that it’s far less than employer policies cost. Still, it’s a lot more than the $1,104 premiums Roy found on eHealthInsurance. The same would be true for a 25-year-old non-smoker with even higher income. These are the young and healthy people who will end up paying more. That’s important and must be part of conversation.

But look what happens when we think about somebody making less money. If this young man’s annual income was $25,000, he’d pay just $1,184 a year. That’s basically the same as the eHealthInsurance bids, give or take a few six packs of beer. Dude! At $20,000 a year in earnings, the expected bronze premium comes all the way down to $481 a year. And at $15,000 a year, insurance is free. That’s right, the premium would be zero dollars. (If you’re interested, you can run the same calculations for silver policies, which are more generous, although the comparison to cheap eHealthInsurance plans becomes even more unfair to Obamacare. You can also run it for older people, or consider the possiblity of catastrophic-only coverage that Obamacare makes available to people younger than 30.)