Affordability and America’s Healthy Future Act

In yesterday’s post answering questions about Senator Max Baucus’ health care reform proposal, I inadvertently overlooked a question posed by JimK. He points out the proposed health care reform legislation provides a tax credit to those earning up to 300% of the Federal Poverty Level (FPL), but questions whether the Chairman’s Mark mandates people pay 13 percent of their income in premium as alleged on Countdown with Keith Olbermann.  Here’s how (I think) Mr. Olbermann’s math works.

Under the America’s Healthy Future Act every citizen would be required to purchase health insurance coverage. As JimK notes, subsidies would be available to help those earning less than 300 percent of the Federal Poverty Level  purchased coverage through the exchange. (Subsidies are apparently not available to those purchasing coverage in the traditional market). These premium subsidies are available on a sliding scale. Those households at the poverty level would be required to contribute three percent of the income toward their health insurance premiums; households at 300 percent of the poverty level would contribute 13 percent. (Chairman’s Mark page 21, page 24 of the PDF)

The FPL is adjusted annually. In 2009 the federal poverty level is $10,830 for an individual and $22,050 for a family of four. If the Baucus health care reform plan was in-force today, individuals earning 100 percent of the FPL would pay $325 toward their medical premium; a family of four with household income of 100 percent of the FPL would pay $662. Individuals at 300% of the Federal Poverty Level ($32,490) could pay $4,224 for medical coverage while our hypothetical family of four (earning $66,150 annually),could pay as much as $8,600.

There are two things to keep in mind concerning this aspect of the Senate Finance reform plan. First, these are preimum subsidies. Consumers could pay thousands of additional dollars — and a greater percentage of their income —  for out-of-pocket expenses.

Second, once household income exceeds 300 percent of the FPL no premium subsidy is provided. In 2009, according to a Kaiser Family Foundation study, “average annual (health insurance) premiums for employer-sponsored health insurance are $4,824 for single coverage and $13,375 for family coverage.” Granted, coverage obtained through the work place is usually much more expensive than insurance purchased on one’s own. Finding an average price for policies purchased on one’s own is a bit harder. eHealthinsurance, based on the carriers they represent and consumers purchasing through their site, found the median premium for individual health insurance was $1,584; for families it was $3,948 (the numerical averages were higher: $1,932 and $4,596 respectively). eHealthinsurance reports the average deductible for the individual plans it sold was $2,326 while it was $3,129 for family coverage)

For an individual earning $35,000 (323 percent of the Federal Poverty Level) and ineligible for a subsidy, the median premium ($1,584) represent 4.5 percent of household income; the average premium ($1,932) comes to 5.5 percent. For a family of four earning $70,000 (317 percent of FPL) their $3,948 median premium amounts to slightly more than 5.5 percent of household income; the average premium ($4,596) represents 6.6 percent of their income.  Again, this is before any out-of-pocket medical expenses are paid.

Which raises the question: assuming the eHealthinsurance rates are roughly equivalent to the cost of coverage available after health care reform, will coverage be affordable? If Americans must purchase health insurance it’s only fair that the cost for this coverage is within their means.

It’s likely Senator Baucus set the subsidy levels based on what the cost of this premium support would be on the federal budget. He determined this is the level of support the country can afford to provide consumers. But can consumers afford these costs? For a family of four with income of $70,000, paying nearly $4,000 in premium plus potentially several thousand more in out-of-pocket medical expenses is a significant burden. The problem is, going without coverage could be much more damaging to their finances — and to their health.

Balancing personal responsibility with the cost of coverage to families and impact of premium support on the federal budget is both a financial and a moral challenge. It requires lawmakers — and voters — to make tough choices. It also shows that the effort to restrain medical costs must be pursued just as rigorously, if not more so, than increasing access. Otherwise health care reform could result in insurance coverage and financial hardship for all.

6 thoughts on “Affordability and America’s Healthy Future Act

  1. Last November, America voted for change.
    Health care reform and a public option is not only a part of that change, but is essential in guaranteeing affordable health care for all people.
    America’s insurance companies and the Republican Party do not want you to have a public option because their business is self interest and profit.
    A public option saves you money and gives you a choice in the kind of health care coverage you and your family needs.
    We must fight those who want to keep things the way they were or we will not have the real changes we voted for.

    George Vreeland Hill

  2. There is a website that suggest some simple, feasible solutions to health care reform. Some of the suggests are using a ‘reverse deductible’, standardizing insurance premiums by eliminating premium discounts to large corporation making insurance more affordable to individuals and small businesses, and standardizing fees charged by health care providers (each provider sets their own fees and charge all customers the same.) to reduce their overhead and make it possible for consumers to know what their charges are . (Many doctors and hospitals don’t know what your ultimate charge will be). Do you know if any of those items are being considered in reform? The website is http://www.shapehealthcare.com/

  3. When you look at this bill you have to also look at what the insurance companies did in Massachusetts. They lobbied for mandatory insurance thinking that this would be a windfall for them. After it passed they noticed that a lot of people that were self-employed and not sick were opting for plans with a $2500 deductible that they had not thought was going to happen. They then went to Beacon Hill with another bag of money and told them that they had to change the plan, which they did. Now people that do have insurance with a $2500 deductible also have to pay a penalty because those plans do not qualify under the “new” system.

  4. You have to compare what they are paying now versus what they will pay under the new plan not what they pay under the new plan. I suspect that on average the $70,000 family either pay significant more than $4,000 plus the out of the pocket or add more burden to the rest of us by going and not paying.

    The reasons are that they often pay rack rates from their medical care today. Also, I would assume such a family has poorer than average health (studies show the poor have poorer health).

    Having dealt with Section 8 tenants before, you discover that they spend their money on unnecessary luxuries that many of the middle class don’t. They would be jobless and on Section 8 yet have 50″ HD TV. And this was a few years ago when those things cost thousands. A matter of bad priorities.

  5. Senator Baucus’ proposal has no tort reform provision, not even a plan for regional pilot programs, an idea that the President supports. Without liability reform, not only will the cost of defensive medicine continue to plague the country, but any effort to reign in excessive in-office testing will fail as the liability issue will remain the “justification” for loose indications for testing.

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