Debunking The Myths of Obamacare Rate Shock

Foggy River Bend wallpaper

Foggy River Bend wallpaper

Jonathan Cohn dives into the “rate shock” and Obamacare debate once again, Un-rigging the Rate-Shock Debate, The truth about what those healthy 25-year-olds will pay.

Still, I think many Obamacare critics and quite possibly some of its supporters don’t fully grasp the significance of one key factor: the subsidies.

To review: Obamacare reorganizes the market for people buying coverage on their own, so that they are no longer at the mercy of insurers who pick and choose the healthiest customers. This “non-group” market is pretty small, in relative terms: The vast majority of Americans will continue to get insurance from employers, Medicare, or Medicaid. But for insurers who sell non-group coverages, the rules for conducting business are changing dramaticaly. Under Obamacare, these insurers must provide all beneficiaries with a core set of benefits, for example, and they can’t deny coverage to people who have pre-existing conditions. Insurers are reacting to this by raising premiums. They really don’t have a choice, since they can no longer skimp on benefits or avoid taking on sick people.

If you want to make Obamacare look really bad, you stop telling the story right there. You imagine a young, healthy person who can get cheap coverage today, compare what he’d pay under Obamacare, and, then, declare that Obamacare has “doubled premiums.” But the real story doesn’t end there. And one big reason is that Obamacare also provides people with financial assistance. This assistance, which comes in the form of tax credits, has the opposite effect of the regulations. It makes insurance less expensive.

Conservatives and libertarians who just hate the Affordable Care Act have not been restrained by ethics in how they talk about Obamacare. They have made statements and illogical arguments that range from wacky exaggeration (Look to Communism to Explain Obamacare – Newsmax.com (Dec. 12, 2009) to stories that dig into new depths of depraved lying. While they have succeeded in convincing much of their base, that was to be expected. The unfortunate effect of the propaganda has to confuse many people who are not especially political and have a combination of personal financial worries and concerns about their health care, and how they’re going to pay for it. Before preparing for this post I read a few of what seemed like sincere concerns expressed in comment sections. With some people wanting to get what they heard was affordable insurance, but they’re afaird – see conservative disinformation – they they’ll be penalized for not having insurance, it will change their tax rate for the worse or they will not get the coverage they need. None of those things should concern anyone – with the possible exception of certain young adults who – when buying insurance on their own, may see slightly higher premiums. Though see bold above, much of that costs in around 85% of cases, will be offset by subsidies.

Not everybody can get these subsidies: They are based on income, so that people who earn more money get less help, and people with incomes of more than four times the poverty line get no assistance at all. (That’s roughly $46,000 a year for an individual and $94,000 a year for a family of four.) But the subsidies are a lot bigger and benefit way more people than many people realize. Most of the commentary I’ve seen doesn’t really convey that.

Let’s go back to former Romney adviser Avik Roy’s 25 year old nonsmoking male buying insurance on his own. If he is making poverty wages, say $15k a year ($7.50 hr, 40 hr week), his insurance will be free. I’m going to try to make the rest of this post as brief as possible, but I do recommend going over to the links to read the entire column and in one case, their full report. Claim About Obamacare Reform “Rate Shock” Is “Unfounded,” Urban Analysis Finds

But, as the Urban Institute paper points out, the large majority of young people affected by this will also become eligible for premium subsidies to help buy coverage in the new exchanges that health reform will create, or for Medicaid (if they live in a state that adopts health reform’s Medicaid expansion).  As a result, the age-rating change “would have very little impact on out-of-pocket rates paid by the youngest nongroup purchasers.”

Specifically, the study found:

92 percent of people ages 21 to 27 projected to buy an individual plan in an exchange in 2017 are expected to have incomes less than 300 percent of the poverty line, so they would be eligible either for Medicaid (if their state expands it) or for substantial subsidies to help pay premiums in the exchange.

Similarly, 88 percent of 18- to 20-year-olds projected to buy a plan in the exchange are expected to be eligible for premium subsidies or Medicaid.

The study also notes that among the estimated 951,000 young adults ages 21 to 27 who now buy coverage in the individual market and have incomes too high to qualify for premium subsidies or Medicaid, two-thirds are age 26 or younger and in families with access to employer coverage.

