Tuesday, May 24, 2016

Subsidies vs Rate Hikes

ObamaTax architect Herr Jonathon Gruber famously quipped that "the stupidity of the American voter ... was really, really critical for the thing to pass.” Confusing go-along-to-get-along as "stupidity" may have been his arrogance speaking, but he wasn't wrong:

"86 percent of the people who use the marketplaces get health insurance subsidies” to buy coverage, a point repeated by policy shops and advocates who want to downplay the effects of possible rate increases"

That's the popular press' spin on the impact of continued premium increases - some higher than 45% - and fewer carriers with narrower networks. If only there were a term for this.

Oh, yeah.

Regardless, the point is that trying to gloss over significant rate and out-of-pocket increases by touting potential subsidies is not just wishful thinking, it's delusional:

"Subsidies diminish in value the more money a family has ... Higher premiums matter a lot to those receiving smaller subsidies and could potentially force some of them to drop their coverage."

It also touches on something we've observed before:

"One's premium and subsidy (if applicable) are based in part of where one lives (zip code, county), but the penalty is simply a flat percentage of income regardless of one's location."

And, finally, roughly the same number of people buy unsubsidized plans as subsidized ones, but few in the press seem the implications of this. That is, an awful lot of folks don't enjoy the benefit of fellow tax-payers footing significant portions of their health insurance tab, amplifying the effect of these rate and out-of-pocket increases.

But we had to pass it to....

[Hat Tip: Charles Ornstein]
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