ACA effect on retirement rates

[MichaelB]

How is this?? Are you saying because business deducts as a tax expense it is a subsidy? Or is there some program where business can get the government to pay for health care?

Employer provided health care insurance is a fully deductible business expense, but unlike salaries, not considered taxable income to the employee. The gov't classifies it as a "revenue expenditure ". In other words, something that really was taxed, then spent on that item. As such, it represents the single largest tax spending item in the budget. As a subsidy, the value is the total cost of insurance times the marginal tax rate of the employee.

 

[ziggy29]

How is this?? Are you saying because business deducts as a tax expense it is a subsidy?

Yes, whereas individuals (except for some who are self-employed) can not take a top-line tax deduction for the premiums paid. This is one form of cost shifting from employer plans to individual plans.

 

[Senator]

Not really. That would be the case for homeowners or life insurance. Health insurance is a product that comes in-between and intermediates both the provider and the consumer, taking from both. By creating preferential prices for insurers and unaffordable, exorbitant prices for consumers, health care providers and insurers combine to make insurance too risky to not have. Financial risk minimization is no longer the primary purpose.

If health insurance did not exist, wouldn't the cost of healthcare have to find it's own level to a point that people could afford?

What did we do before the ACA? Or 50 years ago?

 

[pb4uski]

Part of the problem I see is that the deductibles can be so high that people will have insurance and then can't afford to use it. ....

IMO there is a shift in what insurance is and needs to be a shift in how people view it. Back in the 1950s and early 60s, people paid for their medical services and health insurance was principally for large health events. It is heading that way today... insurance is principally to protect someone from the cost of a large health event... if you have an event that costs $100,000, you pay $6,000 and the insurer pays the rest... same as back then but the cost of medical services and deductibles have got higher.

In between we slipped into a world where people expected health insurance to pay for every medical service other than perhaps a small co-pay and it changed people's expectations and they are having difficulty transitioning back.

It's sort of like collision on your car, you're on your own for the small stuff and insurance kicks in for the big stuff and you can pick your deductible and the cost of insurance is more if the deductible is lower.

 

[NW-Bound]

If health insurance did not exist, wouldn't the cost of healthcare have to find it's own level to a point that people could afford?

What did we do before the ACA? Or 50 years ago?

IMO there is a shift in what insurance is and needs to be a shift in how people view it. Back in the 1950s and early 60s, people paid for their medical services and health insurance was principally for large health events. It is heading that way today... insurance is principally to protect someone from the cost of a large health event... if you have an event that costs $100,000, you pay $6,000 and the insurer pays the rest... same as back then but the cost of medical services and deductibles have got higher.

In between we slipped into a world where people expected health insurance to pay for every medical service other than perhaps a small co-pay and it changed people's expectations and they are having difficulty transitioning back.

It's sort of like collision on your car, you're on your own for the small stuff and insurance kicks in for the big stuff and you can pick your deductible and the cost of insurance is more if the deductible is lower.

In the 50s, most people did not have health insurance. Even Medicare came about only in 1965.

It was before my time, but I was told that people just paid for doctor visits with cash, and it was not expensive. It was not too different than having to pay for car or home repair. For larger hospital bills, people were paying in installments.

But back then, there was no expensive and fancy treatments. Now, when we are seduced with cancer medicine that can prolong our life another month, or machines that can keep us alive but bedridden, not too many dying people can say no.

It's the same as we having a lot of bills that did not exist before such as cable TV and wireless phone bills, smartphone upgrade every couple of years, lots of electronic toys, etc... It's all very nice to have, but they add up.

 

[EastWest Gal]

Except now everything is priced insanely. $100 for a complete blood count. The test involved taking a small amount of blood and sticking it in a machine. A couple of minutes later the machine spits out a result.

An average simple problem doctor visit is $150 retail. And what are the costs for all those annual screenings that didn't exist years ago.

Doctors and hospitals have no idea what the real cost to patients is for their services. They can no longer tell you up front what you will be charged.

