Premium triple-threat? Probably not.

by Adrianna McIntyre

Perhaps you’ve heard the latest sound bite being trumpeted against the Affordable Care Act: Survey: ObamaCare Will TRIPLE Premiums for Thousands, crows one FOX News headline. Cato’s blog touts another: Triple-Digit Premium Hikes Dramatize the Need for Repeal. Most recently, this op-ed was posted on BuzzFeed: Obama Prepares To Screw His Base. In short, the suggestion is that premiums could triple for young, healthy folk. People like, you know, us. So why haven’t we been busy sounding the alarm and raising a little hell? Well some people probably will see their premiums increase, but—as with all things related to policy—the argument is way more nuanced than a single sound bite can convey. Let’s break it down, shall we?

That limelight-ready statistic comes this American Action Forum survey. I can’t assess how sound its methodology is, because the original data was collected and aggregated by a third party “under a non-disclosure agreement in order to protect firm-specific, proprietary information.” It appears that at least four insurance firms had to reply in each of the five cities for responses to be reported; I’m not in a position to guess how representative that makes the sample. Before I go full-on wonk, if you need a primer on how insurance is going to work under the new reforms, check out this stellar infographic from the Kaiser Family Foundation (via JAMA).

Health Coverage Under the Affordable Care Act

The argument. Under the ACA, insurance companies offering plans to individuals and small businesses have to stop or restrict discrimination based on age, gender, and health status. So, insurance companies have to stop charging women more than men and can only charge their oldest beneficiaries three times what they charge their youngest enrollees.

This survey claims that there are healthy young people who currently paying $50 a month who might see their premiums triple to $150 (this is the highest change observed in the survey’s data, and is specific to Wisconsin). Allow me to briefly express skepticism that a $600/year insurance plan covers anything substantive—that’s less than the sticker-price of spending an hour in the ER because you fainted in a hospital after giving blood. Just saying. Anyway, moving along…

Have insurance through an employer? These changes are going to play out in a way that impacts the “individual market”—that’s what we call people buying insurance independent of an employer—most significantly. You know why? Employer-sponsored insurance is already “group rated,” so all employees enrolled in the same plans pay the same premiums… regardless of age, gender, and health status. There may be premium changes for some small-employers, but they’re unlikely to be on the same scale as the individual market, because few companies are built entirely of robust 18-30 year olds.

No insurance, but under 26? Let’s not lose sight of the fact that if you’re under 26 and one of your parents carries health insurance with coverage for dependents, you get to hang out on their plan for a few extra years, even if you’re married or employed. This option only disappears if you’re offered health insurance through your own employer. One other bit of fine print to be aware of, ladies: your parents’ insurance might not include maternity coverage for dependents.

You get a subsidy! And you get a subsidy! A ton of people get subsidies! Okay, so they’re not humpback whales and they’re not from Oprah (and I have friends who will shun me for that outdated Dane Cook reference), but they are a form of federal assistance that’ll be offered to individuals making under $43,000. The exact amount an individual is expected to contribute towards their premium (as a percentage of income) gets calculated relative to the “federal poverty line.” Kaiser has a breakdown here—subsidies are offered for folks who make up to 400% FPL and don’t receive insurance through their employer. But we know that normal people think in dollars, not %FPL, so here’s a handy table for reference–it’s on the conservative side because I used the 2010 FPL figure, $10,830 for a single person; that increased to $11,170 for 2012. The calculations are entirely different for families; a family of four will qualify for subsidies up to a net income of $88,200.

Individual Income Max Annual Premium Max Monthly Premium
Under $10,830 2% income or Medicaid 2% income or Medicaid
$10,830 – $14,404 $216 – $288 or Medicaid $18 – $24 or Medicaid
$14,404 – $16,245 $432 – $649 $36 – $54
$16,245 – $21,660 $649 – $1,365 $54 – $114
$21,660 – $27,075 $1,365 – $2,180 $114 – $181
$27,075 – $32,490 $2,180 – $3,086 $181 – $257
$32,490 – $43,320 $3,086 – $4,115 $247 – $343

The bottom line. As this Politico story notes, “the survey looks only at the estimated increase in cost to insurers, not consumers.” In the bigger actuarial picture, “increased” costs of younger enrollees is offset for insurance companies by the older beneficiaries becoming “cheaper.” The potential out-of-pocket increases are driven by two factors: 1) making the individual market function in the same, less discriminatory way that large-employer insurance has been functioning for decades; and 2) requiring insurance plans to have a minimum benefits package, so many of those paying more will also be getting more than they used to.

Will some consumers see increased premiums? Yeah, and some will see seriously decreased premiums, but seeing out-of-pocket costs triple isn’t going to be a common thing. It’s worth noting that a policy analyst cited in the Politico article reported that over half of people aged 19 to 29 who bought insurance on the individual market in 2011  had incomes under 200% FPL—that corresponds to monthly premiums up to $114 on our table with the subsidies in place. Moreover, there’s going to be a “Young Invincibles” option for people under 30 who don’t want to spend much money on comprehensive health coverage–but still want the benefit of preventive services. I’m sure this bloggy explanation won’t satisfy everyone, though… to paraphrase the interwebs, you still mad, bro? Your last option is to pay the tax penalty instead of buying insurance: that’ll run $695 or 2.5 percent of your income, whichever’s higher—plus whatever health expenditures you incur by virtue of being human.

Thoughts? Questions? Think I’m mental? Leave it in the comments!

_____________________________
Adrianna is a graduate student in public policy and public health at the University of Michigan.
Follow her on Twitter @onceuponA or subscribe to the blog.

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