Report: ACA's Effect on Insurance Premiums Varies by Income Level

[bondi688]

Some healthcare costs may rise when "Obamacare" implemented: official
"U.S. Health and Human Services Secretary Kathleen Sebelius acknowledged on Tuesday that costs could rise in the individual health insurance market, particularly for men and younger people, because of the landmark 2010 healthcare restructuring due to take effect next year.
But the insurance industry, which is set to gain millions of new customers under the law, is warning of soaring premium costs next year because of new regulations that include the need to offer a broader scale of health benefits than some insurers do now.
That has raised concerns about people with individual policies not subject to subsidies and the potential for cost spillovers into the market for employer-sponsored plans, which according to U.S. Census data, cover about half of U.S. workers.
The nonpartisan Kaiser Family Foundation estimates that 3.9 million family dependents could be left unable either to afford employer-sponsored family coverage or to obtain federally subsidized insurance through an exchange."


What a muddled mess at this point.

 

[pb4uski]

A scenario where a couple making $62500 paying $20672, a third of their income for health insurance premium, has to be hypothetical, because they will be getting health insurance coverage at work and the employers pick up a substantial part of the group rate.

But that said, there may come a point when the employers say that they cannot afford to continue to pay for those health insurance coverage for employees, and then everyone will be facing the true cost of paying for health care.

But they could be self employed in a small business or work for an employer who does not provide health insurance benefits or be retirees with SS and a pension but no retiree health benefits. Lots of possible applications.

 

[bondi688]

But they could be self employed in a small business or work for an employer who does not provide health insurance benefits or be retirees with SS and a pension but no retiree health benefits. Lots of possible applications.

You are right. I was beyond shock when I was looking at your numbers.

 

[pb4uski]

Some very odd things about that calculator. Let's say a ER couple age 55 with $60K of income. Our premium is $1,723 a month.

But if I add our 25 yo son then the premium is only $861 a month.

If I adopt an 18 year old then the premium is $574 a month (less than what i am paying now for better coverage).

Can't be right.

 

[bondi688]

pb4uski
Is it because when the family size increases,that family, if the total income drops below a certain level, qualifies for federal subsidy and then the premium drops dramatically?

 

[Gumby]

The subsidy cliff could have a substantial effect on how one saves for FIRE. It may encourage people to save on an after-tax basis, instead of in a 401K or IRA, since withdrawing from these accounts would count as income against the subsidy cliff, whereas using after tax savings would not. This may change some of my current plans.

 

[pb4uski]

pb4uski
Is it because when the family size increases,that family, if the total income drops below a certain level, qualifies for federal subsidy and then the premium drops dramatically?

No, I'm just looking at the premium, not the premium net of the subsidy.

 

[pb4uski]

The subsidy cliff could have a substantial effect on how one saves for FIRE. It may encourage people to save on an after-tax basis, instead of in a 401K or IRA, since withdrawing from these accounts would count as income against the subsidy cliff, whereas using after tax savings would not. This may change some of my current plans.

Agreed. In many cases, it will become important to have taxable funds available until one is Medicare eligible.

One thing I thought of though, if one's income is just over 400% FPL, it would be wise to make bigger 401k contributions to lower your income to below 400% FPL. As I understand it, IRA or HSA contributions would not work in the same way but I think 401k would work because it reduces your reported income on your W-2.

 

[MichaelB]

The subsidy cliff is so large I can't believe it will continue, at least in its current form, and would be very cautious if it were a prerequisite to early retirement.

 

[Gumby]

Agreed. In many cases, it will become important to have taxable funds available until one is Medicare eligible.

One thing I though of though, if one's income is just over 400% FPL, it would be wise to make bigger 401k contributions to lower your income to below 400% FPL. As I understand it, IRA or HSA contributions would not work in the same way but I think 401k would work because it reduces your reported income on your W-2.

Good point. I guess I was assuming that I will have health insurance through my employer so long as I'm working.

