More Lipstick on the ObamaCare PigBy Peter Wilson
The White House PR machine keeps trying to put lipstick on the ObamaCare pig. According to Whitehouse.gov, "there's some great news from a Department of Health and Human Services report... Thanks to Obamacare, half of young adults between age 18 and 34 who are single and uninsured can get health coverage for $50/month or less."
There are two problems with the claim. First, the actual percentage, according to HHS figures, of 18-34 year olds who qualify for the $50/month rate is not "half" but 2.9%. The numbers are 1.3 million out of 44.2 million.
Secondly, the $50/month rate is not a market price but one that is subsidized by an expanded government entitlement.
The White House statement is not technically another ObamaCare lie, but it requires reading the fine print for interpretation. The full "caveated" statement in the report from the Office of The Assistant Secretary for Planning and Evaluation at HHS reads as follows:
Note: "46%" rather than "half" and "may" rather than "can," plus a complete list of conditions.
The discrepancy between 46% and 2.9% is due to the limiting filters placed on the age 18-34 population. HHS counted only:
1.Those who are "Medicaid and Marketplace eligible."
Eligibility is based on the federal poverty level (FPL), which currently stands at $11,490. Individuals are eligible for Medicaid with modified gross adjusted incomes at 100% of the FPL, rising to 133% in January 2014.
"Marketplace eligible" is a euphemism for "eligible for subsidies." Everyone is "eligible" to use the Marketplace to purchase insurance, but subsidies are offered for individuals earning up to 400% of the FPL, or $45,960.
In short, the sample was limited to young people who earn less than $45,960, who then qualify for government assistance. Is a surprise that if you only look at people who pay a fraction of the market price, that a high percentage will have low insurance costs? People on food stamps have low grocery bills, but that doesn't mean that food prices are low.
2. HHS states: "We limited our analysis to young adults in single-person households, where a household is a "health insurance unit" (HIU)... We estimate that 63.7 percent of uninsured young adults nationwide live in a single-person HIU." It's not clear why this matters.
3. Those who are "uninsured"; if you're on your parents' plan, or already on Medicaid, you're not in the market for insurance. HHS warns, however: "we are not able to link a young adult living apart from their parent's household to their parent's health insurance unit." Thus by the study's own rules, many 18-26 years olds would have to subtracted from the "nearly half" of young adults paying $50/month since they're already getting insurance through their parents.
Of the original 44.2 million, 2.9 million meet these three criteria.
Out of these 2.9 million, 1.3 million will pay $50 or less per month for a Bronze insurance plan. 1.3 million is 44.8% of 2.9 million, which is in the rounding error vicinity of HHS's 46% figure.
Furthermore, the 18-34 age range is itself an arbitrary filter. 1.3 million people is a mere 0.42% of the overall American population.
Of course, no insurance plan exists that costs under $50/month. Most individual plans I have seen while scanning different state exchanges are in the $200 to $400 range, with high deductibles. In Massachusetts, bronze individual plans have an out-of-pocket maximum of $6,350 above the cost of premiums -- a significant expense for someone earning under $15,000 a year.
The $50/monthrate is possible only because of government subsidies in the form of "tax credits." The Affordable Care Act describes the formulas for calculating these "premium assistance credits" in precise detail (Subtitle E, PART I -- PREMIUM TAX CREDITS AND COST-SHARING REDUCTIONS).
The maximum annual premium is mandated to be from 2.8% to 7% of an individual's annual income, according to where the individual falls on the income range up to 400% of the poverty level. According to the HHS report, an individual earning $17,235 pays a maximum of 4%, or $689/year, or $57/month for health insurance. If the private insurance plan on the ObamaCare exchange costs $200/month, that person will receive premium assistance in the form of tax credits for the difference, in this case, $143/month.
Those under 133% of the FPL have a "Special Rule" that specifies a maximum premium of 2% of income. Thus an individual making $12,000/year pays $240/year for health insurance, or $20 month. This special rule will be irrelevant after January 2014, since these individuals will qualify for Medicaid and will be required to sign up. And once you're on Medicaid, don't think about upgrading to a better plan. According to Healthcare.gov:
I'm not sure how the tax credit mechanism this would work if 47% of Americans don't pay federal income taxes. Perhaps it's a way to increase entitlement spending off the books; an uncollected tax need not appear on the spending side of the federal budget.
Finally, think about what this "nearly half" claim really means: Half of the population of young people singled out by the White House are in such a dire financial position -- earning less than $17,000/year -- that they qualify for welfare benefits reserved for the most impoverished Americans! Hardly cause to celebrate five years of Obama's economic leadership.
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