Without Obamacare, We Would Have Even More School Crossing Guards

Adrian Dantley was a six-time NBA all-star who averaged over 24 points per game during his 15-year career.  He was inducted into the Naismith Hall of Fame in 2008.  He made good money and reportedly invested it well.

Today Adrian Dantley is 58 years old.  Like most 58 year-olds, he wants health insurance.  But the NBA does not offer health insurance to its retirees. 

So Dantley recently took a job as a school crossing guard – for the health insurance.  The story is all over the sports pages this week.  I’m sure that it is drawing more than its fair share of giggles and head shakes.

But I’ve known a lot of school crossing guards in my life.  And many do it for exactly the same reason.

As a summary of news reports recently digested by Kaiser Health News shows, it isn’t always easy for a 50-something retiree to get health insurance.

In just a few months, the Affordable Care Act will change this – and not just for 50-somethings.

But despite all of the attention to ACA in the three years since it was enacted, most of us still don’t really understand how it will affect us personally.

In recent weeks, some analysts and insurers have said to be prepared for sticker shock as 15-20 million currently uninsured people gain private insurance, and up to 17 million more move onto government-sponsored programs. 

So when a typical, middle income family has to buy insurance in this post-ACA world, what will it cost and what will they find?

The gross cost will indeed be high, but the net cost much lower.

You can plug your own numbers into the Kaiser Family Foundation’s excellent subsidy calculator and see for yourself. 

But this example will give you an idea.  The full premium cost of health insurance for a middle-class family of four making $46,850 per year will be $14,245 – almost one-third of that family’s total income.  They will then get back a tax credit worth $11,294.  So their net health insurance cost will be $246 per month.

And their ACA tax credit will be so big that they will end up paying virtually nothing in net taxes to the federal government. 

Instead, their entire tax burden – something that has historically supported spending on defense, highways, energy development, environmental protection, public health, education, social services, veterans’ services, childhood nutrition, and more – will essentially be returned to them to pay for their health insurance.

This will be true for many.  According to recent data from the Congressional Budget Office, the average ACA tax credit in 2014 will be worth $5,510. 

But, remember, you only get the credit if you personally pay the bill.

Where will we find our insurance, and what will it look like?

We will find insurance through new exchanges that seem as shrouded in mystery as the creation of the universe.

But when the exchanges come into existence in six months, they won’t be quite so exotic. 

We will just find a number of standard insurance plans from a variety of well-know insurers that we or our employers will be able to buy through premium payments and tax credits.  Nearly all will cover a standard set of health and mental health benefits.

Some plans will cover additional services, and be given a higher rating, “gold” versus “silver,” for example.  And co-pays and deductibles won’t disappear.  Premiums for insurance plans with lower deductibles will be higher; those with higher deductibles will cost less.

Health care procedures will still be covered, providers will still be paid, and insurers will still occasionally deny reimbursements for reasons that we can’t fathom.

Who will be left out?

If nothing else changes, in another three years thirty million people will remain uninsured. 

• Six million people who, for the privilege of avoiding the health insurance system in its entirety, choose to pay up to 2.5 percent of their income as a tax penalty to help pay for uncompensated care.
• Up to 12 million people with serious mental illnesses or addiction disorders who are currently not receiving care (except when they are in jail).
• Twelve million more who fall through the cracks, or are uninsured for short periods of time.

But at least Andrian Dantley and 68,520 others will have a choice.  They won’t have to work as crossing guards anymore just for the insurance.

To reach Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/

Uncloaking the Two Percent

Should the Affordable Care Act be repealed so that over a million people making more than $123,000 per year can avoid paying $3,000 in taxes beginning in 2016?  And should they be allowed to pass on the cost of their health care to everyone else?

This week, a local newspaper quoted a lifelong Florida Democrat as saying she might vote for Mitt Romney because she believed ACA offered “a costly giveaway to freeloaders.”

The irony is that the law actually does just the opposite – and Mitt Romney knows this better than most.  It requires nearly all health care “freeloaders” either to get insurance or pay a tax penalty.

Eighty percent of those affected will get insurance.  But the Congressional Budget Office reported last week that it expects 6 million people to owe the tax penalty beginning in 2014.  The $8 billion the penalty will eventually raise will help defray the cost of uncompensated care.

Six million people make up less than 2% of our total population.  Should the Affordable Care Act be repealed because of them?

Like that Florida Democrat, at least half of us seem to think so.

According to a CNN poll taken just after the June Supreme Court decision upholding the tax penalty, 51% opposed the so-called individual mandate.  According to a Kaiser Family Foundation July tracking poll, 61% opposed collecting the tax penalty.  And according to a Rasmussen poll released this week, 52% still want to repeal the whole Act, largely because of this provision.

Just who are these 2%, for whom our collective hearts bleed?

They are hiding among the 30 million people who will still be uninsured after the Affordable Care Act takes full effect. 

The vast majority of those 30 million are exempt from the mandate, because they are Native Americans, undocumented immigrants, individuals who are so poor that their insurance premiums would exceed 8% of their income, and people who will be granted hardship exemptions.

The remaining 6 million comprise the 2%.  And most are fairly well-off.  In today’s dollars:

• 69% have Adjusted Gross Incomes (AGIs) of at least $46,100 for a family of four, roughly equal to the median household income in America;
• 49% have AGIs of at least $69,150;
• 31% have AGIs of at least $92,200; and
• 20% have AGIs of at least $115,250.

How much will it cost the 6 million to buy health insurance?  Not as much as you might think.

Beginning in 2014, a family with $69,150 in income will get a tax credit of $10,385 if they have to buy their own health insurance, limiting their total net insurance cost to just under $540 per month.

And families with incomes of $46,150 will get tax credits of $14,014.  They’ll pay just $237 per month net for their health insurance.

The 2% is made up almost entirely of these two groups.  The first is people with six figure incomes who can afford to buy insurance.  The second is lower income people who will be offered tax credits so big that their net cost of insurance will be far less than what many people are paying out-of-pocket today.

What these two 2% groups have in common is a sense of entitlement – a belief that if they become seriously ill then the rest of us should pay their health care bills as well as our own.

Or, as Mitt Romney characterized it for Glenn Beck in 2007, they want “free care paid for by you and me.  If that’s not a form of socialism, I don’t know what is.”

Is that fair?

As the Affordable Care Act is written, the free ride ends.  1.2 million wealthier people who today make more than $115,200 per year and choose not to buy health insurance will pay, on average, a tax penalty of around $3,160 per year when the penalty is fully phased-in in 2016 – to help cover health care costs that average more than five times that. 

And the 1.2 million middle-income people making between $46,100 and $69,150 will pay a tax penalty averaging around $583 per year– about the same as what other middle income people will pay for insurance every month or two.

Maybe people who oppose the penalty think it is too small.  I doubt it.

I think they’ve more likely been mesmerized by the wizardry of politicians and pundits, who are using the cloak of repeal to protect an entitled 2% at the expense of everyone else.

Questions or comments?  Post them below, or email gionfriddopaul@gmail.com.