New HC rates with Obamacare

[samclem]

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Originally Posted by MichaelB The ACA is about many things, but young subsidizing old and healthy subsidizing sick are not among them.

The ACA does both of these things, I'm not sure why you write this.
- Young subsidizing the old: The ACA, by law, says that the rates charged old people cannot be more than 300% of the rates charged young people. If rates were allowed to reflect expected claims experience the rates charged a typical 60 year old would be much more than 3x the rates charged a typical 28 year old. Rates on the current individual market reflect this.
- Healthy subsidizing the sick: This is clearly the intended result when there is no medical underwriting, I'm not sure how it is possible to deny it.

Let's be honest with each other. We can differ about the desirability of various aspects of the law, but the fundamentals of how this law is supposed to work are not in dispute.

[jasg]

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Originally Posted by homestead 3.5k deductible 257 premium, 50% Coinsurance, 5k max out of pocket, 2M lifetime I believe.

I have a similar Regence policy for $337. I go on Medicare in Feb so it is sort of academic but they have dropped that policy and recommend a Bronze policy for $605.

The key point here is that my existing policy is a catastrophic coverage and comes nowhere close to ACA minimum standards. There are catastrophic policies under ACA but only if you are under 30.

The fact is that catastrophic policies are a bet that only works for the few of us who have the assets to cover the high deductibles and/or are in good health. In my case, being close to Medicare made the bet better. I actually expect to spend more than now per month in Medicare once I factor in Parts C and D...

[Mulligan]

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Originally Posted by samclem The ACA does both of these things, I'm not sure why you write this. - Young subsidizing the old: The ACA, by law, says that the rates charged old people cannot be more than 300% of the rates charged young people. If rates were allowed to reflect expected claims experience the rates charged a healthy 60 year old would be much more than 3x the rates charged a healthy 28 year old. Rates on the current individual market reflect this. - Healthy subsidizing the sick: This is clearly the intended result when there is no medical underwriting, I'm not sure how it is possible to deny it. Let's be honest with each other. We can differ about the desirability of various aspects of the law, but the fundamentals of how this law is supposed to work are not in dispute.

If the young are not supposed to help subsidize the old, why does every article I read express concern that if the young do not purchase the health insurance, it will create a death spiral in premium costs where more and more people drop out if premiums rise from the lack of healthy youthful participants?
I would also agree that the intent is to have the healthy subsidize the unhealthy (though that is pretty much what insure is about anyways). Otherwise why would they eliminate the higher deductible plans that a healthy person would purchase that had plenty of assets to handle the deductible?

[Malcolm2]

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Originally Posted by Fermion Well, yes, until the fines become 2.5% of their income. I was making $70,000 a year at age 27. The fine for not having HC would be $1750 plus I would be out of pocket $5000 or so when I get a compound fracture in my arm riding dirt bikes

It would be unusual for someone making $70K not to have access to a health plan via their employer, therefore you would get a large (or some) subsidy from them and the economics change. Most fines will be nowhere near $1750, and there is the rub. If you are 26, making just over the subsidy limits, and are healthy how far up the priority chain will it be to pay $3500 per year to get a policy with a $4K deductible? At the bottom I think.
Many younger folks will just pay the tax and write it off like the SS tax. I have spoken to quite a few in my recent work and have yet to find any that think it is that important (i.e. top 5 controllable expenses) unless married or with health issues. When you look at the high deductibles it becomes even less attractive for them. "Maybe after rent, taxes, food, school loans, car payments...etc" is the response I get.
How would you answer a 26 year old male who asks why he should pay for such a policy to subsidize someone with a $1M IRA who engineers his income down to get a subsidy. I don't know a good response.

[Fermion]

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Originally Posted by Malcolm2 How would you answer a 26 year old male who asks why he should pay for such a policy to subsidize someone with a $1M IRA who engineers his income down to get a subsidy. I don't know a good response.

The person with the $1M IRA probably paid a good amount of tax during their career, which perhaps went to subsidize the schooling of said 26 year old, or paid for his/her father's government pension.

