October 1st has come and gone, and the roll-out of Obamacare has been far from stellar. Most people are unable to enroll in an insurance plan through the exchanges because of technical glitches in the website, and people have also learned that the insurance plans they do get will give them less choices than they had before. Well, when it comes to Obamacare, when it rains, it pours. Philip Klein of the Washington Examiner has a piece out today where he demonstrates just how much much more some of these exchange plans will be compared to plans purchased in the conventional market. Klein searched what a plan would cost for a 30 year old male in Connecticut in and out of the exchanges. He chose Connecticut because it was one of the only exchange websites that he was able to search reliably. Since certain income levels are available for subsidies under Obamacare, he took that into account. Here is some of what he found:
To create a benchmark for comparison, I searched eHealthInsurance.com Monday morning and found that a 30-year old living in Hartford, Conn., can currently purchase a plan from insurer ConnectiCare for $109.59 per month that has a $5,000 deductible and caps out-of-pocket costs at $6,000.
I found a roughly similar plan on Connecticut’s state health insurance exchange — a ConnectiCare policy that has a $5,000 deductible and a $6,250 cap in out-of-pocket costs.
The base price of the plan on the exchange was $221.48, or slightly more than double the pre-Obamacare cost of the similar plan.
Insurance premiums vary from state to state, but $109 for a healthy, 30 year old non-smoking male is a bit high, at least from my own experience. I am currently an employee, but 3 years ago I was self-employed and purchased an individual policy. I was a 35 year old non-smoker and was able to find a plan for less than $60 a month. The plan was from a major provider, I had access to the best network, it covered everything I needed, and it even provided for one annual physical. So, this was no bottom of the barrel plan. All of that for less than $60 a month. For a 30 year old to have to pay nearly four times what I paid for my individual policy is ridiculous.
Of course, Obamacare provides subsidies to lower income Americans to help them purchase this coverage. Klein takes a look at that:
I then adjusted the income level of the theoretical Hartford 30-year old and created the graph that accompanies this post, which looks at the cost of the plan after subsidies at various income levels.
As the graph shows, at $17,500 in income, federal subsides would be significant enough to allow individuals to enroll in the plan at no cost to themselves.
At $27,500 of earnings, the cost of the plan would be $105.57, nearly the same as the pre-Obamacare cost. But after that point, the Obamacare cost starts exceeding the pre-Obamacare status quo.
And by $37,500 in income, 30-year old individuals from Hartford earn too much money to qualify for any subsidies, meaning the cost of purchasing the same insurance policy is slightly more than double than what it was this year, before the effects of Obamacare.
Klein then concludes with this, and demonstrates perhaps the most significant reason as to why Obamacare will fail:
This, of course, is only one aspect of the debate. Remember, for Obamacare to succeed, about 40 percent of enrollees have to be from the young and healthy demographic.
Subsidies are one way in which the administration hopes to entice young people to sign up. But if that doesn’t work, they hope the threat of a financial penalty will be enough to compel them to purchase insurance.
However, in 2014, the mandate penalty is $95 or 1 percent of taxable income, so it isn’t a very powerful stick. For the plan referenced above, the cost of premiums would be higher than the cost of the mandate, even for somebody earning $20,000.
For somebody earning $35,000, premiums on the ConnectiCare plan would be nearly $2,500 annually, while the mandate penalty would only be about $250.
Thus, even if administration officials can fix Obamacare’s technical problems, they may have a hard time convincing young and healthy Americans to purchase insurance.
There is not one compelling reason for a healthy person under the age of 40, perhaps under the age of 50, to go out and purchase health insurance. Why? Because since insurance companies are now required to accept anyone regardless of how sick they are, it is no longer necessary for a healthy person to purchase a policy. In all other types of insurance, and it used to be this way with health insurance, too, you bought insurance for something when you didn’t need it, because if you waited until you needed it, it was too late. Now, the opposite is true. Why purchase health insurance when you are young and healthy and don’t need it, if you can just wait until you do need it? This is what many will ultimately end up doing. As you can see above, the subsidies won’t apply to a large block of people, and the fines for not purchasing coverage are far less than the premiums. And, considering all the troubles the IRS is having right now, are they really going to be in a position to enforce these penalties, anyways? We’ll see.
The large discrepancy between the Obamacare premiums and the premiums from the conventional market should come as a surprise to nobody. When you force insurance companies to take on a substantial amount of additional risk, they have to protect themselves. The only way to do this is to increase everyone’s premium. Oftentimes by a lot. It’s not because they are heartless or running a scam. They do it in order to be able to stay in business. If they go under, everyone loses their coverage, and the very people the left claims to care about loses their coverage and gets screwed. But, we know this is what many on the left want. Force private insurers out, so everyone, or at least almost everyone, will have to go on Medicare or Medicaid. Then the Dems will have their single payer health care, the Holy Grail of socialism. This bill sucks.