The problem is all those little events quickly add up to $100,000.

Physicians and hospitals used to provide charity care. Can you imagine a physician doing that nowadays?

Insurance started in the Civil War era. Health insurance as we know it really took off during and after WW II, including Kaiser Permanente.

So none of us are old enough to have seen a time before total health care insurance.

 

[NW-Bound]

Except now everything is priced insanely. $100 for a complete blood count. The test involved taking a small amount of blood and sticking it in a machine. A couple of minutes later the machine spits out a result.

An average simple problem doctor visit is $150 retail. And what are the costs for all those annual screenings that didn't exist years ago...

Well, one should shop better. As I showed in another thread, the common blood tests are insanely cheap at Sonora Quest, a lab that we go to.

A CBC (complete blood count) is $11, and that's everything, including the labor to draw your blood. And that's if I walk in and pay cash, not the insurance negotiated rate, though I doubt it can be much lower.

A comprehensive blood test including the Complete Metabolic Panel and the Lipid Panel would cost me $37 cash. Again, surprisingly cheap.

I think a hospital would gouge for hundreds, if not thousands for these blood tests.

PS. By the way, my PCP gets $90 for a routine visit. I think it can be lower, if he does not have to hire the clerks to handle paperwork. The clerical staff is more than his medical staff.

 

[2017ish]

...

Physicians and hospitals used to provide charity care. Can you imagine a physician doing that nowadays?

....

Yes (although there are limits--the business must run). And DW also insists that the local charity medical clinic be a substantial recipient of our giving.

 

[GTFan]

IMO there is a shift in what insurance is and needs to be a shift in how people view it. Back in the 1950s and early 60s, people paid for their medical services and health insurance was principally for large health events. It is heading that way today... insurance is principally to protect someone from the cost of a large health event... if you have an event that costs $100,000, you pay $6,000 and the insurer pays the rest... same as back then but the cost of medical services and deductibles have got higher.

But the problem is that the premium just to get that basic coverage is now $1k a month or more for many couples. So add another $12k+ a year to that.

I think most of us here can handle that, but the ones that truly need the help (just over the subsidy cutoff) are complaining loudly that they can't afford it. And I don't blame them.

Whatever, probably doesn't matter at this point. The ACA as we know it will probably not be around in 2018.

 

[scrabbler1]

How is this?? Are you saying because business deducts as a tax expense it is a subsidy? Or is there some program where business can get the government to pay for health care?

I was thinking about in terms of the employer subsidy of health insurance not being taxable on the employee's income tax return. I saw a huge difference in how I paid for HI before I ERed and after.

Before - my employer paid some or most of my HI and that was tax-free for me. The rest of it was pre-tax (i.e. fully deductible) even if I didn't itemize my tax deductions.

After (but pre-ACA) - I pay for my entire HI, some of it tax-deductible but much of it not tax-deductible because it falls within the 10%-of-AGI threshold.

After (and after ACA) - Same as above but some of my premiums (ACA subsidy) are tax free.

 

[BellBarbara]

ugh if trump repeals aca one of will need to go back to work. we would only be able to get insurance from assigned risk pool. we live in mass so hope mass brings back it's previous plan.

i think we will have a year to figure it out. we retired at 56 and 54 because we could get health ins with no pre-existing cond issues (no subsidy needed). if we can't we will need to get some for 5 more years.

 

[gauss]

I don't have pre-existing conditions, but I understand the risk to those in the individual market, under the old system.

The outcome of the 2012 presidential election and the likely upholding of the ACA was a key enabler of my actual ER in early 2013. MegaCorp HR was also asking me if I was ready to come back from my leave of absence (dependent care) at this time too so the timing was good.

DW still has employer coverage and retiree coverage awaits, but either of those could change at any time.

I didn't want to take the ER plunge until I was confident that "Medical Bankruptcy" was no longer a potential outcome. The ACA prohibitions on individual medical underwriting of premium rates combined with the must-issue rules facilitated this in our case.