During our high earning years we were not allowed to deduct tuition, were not allowed to contribute to a deductible IRA or a Roth IRA, and there were a few other denied deductions. Arranging low income for ACA is payback time.

[Mulligan]

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Originally Posted by Fermion The person with the $1M IRA probably paid a good amount of tax during their career, which perhaps went to subsidize the schooling of said 26 year old, or paid for his/her father's government pension. During our high earning years we were not allowed to deduct tuition, were not allowed to contribute to a deductible IRA or a Roth IRA, and there were a few other denied deductions. Arranging low income for ACA is payback time.

Somehow methinks, no matter how truthful your comment may be, that reason will not motivate him much to go buy the insurance...

[Fermion]

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Originally Posted by Mulligan Somehow methinks, no matter how truthful your comment may be, that reason will not motivate him much to go buy the insurance...

yeah, probably not

We will just have to increase the penalty a bit to the point where they do see the need to get insurance. 10% ought to do it.

[jclarksnakes]

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Originally Posted by Fermion yeah, probably not We will just have to increase the penalty a bit to the point where they do see the need to get insurance. 10% ought to do it.

Be careful what you wish for. The young already hate us. They may be putting bounties on our heads soon.

[daylatedollarshort]

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Originally Posted by Malcolm2 How would you answer a 26 year old male who asks why he should pay for such a policy to subsidize someone with a $1M IRA who engineers his income down to get a subsidy. I don't know a good response.

I think the main question is why should he get health insurance. The answer is because even 26 year olds aren't immortal and that medical bills in the US. for a serious illness or car accident can be over $1M a year.

A low income 26 year old would get a subsidized plan, and a 26 year old in my zip code making $47.5K would pay ~3K a year for a plan with a 2K deductible.

Your question is like why should I pay my property taxes now that my kids are out of school.

[samclem]

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Originally Posted by Malcolm2 How would you answer a 26 year old male who asks why he should pay for such a policy to subsidize someone with a $1M IRA who engineers his income down to get a subsidy. I don't know a good response.

Well, there are really two questions:

1) "Why should I buy health insurance?" Because if you don't you could wind up in bankruptcy due to unforeseen medical bills, and insurance also allows you to get better rates for many services than you'd be able to get as a cash customer.

2) "Why should I pay so much more than the true value of my coverage in order to subsidize that old, rich guy?" That's a great question. The short answer is: Those in power have passed a law that takes away your other options for insurance, they think this is best for you.

[2B]

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Originally Posted by tomz I, for one, will not be paying for more coverage than I might have selected. My current coverage is expensive and it sucks. The new coverage I will be getting will be cheaper and more extensive.

I hope that is the case for you. I will also probably pay less than the Texas high risk pool. I have minor issues that preclude a non-risk pool plan and I'm older. I will be subsidized by the healthy and the young. I can't speak for your situation.

In fact, I will look at arranging my income to qualify for a subsidy so I'll be subsidized by the "wealthy" or, at least, those that are forced to show a significant taxable income. I probably have more weath than most of the people subsidizing me but the subsidy is based on income and not assets (for now).

[2B]

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Originally Posted by daylatedollarshort I think the main question is why should he get health insurance. The answer is because even 26 year olds aren't immortal and that medical bills in the US. for a serious illness or car accident can be over $1M a year. A low income 26 year old would get a subsidized plan, and a 26 year old in my zip code making $47.5K would pay ~3K a year for a plan with a 2K deductible. Your question is like why should I pay my property taxes now that my kids are out of school.

Most 26 year olds do think they are immortal. At least, they think they are not going to get seriously injured or contract some disease and if they do they'll get by. The ones with employer plans take it but those that don't will view it as a discretionary purchase.

A single 26 yr old making $47.5K (w/o employer plan) would pay about $8000 in federal income taxes and another $3500 in FICA/SS (all quickly estimated). Throw in state income taxes, student loans, car payment, taking his gf/bf to Cabo, rent, food, utilities, new iphone, etc and they might balk at $3K/yr for something they haven't used in their memory. There's a reason that young people don't buy insurance now. The ACA will, in general, raise the cost to them except for the very heavily subsidized.