This is also an important point that Avik and others at Forbes and elsewhere are failing to note. Everyone who is under 27 can stay on their parent’s plan. Those plans are almost always lower cost group plans. Plus they will have the slightly expanded guaranteed benefits specified by the ACA. About that Urban Institute Study,

ACA will not cause rate shock

ACA will not cause rate shock

Quick-Take-on-Young-Adults-with-Current-Nongroup-Insurance-or-Uninsured

This chart shows that the people Forbes claims to care so much about will get some kind of tax break/subsidy. In the category of people who buy insurance on their own – non-group insured – maybe 11% may pay more. Though they too will get better benefits and cannot be denied coverage for preexisting conditions. Again, not perfect, but not the “disaster” or “rate shock” being predicted by partisans with an agenda that trumps the facts.

• Given the age-rating gradient HHS has adopted in regulations, premiums for people age 28 to 56 would be very similar regardless of the age rating limits chosen; premium variation across the rating scenarios is concentrated in the age groups of 21–27 and 57 and above.
• Although the average premiums insurers will charge for 21–27 year-olds are lower under 5:1 than under 3:1 rating, subsidies these purchasers receive will leave average out-of-pocket premiums almost identical under the two methods. Over 90 percent of young adults age 21–27 purchasing single nongroup coverage in the exchanges receive significant subsidies that limit their costs as a share of their income.

The ratio seems like wonky stuff, but it is just the limit the ACA places on premiums for the same benefits between young insured and older insured. This is so younger insured are not forced into paying for the higher health care costs of older insured. The full report is available at the link.

Does Rush Limbaugh listen to his own words, “Yes Virginia, There Are Death Panels”: Limbaugh Exploits Child Transplant Patient To Revive Obamacare Myth.

Rush Limbaugh rehashed the widely debunked myth that President Obama’s Affordable Care Act will result in death panels to smear Health and Human Services (HHS) Secretary Kathleen Sebelius, claiming that “Obamacare establishes death panels and right now Sebelius is it.”

Limbaugh used the case of Sarah Murnaghan, a 10-year-old girl awaiting a lung transplant, as evidence that “The government’s making the decision who lives and dies. That’s what Obamacare is.” Later, Limbaugh responded to a caller, saying, “Yes Virginia, there are death panels.”

So Limbaugh wants the gov’mint to intervene in the personal medical care of a patient. That would be something like a death panel would do. The ACA or Obamacare does not give the gov’mint authority to intervene in the diagnostic or medical procedures for individual patients. It could only do so if the government had the authority Limbaugh lies about. And good for Politico (I’m a little shocked that Politico is being so rational) for explaining how the government should not get involved in the case of this one girl because it would likely just mean the death of one or two other girls, Kathleen Sebelius at center of storm over child’s lung transplant

“I can’t imagine anything worse than one individual getting to pick who lives and who dies,” she said. Sebelius said putting Sarah next in line would disadvantage other young people who have also been waiting for transplants — including three in the same area. Helping one child could possibly hurt another.

Some experts agree that the lung allocation policy may need to be revisited; it has been for kidney and liver transplants. But they say no snap decisions should be made because of the media glare.

Should Sebelius step in and do something? No. She doesn’t have all the facts,” said NYU bioethicist Art Caplan. Acting under pressure from a media savvy family “or the noisiest person in line” is bad policy, he added.

[  ]…Caplan noted one reason that may give Sebelius pause: by moving someone up the list, someone else goes down. One child saved could mean another child dies. Sebelius, he noted, “doesn’t have all the information.”

So Limbaugh and other conservatives are the ones acting as Death Panels via media pressure to act on the politics of the moment, not the medical ethics which might save this one adorable little girl, but kill one or possibly three others. This is also a good post on the subject, Suddenly everyone is a backseat expert on medical ethics

Here’s the thing. There are many people waiting for lungs in Pennsylvania now, and few will get them. With so few lungs available, it’s important to come up with a fair, unbiased system that maximizes the potential to make good use of them while also not favoring anyone unfairly over anyone else. There is just no way that it ends well for everyone. When a lung becomes available, someone is going to get it, and others will not. That means one person gets a chance to live, and the rest likely die. It’s tragic, no matter how the decision is made.

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