OBAMACARE supporters claim subsidies provided under the law will help offset the higher insurance prices caused by the same law. This may be a triumph of wishful thinking over serious analysis.
According to The Hill, a newspaper covering congressional activity, Obamacare-related premiums could double in some parts of the country next year. Rate increases would vary significantly from one part of the country to another. But insurance officials interviewed by the newspaper said the surge in health insurance prices will be driven primarily by Obamacare’s mandates, the negative impact of the administration’s ad hoc rewriting of the law, and the fact that enrollment in Obamacare exchanges has fallen short of projections and has been skewed toward more expensive patients.
Dramatic rate increases will come in 2015. They will be on top of increases already underway due to Obamacare. According to eHealthInsurance, individual premiums have increased 39 percent since February 2013. The average individual premium is now $274 a month. Family policies have increased by 56 percent. Average premiums are now $663 per family each month.
Prior to passage of Obamacare, family policy premiums were increasing an average of 31 percent a year. Thanks to Obamacare, policyholders may come to think of those previously dramatic price increases as the good ol’ days.
Obamacare’s backers will argue that subsidies provided by the law ensure that many citizens will pay far less than the actual sticker price. But if rates double and continue to skyrocket, it’s virtually certain that many families qualifying for subsidies will still pay more out of pocket than they would have prior to the law’s enactment. And individuals accepting Obamacare subsidies could come to regret it.
Under Obamacare, tax credits are granted on a sliding scale, based on income and family size. Eligible are those making between 138 percent and 400 percent of the federal poverty level in states that have expanded Medicaid, and to those earning between 100 percent and 138 percent of the poverty level in states (including Oklahoma) that didn’t expand Medicaid. The credit can be used only to buy insurance through an Obamacare exchange, not the traditional private market.
However, the credit is awarded based on last year’s income. Those who make more money this year could be required to pay back all or part of their credit after filing 2014 tax returns next year. Because the targeted population has very low income, even a minor raise translates into a significant percentage increase in salary. Thus, because the sliding scale used to determine tax-credit eligibility is steep, small pay bumps or new job opportunities could have dramatic tax implications.
Writing at Forbes.com, Josh Archambault notes, “Just a few dollars of extra income could result in thousands of back taxes to be paid.”
A study recently published in Health Affairs estimated that nearly 40 percent of exchange enrollees in California would have to repay subsidies as the result of improvement in their personal finances. So people who qualify for Obamacare subsidies may still pay more out of pocket, and also face a dramatic tax penalty if they happen to get a raise or a promotion. What a bargain!
The health care law’s backers sometimes object to calling it “Obamacare.” But it’s increasingly difficult to call it the Affordable Care Act with a straight face.