When actuaries combine all these factors, some predict that some individuals will see increases higher than 100 percent. But note: that is before taking into account any premium subsidies called for by Obamacare. Some people will get help paying for their insurance.
The White House and Obamacare advocates argue that although premiums may be high, subsidies called for by the health reform law will make the overall premium more affordable and manageable. And that’s true, for about 60 percent of those 12 to 15 million people who buy their coverage in the individual market. Using US Census data, insurance experts estimate that proportion of customers in the individual market will get some government help to make their outlay “more affordable.” To be clear: that doesn’t mean their premiums won’t increase, just that those who get subsidies won’t have to pay the total cost.
Think of subsidies as akin to the help workers get from their employers who pay some portion of their premiums. Subsidies will be available to those with incomes less than 400 percent of the federal poverty level this year—$94,200 for a family of four and $45,960 for a single person this year. If people have too much income or too many assets, they are over the line, and there’s no government assistance. The 40 percent who are over the line will have to pay the full cost (though they can still shop in the exchanges).
Whether premiums will be affordable for someone in the 60 percent group depends on the amount of their subsidy. The less income a family has the larger the subsidy.
For some, subsidies may indeed be substantial, and make insurance much more affordable. Those at the upper ends of the income eligibility spectrum, on the other hand, will get smaller subsidies. And it’s possible that subsidies won’t be large enough for some people to make premiums affordable at all. A study by the Congressional Budget Office notes that a family of four buying a silver plan—a plan that pays
80 70 percent of a policyholder’s medical expenses—with income between 139-149 percent of the poverty level, would get a subsidy covering about 96 percent of the policy’s cost. The same family with an income between 300 and 349 percent of poverty would get a subsidy covering roughly 44 percent of the premium; and a family whose income came to 350 to 399 percent would get a subsidy of only about 35 percent, meaning they have to pay two-thirds of the premium out of pocket.
If subsidies are not adequate, supporters of the law fear that some families will simply take the penalty for not having insurance, rather than buy something they can’t afford. In the end, it will come down to a matter of a family’s budget and its spending priorities.
A piece published awhile back by The Associated Press offered readers a glimpse of what insurance affordability looks like in dollars and cents. It presented five scenarios, using different families buying insurance in the individual market, and showed how the law might affect their pocketbooks. The AP’s examples also show that the subsidies are hardly a one-size-fits-all affair.
When people apply for coverage in an exchange and pick a policy, the exchange will automatically generate the amount of the subsidy. A family of four, for instance, with a 40-year-old policyholder and a family income of $50,000—near the median of $51,400—could get a government subsidy of $8,745 for a policy costing $12,130. The family would have to pay $3,385, an amount that may or may not be affordable.
The AP also showed what a single adult age 30 might face. Assuming an income of $30,000 and an annual premium of $3,440, the government subsidy would only be $932, while the person’s share would be $2,509.
Softening the price wallop
The insurers’ game is to grab as much market share as possible, as fast as possible. To do that, they need to entice customers with low premiums. The White House euphemistically calls low-cost policies “more efficient”—words that tend to obscure the trade-offs and choices that shoppers will have to make.