-gauss

And hindsight is 20-20!

-gauss

 

[pb4uski]

In the 50s, most people did not have health insurance. Even Medicare came about only in 1965.

It was before my time, but I was told that people just paid for doctor visits with cash, and it was not expensive. It was not too different than having to pay for car or home repair. For larger hospital bills, people were paying in installments. ....

No, there certainly was health insurance in the 1950s. It was different from health insurance as we know it today, and focused principally on hospitalization and surgeries... and as you said, smaller medical services were paid for in cash.

Unlike the Blue Cross plans, which generally provided specified services, hospital expense policies generally took the form of reimbursement of charges for room and board and ancillary services up to specified amounts. Surgical expense policies provided for reimbursement of surgical charges up to a specified allowance for each operation.

A number of companies soon began writing similar insurance under individual policies. By 1951, the insurance companies were covering as many persons under hospital expense policies group or individual-as Blue Cross. From the
start, surgical insurance by insurance companies grew faster than the medical service prepayment plans.

https://www.ssa.gov/policy/docs/ssb/v28n12/v28n12p3.pdf

 

[NW-Bound]

No, there certainly was health insurance in the 1950s. It was different from health insurance as we know it today, and focused principally on hospitalization and surgeries... and as you said, smaller medical services were paid for in cash...

As mentioned, that was before my time (and I was not born in the US), and I just retold a story by a friend who's now 70.

He told me about his experience growing up. His father was a milkman, and did not have insurance. My friend said his father managed to get health care for them all with no insurance, nor government help.

Of course back then, there was no fancy-schmancy MRI machines, exotic cancer treatments, etc... One had to be careful of not getting sport or recreational injuries, because it could mean death or becoming invalid. Things were simpler then. You got really sick, you died. No multi-million-dollar treatments like we do have now.

 

[pb4uski]

Not really. That would be the case for homeowners or life insurance. Health insurance is a product that comes in-between and intermediates both the provider and the consumer, taking from both. By creating preferential prices for insurers and unaffordable, exorbitant prices for consumers, health care providers and insurers combine to make insurance too risky to not have. Financial risk minimization is no longer the primary purpose.

WADR, I disagree. For me at least, and many others I suspect, financial risk minimization is the primary purpose of health insurance, closely followed by what you indicated... access to negotiated rates for medical services.

I buy health insurance because I want to mitigate the financial risk of a health event that costs more than my $6k deductible and could be $100k or more. A nice byproduct is that I get access to negotiated rates for the first $6k of medical services that I use in a year.

 

[pb4uski]

But the problem is that the premium just to get that basic coverage is now $1k a month or more for many couples. So add another $12k+ a year to that.

I think most of us here can handle that, but the ones that truly need the help (just over the subsidy cutoff) are complaining loudly that they can't afford it. And I don't blame them.

Whatever, probably doesn't matter at this point. The ACA as we know it will probably not be around in 2018.

Agreed... that is why I would like to see health insurance totally divorced from employment... the group market eliminated and everyone buys individual insurance with some subsidies for those whose premiums are unaffordable... that way everyone would be treated the same and your insurance would not change if you change jobs or get laid off for a couple months or whatever....just dreaming though... it will never happen.

 

[MichaelB]

WADR, I disagree. For me at least, and many others I suspect, financial risk minimization is the primary purpose of health insurance, closely followed by what you indicated... access to negotiated rates for medical services.

I buy health insurance because I want to mitigate the financial risk of a health event that costs more than my $6k deductible and could be $100k or more. A nice byproduct is that I get access to negotiated rates for the first $6k of medical services that I use in a year.

It doesn't make sense to argue the point. In a functional system you would be able to assess your risk and make a choice, perhaps choosing levels of risk and coverage (which you do with a catastrophic policy). When the price you pay as in individual varies by a factor of 5 or 10 with the price the insurer pays, you are captive and can no longer make a rational choice.