Why do any of us pay our property taxes? In my case I would have a tax lien put against my property and it would eventually be sold on the steps of the county court house. I don't think many people get joy out of paying taxes hence the strong penalties against paying them. Anyone who thinks that our society would happily pay all their taxes if no penalties existed is seriously delusional. Just look at all the tax cheats and frauds that are discovered when serious penalties do exit.

[MichaelB]

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Originally Posted by Mulligan If the young are not supposed to help subsidize the old, why does every article I read express concern that if the young do not purchase the health insurance, it will create a death spiral in premium costs where more and more people drop out if premiums rise from the lack of healthy youthful participants? I would also agree that the intent is to have the healthy subsidize the unhealthy (though that is pretty much what insure is about anyways). Otherwise why would they eliminate the higher deductible plans that a healthy person would purchase that had plenty of assets to handle the deductible?

All insurance involves everyone paying, and some using. To call that a subsidy is an effort to shift the attention and portray it a certain way.

The insurance companies segment and price the individual market differently than the large group market. They currently define group by gender, age, region, state, and health condition, break them down into hundreds of segments, and price each differently. This is a failed model because it excludes so many and is punitive on some that move between sub-group.

The large group market defines groups differently, with fewer segments and far less granularity. This market works much more smoothly for sponsors and users. The ACA is attempting to make the individual market work more like large group insurance, where the primary driver of difference in premium is coverage.

Individual group coverage will continue to define sub-groups with more segmentation. Age is still a factor, as is region. It is still critical shift, however, away from a model where the key driver of price is exclusion.

While many measures have already been fully implemented, it is fair to say that one key test is new enrollment. The key to success in not getting more young people to enroll, it is getting all people to enroll, and making the individual marketplaces more like a large group market.

[donheff]

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Originally Posted by MichaelB The ACA is about many things, but young subsidizing old and healthy subsidizing sick are not among them. In fact, in the "other" insurance market, which includes group policies and covers about 90% of private insurance in the US, individual premiums do not differ because of age, health or pre-existing condition (in most cases). Premiums differ due to coverage. Insurers are not allowed to exclude, everyone can join if they are eligible members of the insured group, and all group members get the same price for the same coverage. Price discrimination for the same coverage is present in the individual and very small small group market, the target of the exchanges, and covers around 10% of the marketplace. Even after all the ACA measures are implemented, policies in the exchanges will still price to age far more than most group policies. The discrimination is reduced but still exists. If anything, the ACA is trying to make individual and very small insurance look more like the large group insurance. The question here is not why a grandfathered plan premium is rising, even when it is not implementing yet many of the ACA mandates. The real question is why is the current premium below the US average for group insurance, and what is changing within that policy to drive a price increase without a corresponding change in coverage.

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Originally Posted by samclem The ACA does both of these things, I'm not sure why you write this.

Quote:

Originally Posted by Mulligan If the young are not supposed to help subsidize the old, why does every article I read express concern that if the young do not purchase the health insurance, it will create a death spiral in premium costs where more and more people drop out if premiums rise from the lack of healthy youthful participants?

I think MichaelB has a good point even though others are correct that youth participation is important. This is insurance after all. The very concept is built on a broad pool of participants. The private sector group model with no age distinction only works because most policies are heavily subsidized by employers bringing the price within range for a broad range of employees.

It is frustrating to listen to talking heads on the news blab on about the young subsidizing the old as if this is a bad thing. There are many who argue that such cost shifting makes the program a bad deal for the young such that they should not enroll. But we don't hear them complaining that the work based programs (which are much more redistributive) are bad for the young. The fact is, we all need HI, young or old. That is why so many of us were overjoyed to be able to keep our kids on our group policies for a few extra years after college. A catastrophic illness or injury can strike anyone leaving them destitute if they have no HI.

