Monday, November 15, 2010

What Insurance Will Cost You in the New Era of Health Reform

Now that health care reform has passed, ever wonder how much you'll have to pay for health insurance if you carry no employer-based insurance in 2014?

I have spent some time entering sample scenarios to a helpful Health Reform Subsidy Calculator from the Henry J Kaiser Faimily Foundation. The calculator helps you understand the government subsidy you might acquire for insurance based on your income now vs. 2014, age, employment status, difference between a single person insured vs. a family of four, all adjusted with a regional 'cost factor' based on where you live.

Some interesting cut-offs were noted and I have highlighted a few examples using their calculator:

If a 30 year old man without employer-based insurance enters a government insurance "pool" and makes $15,302, then he will have his insurance paid my Medicaid and pay a "modest" out-of-pocket amount for coverage, depending on his state. If he makes one dollar more ($15,303), his premium will become $3,404 annually, for which the government will provide a tax credit of $2,981 and will require an unsubsidized payment from the patient of $459. This does not include an additional $2,083 of out-of-pocket expenses for health care used, resulting in a possible total cost to the individual of $2,542. (16.6% of his income).

If the same person is 49 years old instead and and makes the same $15,303, the premium rises to $6,717, but the government picks up a larger share so the unsubsidized payment for insurance remains $459 and the out-of-pocket expenses remain $2,083.

Now, if the 49 year old has to cover a family of four and makes $31,155 without employer-based insurance, he and his family will be covered by Medicaid. But if this individual makes one dollar more ($31,156), his premium for insurance will be $16,360 with the government crediting the individual for $15,425 for a total unsubsidized annual premium of $935. Out-of-pocket expenses for health care services for this individual and his family rises to $4,167 for a total cost of $5,102 annually ($16.4 percent of their total annual income).

Finally, if we take a person making $200,000 annually at age 49 who is has no employer-based insurance, their premium jumps to $16,300 annually with no government subsidy available and an additional $12500 in out of pocket expenses to be paid ($28,800 annually or 14% of their income).

What is clear is that health care is about to get MUCH more expensive for the majority of Americans, even those from the government's definition of "middle class."

Take some time and enter your information to see where you'll be under the new law when it takes effect. The results are eye-opening.



Andrew_M_Garland said...

Historically, the Young have helped the Old, partly out of family love, and partly because of a transfer of wealth from the Old to the Young. The Young have been paid for their services, to the extent they have worked for the Old.

Our politicians have now built a scheme where the Young will be expected to work for the Old, for nothing. The Young will be ordered to pay the amounts promised by Medicare, Social Security, and union and government pensions, lavish healthcare promises, and lavish pensions.

There is nothing real in the "Social Security Trust Fund". There is only a political promise to find the money somewhere that has already been spent. This is 1000 times bigger than the Bernie Madoff fraud of $50 billion. It is a gigantic Ponzi scheme pretending to be a sensible government program. Collecting more tax for that scheme will not change anything.

The Old will wave pieces of paper at the Young calling for perfectly legal, high taxes on them. This will be presented as a given, the amount of transfer duly voted under law by the Old for the benefit of the Old.

In exchange, the Young will be told that they too can collect from their children in turn. The Young will be slaves to the Old, under the suggestion that they too can enslave their Young.

If the Young have any sense at all, they will tear up those pieces of paper in contempt for the Old who decided to enslave them. The Young will have contempt for the government and "the Law" that arranged this enslavement. They will break the Ponzi scheme of Social Security. They will blame the government that pretended to plan for the future, but instead spent it all, expecting the Young to supply what was never saved.

There will be a revolution that changes much of our current law. Government bonds, then refered to as the "old government bonds" will be worth the paper they are printed on.

--> Ponzy Schemes Like Social Security
There is nothing real in the "trust fund". There is only a political promise to find the money somewhere that was paid in and already spent. The shortfall is about $15 trillion in today's dollars, about the entire yearly income of everyone in the US.

--> Obamacare Bails Out Medicare
Obama's "Healthcare Reform" is a huge tax hike with rationed medical services.

Jodi said...

Too bad people cannot get a view of what it will look like when their subsidies get cut because the government cannot afford them as they are.

Anonymous said...

DH and I have our own business and provide employer-based coverage for ourselves and our employees. When premiums increase (15%) came in Oct 2008 and was going to take our comprehensive family policy premium to $14,500, we changed plans to a high-deductible HSA for ourselves and employees (after discussion with employees who were ALL in favor of going with the HD-HSA).

