Friday, November 8, 2013

Obamacare's other subsidy --help with cost-sharing

Richard Mayhew over on Balloon Juice just pointed out a very important (but little known) part of health reform: subsidies for low-income people to alleviate cost sharing.

Short summary: You know that $3,000 deductible on the Silver Plans you're worried about? Well, the working poor get a big discount on it.

Longer explanation:  So we (hopefully) all know now about how the Affordable Care Act's subsidizes insurance premiums for people below 400 percent of the poverty line pay their monthly premiums. For example, an individual making $17,235 a year (150 percent of the poverty line) would have to contribute no more than 4 percent of his income to paying the premium of the second-lowest Silver plan on the market.

But that still leaves cost sharing if you actually get sick and need health care. A Silver plan on average has an actuarial value of 70 percent, meaning that consumers as a whole will end up picking up 30 percent of the plan's costs through deductibles, co-insurance and co-pays.

And though preventative services are free, that $3,000 deductible attached to most individual Silver plans looks pretty frightening. If Joe has a heart attack on a  $17,235 income on a Silver Plan, how the heck is he going to be able to come up with $3,000? (Remember, this is a vast improvement over having to pay the whole $20,000 or $50,000 bill and getting dumped by his insurance before health reform, but still, it's a tall order).

The answer is that he won't.  Cost-sharing subsidies improve the actuarial value of the plan for people with incomes below 250 percent of the poverty line ($28,725 for a single) -- ranging from slight increases to 73 percent all the way up to 94 percent, which is the equivalent of a platinum plan.

So our poor heart attack victim actually gets a break on his insurance deductible. Since his income is so low, his cost-sharing bracket leaves his Silver Plan with an actuarial rating of 94 percent.  Instead of $3,000, he'll owe a $600 deductible instead -- a cool 80 percent discount.

A $600 bill still isn't fun, but it's not something one generally has to declare bankruptcy over.

Then insurance picks up the tab for everything else that year.

The Center on Budget and Policy Priorities has this convenient table outlining both the premium subsidies and cost-sharing here.

And remember that these benefits for working class Americans come from raising taxes on high-income Americans.

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