 

[NW-Bound]

... I buy health insurance because I want to mitigate the financial risk of a health event that costs more than my $6k deductible and could be $100k or more. A nice byproduct is that I get access to negotiated rates for the first $6k of medical services that I use in a year.

I like the risk mitigation part (that's what insurance is about), but hate the "negotiated price" part. It should be like car insurance. They pay for my collision damages, but I do not need them to negotiate the price of an oil change or car wash for me. It's like paying the Mafia for "protection".

We need transparency in hospitalization costs. Else, we cannot become educated consumers of health care. I know, I know, that some people do not want to be educated, and just want somebody else to write the check. But that attitude got us into this mess.

When people are hit in their pocket book they get smart really quick. Everybody knows to ask around to shop for best deals on TVs, smartphones, etc... They should be given info to shop for healthcare too.

 

[sengsational]

WADR, I disagree. For me at least, and many others I suspect, financial risk minimization is the primary purpose of health insurance, closely followed by what you indicated... access to negotiated rates for medical services.

I buy health insurance because I want to mitigate the financial risk of a health event that costs more than my $6k deductible and could be $100k or more. A nice byproduct is that I get access to negotiated rates for the first $6k of medical services that I use in a year.

I'm right there with you on that. It would be nice if we could get rid of the secret pricing contracts between insurance companies and providers, and have outcome data (allowing real consumer shopping pressures to arise). But mainly I don't want a $500k plus medical bill.

 

[NW-Bound]

Agreed... that is why I would like to see health insurance totally divorced from employment... the group market eliminated and everyone buys individual insurance with some subsidies for those whose premiums are unaffordable... that way everyone would be treated the same and your insurance would not change if you change jobs or get laid off for a couple months or whatever....just dreaming though... it will never happen.

Once a group of people gets a preferential treatment, it is hard to take it away.

That is unless the group is small in number, and does not have an electoral power. Like a bunch of ERs.

 

[audreyh1]

Hi,
I assumed that the ACA might have a large effect on retirement. I seem to remember news on that and talk about job lock keeping people working etc.

I just saw this paper and it suggests that the increases will be small in comparison to the total (1/2 a percent).

https://deepblue.lib.umich.edu/bitstream/handle/2027.42/134388/wp343.pdf

Seems to fly in the face of stuff I read here but then again I don't qualify for subsidies so I have ignored it for the most part.

Hmmmm - moot point now I think.

 

[pb4uski]

Once a group of people gets a preferential treatment, it is hard to take it away.

That is unless the group is small in number, and does not have an electoral power. Like a bunch of ERs.

Yes, God forbid that they actually do something because if makes sense for the many in the long run even though it adversely affects some in the short run. Hopefully the new administration feels they have a mandate to cut through such stuff.

 

[daylatedollarshort]

I like the risk mitigation part (that's what insurance is about), but hate the "negotiated price" part. It should be like car insurance. They pay for my collision damages, but I do not need them to negotiate the price of an oil change or car wash for me. It's like paying the Mafia for "protection".

We need transparency in hospitalization costs. Else, we cannot become educated consumers of health care. I know, I know, that some people do not want to be educated, and just want somebody else to write the check. But that attitude got us into this mess.

When people are hit in their pocket book they get smart really quick. Everybody knows to ask around to shop for best deals on TVs, smartphones, etc... They should be given info to shop for healthcare too.

I negotiated 40% off a recent hospital bill for a family member. Did I get a good deal? Did they overcharge me and expect me to offer even less? Could I have gotten 60% off? Who knows. The whole process is absurd. It was like buying a used car.

 

[NW-Bound]

It's worse than buying a used car. With a used car, you get price guidance from the Blue Book.

And with a car, you test drive, and get to see what you are getting. Do we get any of that with hospital services?

 

[daylatedollarshort]

It's worse than buying a used car. With a used car, you get price guidance from the Blue Book.

And with a car, you test drive, and get to see what you are getting. Do we get any of that with hospital services?

Too true!