We did a look back on utilization (for us) and realized we averaged, in our family, less than $1000 a year and the insurance company couldn't give us a good reason why, with low utilization, we were facing such a crazy was what it was, period.

We opted for the HD-HSA with a deductible of $6,000 for family ($3,00 for individual) and our premiums for our family policy dropped in 2008-09 coverage to $6,450...with our HSA contribution of $5800 it cost $12,250 that year.

2009-2010 we had a policy increase to $6,580 (2% increase) + $6,000 into the HSA = $12,580 total for that year.

Our recent renewal came with another 2% increase, bringing the premium to $6,712 + $6,600 into the HSA = 13,312 for this year into next.

We've been fully covered, with a better overall policy (no lifetime limits, full coverage worldwide, 100% coverage beyond deductible) and have kept our cost down.

Better still - our HSA has $16k and change in it now....we've used just a couple thousand in the last few years in paying with the HSA for our medical bills and are satisfied with the concept of the HSA - it makes us much more cognizent of the cost of care and more aware of whether something is necessary or not. We feel in better control of the spending and if something catastrophic happens, we're covered and have the funds in the HSA to meet deductibles without worry.

IMO, this is a model we should be moving toward as a country - the vast, vast majority DO NOT use more than $1,200 a year in medical care, yet they're paying astronomical fees for premiums and then hit annually with sharp increases....and walk around with an entitlement mentality when they do see a doctor because they're covered - they don't ask if that test is needed, or what the lab work if for - they just do it without caring about cost.

Anonymous said...

Dr. Wes,

Just want to be sure I understand...what is the definition of "out of pocket expenses"?

DrWes said...


Good question. According to the Calculator website:

"Specific provisions like deductibles and copayments may vary from plan to plan, and out-of-pocket costs for any given individual or family will depend on their health care expenses. Preventive services will be covered with no cost sharing required."

I assume out-of-pocket expenses is defined as money spent by the beneficiary(ies) above and beyond their insurance premium.

Anonymous said...

Dr. Wes,

OK. Now tell me what insurance will cost me if we stay in the present era without reform. We need the comparison in order to understand and make judgements. Unless your intent is just to scare us...

DrWes said...


When you uncloak yourself from the thin veil of anonymity, we'll talk.

For this post, I used a third party calculator that is publically available that demonstrates (in estimated terms), what health care will cost an individual based on the PPACA law recently passed by Congress - hardly a "scare tactic."

I will refer you to this reference (pdf) as a guide to the best estimates I can find for current individual health insurance costs as a comparison. I will leave the inflationary rate for the cost in 2014 dollars up to you.

Anonymous said...

Dr. Wes,

Well, you got me. I went to your suggested site and promptly suffered a seizure. No way I could possibly begin to make some projections. So I went to the calcualtor that you used for your figures. The introduction caught my eye...

"Premium calculations are consistent with estimates of premiums under reform prepared by the Congressional Budget Office. CBO projects that average premiums under reform for the same level of coverage for a given group of enrollees would be 7-10% lower than under the status quo. However, in many cases coverage will be more comprehensive and accessible than what is typically available today in the non-group market. As a result, 2014 premiums in the calculator cannot necessarily be compared to what people buying insurance on their own are paying in 2010."

Now I am old and not so sharp as I used to be but this information seems to shed some light on the question I asked. The rates will be lower under reform (7 - 10%), not by much, but will offer better access and coverage. When you add the social benefit of 30 million more folks with coverage, I am satisfied that reform is of benefit to the country. Could it be better? Damn right. But I'm not ready to fight with you about the public option right now. I'm still recovering from that seizure.

DrWes said...

It's easy to say insurance will cost less if you don't count the IRS or Social Security workers along with your government benefits cost. How much will they cost? Oh, they won't show up on the health care balance sheet. And those waivers granted to unions, corporations, and insurers who supported the bill - no doubt they'll quell your seizure.

Given the government's track record with managing Medicare's cost overruns, I remain skeptical at their ability to control cost with an even larger entitlement program. Still, the reality is that the PPACA is law. It does address some real problems with our healthcare system, but it's costs are grossly underestimated therefore I fear just as non-sustainable as what it was to correct.

Andrew_M_Garland said...