[2B]

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Originally Posted by MichaelB The insurance companies segment and price the individual market differently than the large group market. They currently define group by gender, age, region, state, and health condition, break them down into hundreds of segments, and price each differently. This is a failed model because it excludes so many and is punitive on some that move between sub-group. The large group market defines groups differently, with fewer segments and far less granularity. This market works much more smoothly for sponsors and users. The ACA is attempting to make the individual market work more like large group insurance, where the primary driver of difference in premium is coverage.

I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children. They did weed out serious health conditions by having a lifetime maximum which I've seen at $1MM and $2MM. I knew one person with a child with CP that was getting close to the $1MM mark and took a new job so he could start the clock over.

Smaller group policies where the insurance companies are actually assuming the payment risk are either bundled with other small policy holders and/or rerated every year so the insurance company makes a profit.

Without saying good or bad, the ACA added older "children" to the plans, added "essential" coverages and eliminated the maximum. All of these increased the cost to the companies and many passed on a portion of the additional costs to employees.

As for calling something a "failed model," that sounds like an opening to a political argument and has typically been suppressed by the moderators.

[pb4uski]

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Originally Posted by samclem ...."Why should I pay so much more than the true value of my coverage in order to subsidize that old, rich guy?" That's a great question. The short answer is: Those in power have passed a law that takes away your other options for insurance, they think this is best for you.

While I don't think it would convince the young guns to buy health insurance another angle would be that society has decided that in order to make health insurance affordable when you are old that you essentially pay more that what it costs when you are young to be able to pay less than what it costs when you are old.

I hate to mention it but it is sort of like permanent (aka whole) life insurance where you pay more than term rates when you are young to have the right to pay less than term rates when you are older.

The rub is, with whole life your right to buy for less when you are older is contractually guaranteed, whereas with health insurance it isn't.

[pb4uski]

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Originally Posted by 2B I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children.....

WADR, IMO it is outrageously disingenuous to suggest that MichaleB, of all people, doesn't understand how mega-corp group insurance works.

What you leave out is that in most cases, in addition to using insurers to administer their claims, these mega-corps also buy stop-loss insurance from an insurance company to protect them from excessive claims.

My guess is that there is less granularity of premiums in the group insurance market because it would introduce a degree of complexity that the megas haven't seen as necessary given the degree that the companies subsidize the cost.

[Jack_Pine]

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Originally Posted by Fermion So what are you supposed to do with ACA if you move from state to state constantly (ie, traveling around in an RV)? I haven't really seen a firm answer here.

It's an interesting question for a full timer. I understand a policy that is nationwide but what state would you buy it in if you have no state of residence? (since the plans are state based)

I know some folks who full time that have a stick house and some that do not.

[MichaelB]

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Originally Posted by 2B I think you misunderstand how mega-corp group insurance works. Most companies self-insure and use an insurance company to manage their program. By custom, companies do not break out cost based on age or health condition but I'm not aware of any law preventing it. The typical breakdown is single, married, married with children. They did weed out serious health conditions by having a lifetime maximum which I've seen at $1MM and $2MM. I knew one person with a child with CP that was getting close to the $1MM mark and took a new job so he could start the clock over. Smaller group policies where the insurance companies are actually assuming the payment risk are either bundled with other small policy holders and/or rerated every year so the insurance company makes a profit. Without saying good or bad, the ACA added older "children" to the plans, added "essential" coverages and eliminated the maximum. All of these increased the cost to the companies and many passed on a portion of the additional costs to employees. As for calling something a "failed model," that sounds like an opening to a political argument and has typically been suppressed by the moderators.

A little confused. My point is that large group insurance has far less segmentation than small. You are giving examples of the few segments seen in large groups. I would conclude we agree on that point. This difference in group definition is what drives such dramatic differences in pricing.

As for the failed model comment, there was no politics in that, but if it in some way offends you I will withdraw it, ask that it be ignored, and publicly express regret at having used it.

[pb4uski]

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Originally Posted by Fermion So what are you supposed to do with ACA if you move from state to state constantly (ie, traveling around in an RV)? I haven't really seen a firm answer here.

IIRC there has been mention in some threads that one needs to shop for a HI policy with nationwide coverage. I suspect that you would need to shop/buy from the exchange in your state of legal residence.