Obamacare critics keep insisting that Obamacare is a bad deal for most people buying insurance on their own. And a big reason is that they don’t think much of the subsidies.
To review: Obamacare provides offers tax credits to offset the cost of insurance. If your income is less than four times the poverty line, and if you’re buying through one of the new insurance exchanges, then the tax credit will operate like a discount. The less money you have, the bigger the discount. Nowadays, most Obamacare critics acknowledge that the subsidies exist. But they tend to dismiss them as trivial. “Some low-income people will get subsidies,” Rich Lowry of the National Review wrote on Monday. “But that doesn’t change the essential facts.”
Kaiser Family Foundation
The authors start by figuring out what the initial, upfront cost of insurance will be for people buying coverage on the exchanges. Based on Congressional Budget Office projections, the average across all households—that is, individuals and families, of all ages—works out to $8,250 a year. That’s not a bad price for comprehensive coverage: It’s in the same ballpark as policies that employers provide employees. Still, it’s more than some families buying coverage on their own might pay today, because they have skimpy policies or benefit from preferential pricing for the healthy that Obamacare prohibits. That’s why conservatives insist people won’t want to sign up for Obamacare’s insurance options.
But, again, those are the initial premiums. According to the Kaiser study, the subsidies on average will reduce premiums by $2,672, or about a third of the price. The averages mask a lot of variation, with more affluent people getting less assistance and less affluent people getting more assistance. People with incomes of more than four times the poverty line, or about $94,000 for a family of four, get no discount at all. That’s one reason why some people really will pay more for their insurance next year.
Still, the number of people receiving discounts is a lot larger than even many analysts seem to realize. It turns out that about half the people who buy their own insurance today will be eligible for subsidies. For them, the subsidies will be worth an average of $5,548 per household, effectively discounting the price by two-thirds. The study defines the “typical” plan as the second cheapest silver option. (Silver plans cover about 70 percent of the average person’s expenses.) Keep in mind that people who choose less expensive options, like those that cover fewer expenses, will pay even less for their coverage.
“It makes sense to look at what people will pay for health insurance after taking tax credits into account, just like we do for things like 401(k) plans, child care, or educational expenses,” Levitt told me. “The law provides a surprising amount of financial relief for people who are buying their own insurance today, not to mention the uninsured, who tend to have lower incomes.” Len Nichols, a health economist at GeorgeMasonUniversity, agrees. “In many ways, what the ACA is about is extending premium tax breaks to those without good employer offers today, and doing so through a sliding scale that provides the most help to those who need it most.”
Of course, Lowry and other critics downplaying the subsidies aren’t just making a statistical argument. They’re also making a philosophical claim—that subsidies simply hide the cost of insurance, by transferring it to taxpayers, rather than reduce it. But that’s a separate question, to discuss at another time.
For now, we should at least agree on the arithmetic, which the Kaiser Foundation study lays out nicely. A large portion of people who buy individual coverage through Obamacare are going to be eligible for subsidies. And those subsidies are going to be worth, on average, thousands of dollars per person.
Obamacare: Healthcare Reform Facts
1. No lifetime limit on coverage for 105 million Americans.
*2. Up to 17 million children with pre-existing conditions can no longer be denied coverage by insurers.
*3. 6.6 million young adults up to age 26 have taken advantage of the law to obtain health insurance through their parents’ plan.
*4. Free coverage for comprehensive preventive services for millions of women starting in August.
*5. 86 million Americans, including 32 million seniors in Medicare, have already received free preventive services.
*6. 5.3 million seniors have already saved $3.7 billion on their prescription drugs.
*7. Since the health care law was enacted in March 2010, 4.2 million private sector jobs have been created – many of them in the health care industry.
*8. The Small Business Health Care Tax Credit has already been used by 360,000 small businesses to help insure 2 million workers.
*9. $1.1 billion in rebates from health insurance companies this summer will benefit nearly 13 million Americans.
*10. The health care law reduces the deficit by $124 billion over the next 10 years and over $1 trillion over the following decade.
Question: ARE THESE VALID CLAIMS FOR THE AFFRODABLE CARE ACT?