 

[foxfirev5]

Agreed. In many cases, it will become important to have taxable funds available until one is Medicare eligible.

One thing I though of though, if one's income is just over 400% FPL, it would be wise to make bigger 401k contributions to lower your income to below 400% FPL. As I understand it, IRA or HSA contributions would not work in the same way but I think 401k would work because it reduces your reported income on your W-2.

It looks like my careful planning over the years is going to be thrown out the window. With large balances 401k, IRA and Retiree medical accts I had planned to be in the lower 70k income range in retirement. It looks like this is the one area you don't want to find yourself. Talk about a huge marginal tax rate!
Meanwhile I guess I'll stay with my job even longer, and stash cash under the mattress. It's much easier than trying to figure out this stuff.

 

[pb4uski]

The subsidy cliff is so large I can't believe it will continue, at least in its current form, and would be very cautious if it were a prerequisite to early retirement.

I totally agree. But the dilemma is that if you smooth out the cliff to try to make health insurance more affordable for middle income people then the cost of the subsidies becomes a huge problem. OTOH, If you smooth out the cliff to make health insurance more affordable for middle income people and then shift the subsidies downward to make the cost of the subsidies viable in aggregate then I suspect the subsidies for low income people would become so paltry that it wouldn't be effective in helping them buy insurance. What a mess.

 

[pb4uski]

It looks like my careful planning over the years is going to be thrown out the window. With large balances 401k, IRA and Retiree medical accts I had planned to be in the lower 70k income range in retirement. It looks like this is the one area you don't want to find yourself. Talk about a huge marginal tax rate!
Meanwhile I guess I'll stay with my job even longer, and stash cash under the mattress. It's much easier than trying to figure out this stuff.

Just remember that this discussion only applies from ER until Medicare (65). But if one is planing to ER at, say, 55 then taxable funds will be valuable. You might consider ceasing tax-deferred contributions in excess of the match in favor of taxable account investments - but that has its own problems in that your current taxes would be higher. But the benefit of the subsidy may well exceed the taxes you pay today.

Since we don't know whether or how the subsidies will change, it makes it real hard to plan.

 

[Gumby]

As I think more about this, the prospect of stepping over the cliff could also affect one's decision to take social security at 62.

 

[Accidental Retiree]

DH and I currently pay around $1400 month for our insurance here in CA. We are insured separately. Because of his pre-existing condition (well-controlled Type II diabetes), he got a guaranteed underwriting policy when his COBRA ran out back in 2011, so he has always paid around $1000/month. His policy had a recent increase, so I think it has actually gone over that by now.

I got a HD policy, with a 10% surcharge, because I have a little arthritis in my base of my thumbs, no other medical conditions. That rate has gone up 3 times, I think, since early 2011.

When I checked the high-risk pool last year, premiums for a couple were over $1600/month, IIRC. Similar premiums for other states where we had considered relocating were quite a bit less, so yes, California is expensive.

With ACA, I see the same numbers on those calculators that everyone else sees: north of $1700/month for our premiums, before tax credits.

 

[gerrym51]

As I think more about this, the prospect of stepping over the cliff could also affect one's decision to take social security at 62.

the thing i would be more concerned with is subsidies in general.

there is no way based on these prices that the government is going to get enough money to pay for this.

I predict that all the subsidies will be forced downward

 

[eytonxav]

I am not real up on the ACA, but reading this thread makes me think there is strong justification for a new acronym: UACA (unaffordable care act)

 

[gerrym51]

there is one more thing that i have forgotten to mention in all my massachusettes health posts.

insurers here can pick what plans they are in.

all the subsidized plans-none of them are from major providers. they are all the same plans that currently supply medicaid members.

the only way to get major providers-at least in mass.-is to buy the non-subsidized plans.

i think whats more important is to find out in california-just what plans will be subsidized.

based on my state(mass.) i would not be able to get the plan i have if subsidised



i'll use an example with an insurance company you've heard of. Blue Cross of mass. is not a subsidized plan provider-so if you go to a doctor in an expensive suburb and he /she does not take a subsidized plan(which because are low reimbursement plans to provider) your choice will be change doctors or get non subsidized plan.