Here is how trustworthy are the CBO figures. Their problem is that they must evaluate bills according to what they are told. They aren't allowed to evaluate according to reality.

Link - Romer is Theoretically Correct
(Search for CBO)

How The CBO Scores Congressional Legislation:
A fly on the wall:

CBO: The MedHelp bill spends $1 trillion and increases what you must borrow, the deficit, by $230 billion.
Politician: What if I tell you that we will stop paying the doctors, saving an additional $400 billion?

CBO: Can you really do that?
Politician: Just assume that I can. I'll write it into the margin.

CBO: Then, the bill spends $1 trillion and decreases the deficit by $170 billion. It raises taxes by $770 billion, and saves $400 billion on the doctors.

Press Conference: The bi-partisan, non-partisan, mathematical, unbiased, technoid, trustworthy, very smart CBO has just scored the MedHelp bill. Ladies and Gentlemen and Republicans, this bill delivers medical help to everyone, and reduces the deficit by $170 billion. How could any intelligent person be against it?

NY Times and Washington Post: CBO Numbers Stink
03/19/10 - The Lid by Sammy Benoit
[edited] Democrats worked with the nonpartisan Congressional Budget Office for more than a year, fine-tuning the bill in the last weeks. And, they consulted repeatedly with the bipartisan staff of the Joint Committee on Taxation.

The CBO found that cost and deficit targets would be missed. So, Democrats adjusted parts of the legislation to meet their goal.

Here are two of their tricks.
() The first ten years of increased taxes are applied to only six years of costs.
() $500 billion of Medicare savings are counted twice.

Anonymous said...

Dr. Wes,

Me again. I don't disagree with you about sustainability given the your CBO info. That was what so scary. Families making less than $50K, frankly making less than $60K, will have a terrible time with premiums that are 14% of their income. I can't deal with your new argument about IRS and Social Security. It's almost like John McCain and his ever changing criteria for DADT. I guess we'll live to fight again another day.

I'm sorry about Mr. Garland. I'm pretty sure we will never agree. Methinks he is of the school that tax cuts will reduce deficits.

Night for now. Let's all get some rest.

Anonymous said...

Dr. Wes,

Your point is made. Insurance costs for the middle class under reform are unaffordabe. My point? The status quo (w/o reform) will cost even more. Another follower thinks both estimates are too low. No wonder I'm depressed.

We all know our arguments for our positions. Whether repeal, tweak, or acceptance, let's get on with it and see what 2014, 2016, 2020 will bring.

But do give this poor old liberal one concession. If your going to project a future cost and I ask if there is a comparison, you'll not get so cranky.

Best regards,
Still Veiled in Anonymity

Doreen said...

I was going to ask what anonymous asked. What would they cost us without health reform. My husband is a small business owner and every year the cost of insurance goes through the roof. He is happy that he will now get a 35% tax break because he gives his employees health insurance. I see nothing from insurance companies that they care about our expenses.

Anonymous said...

I was going to ask what anonymous asked. What would they cost us without health reform. My husband is a small business owner and every year the cost of insurance goes through the roof. He is happy that he will now get a 35% tax break because he gives his employees health insurance. I see nothing from insurance companies that they care about our expenses.

Your husband doesn't "give" his employees health insurance - he, like my own husband who owns a business, calculates the cost of insurance and other things like taxes into compensation costs and adjusts pay the employees actually see accordingly. Unlike your husband's business, ours makes too much to qualify for credits.

He should look at switching to an HSA - premiums are lower, even if he contributes 100% of the annual deductible into the employees HSA account (which my husband does along with paying 100% premium).

I call BS on the calculator myself. According to it, our family-of-four policy will cost $19,125 per year + $12,500 for deductibles/copays? Sorry, but there is no way on God's green earth our policy, if we'd opted to continue the comprehensive plan we had, would equal that much in just three more years.....not unless it's cost is being driven UP by the healthcare reform.

Anonymous said...

I read today that someone's premium was being increased by 20% for 2011. Anecdotal? Sure... but Craaaaazy times!

BTW. Did you happen to catch the Rand Paul/Spitzer interview? Ouch!

Anonymous said...

Dr. Wes,

I agree that the government does a lousey job of managing Medicare cost overruns. They sure missed the boat when they didn't put Florida Governor Elect, Rick Scott in jail for the $600 Million medicare fraud perpertrated by his insurance company during his presidency. No such luck. Now he will govern Florida. With any luck he will opt-out of health reform.