 

[kmt1972]

As for Obamacare subsidies running out of money see

Obamacare Exchanges To Shed Users After 2018 - Hit & Run : Reason.com

It points out that Obamacare subsidies will get reduced if it cost over 0.5% of GDP as it surely must will. It is not clear how they will get cut. Perhaps subsidies will kick in at 350% versus 400% of the federal poverty level or the 9.5% rule becomes a 10.5% rule.

 

[Sittingduck]

This has mad a mess of my careful FIRE planning

I am 57 and was looking at ER in January.
Megacorp used the ACA as a way to scrape their retirees off the bottom of their shoe by canceling retiree coverage and replacing it with a very paltry sum in a HSA. This is saving them billions. At the same time they were protesting the 2.8% excise tax they had to pay on their healthcare products they sold. I work for one of their healthcare divisions and the amount of profit (margin) they make is really obscene. (See Steven Brill's recent article on why healthcare costs what it does in this country).

Now I am faced with trying to find a way to get at the money I have saved in IRAs/401Ks.
I don't have enough in taxable accounts to cover 8 years until Medicare. Being forced to get our AGI below 62K is a moving mess of balancing capital gains in taxable accounts along with per-tax withdrawals. Looks like we will have to push back SS now. DW and I need about 75k to maintain our standard of living. A 20k premium would push us into an uncomfortable level and would not be sustainable. I have a per-existing condition that is stable but requires us to maintain coverage.

What a mess. It's the only reason I am continuing to work. I am hoping to see some better rate info on plans as we get closer to the end of the year.

 

[bondi688]

It sounded so simple when they were trying to sell the legislation. Not to mention the promise of $2500 a year in health insurance premium savings per family.

 

[gerrym51]

This has mad a mess of my careful FIRE planning

I am 57 and was looking at ER in January.
Megacorp used the ACA as a way to scrape their retirees off the bottom of their shoe by canceling retiree coverage and replacing it with a very paltry sum in a HSA. This is saving them billions. At the same time they were protesting the 2.8% excise tax they had to pay on their healthcare products they sold. I work for one of their healthcare divisions and the amount of profit (margin) they make is really obscene. (See Steven Brill's recent article on why healthcare costs what it does in this country).

Now I am faced with trying to find a way to get at the money I have saved in IRAs/401Ks.
I don't have enough in taxable accounts to cover 8 years until Medicare. Being forced to get our AGI below 62K is a moving mess of balancing capital gains in taxable accounts along with per-tax withdrawals. Looks like we will have to push back SS now. DW and I need about 75k to maintain our standard of living. A 20k premium would push us into an uncomfortable level and would not be sustainable. I have a per-existing condition that is stable but requires us to maintain coverage.

What a mess. It's the only reason I am continuing to work. I am hoping to see some better rate info on plans as we get closer to the end of the year.

make sure your doctors will take a subsidized plan. all insurers will not be subsidized plan providers

 

[gerrym51]

It sounded so simple when they were trying to sell the legislation. Not to mention the promise of $2500 a year in health insurance premium savings per family.

Obamacare is strictly a plan to get more lower income people insurance-thats it


and get us to pay for it

 

[bondi688]

Sittingduck
Sorry to hear that your plan will be so drastically altered. Maybe your username jinxed you.

 

[bondi688]

Obamacare is strictly a plan to get more lower income people insurance-thats it


and get us to pay for it

I could maybe see that if the burden fall to the upper income folks ( which has happened with the tax increase). They will gripe about it bitterly but they are easy enough prey and they will move on. But hitting folks who make $65000 a year, to have them pay 30% of the annual income for health insurance is unconscionable.