Obamacare: For Real?

Next week, the Obamacare health care exchanges will open up, enabling Americans to buy health insurance at allegedly reduced premiums.  An op-ed piece in the Daily News urged people to look up how much health insurance would cost before complaining.

OK, I’m game.

For comparison, the health insurance I buy for my company has a premium of $575/month for a single person.

Under Obamacare, there are four grades of coverage: ‘platinum,’ ‘gold,’ ‘silver,’ and ‘bronze.’  The grades are defined in terms of what fraction of the aggregate medical costs of the covered population they will pay: ‘bronze’ pays 60%, up to ‘platinum,’ which pays 90%.  I don’t have any information about how this resolves into practical details like co-payments, or how much one will have to pay for a hospital visit, and I don’t have a real basis for comparison with my current insurance.  (I asked my insurance agent  for a figure for comparison, but didn’t get an answer.  I suspect, though, that my current insurance is somewhere between ‘gold’ and ‘platinum.’)  There’s also a ‘catastrophic’ level, which is only available to people under 30.

There are nine insurance providers offering Obamacare policies in Brooklyn; for the purposes of this table I took the median premium as a middle-of-the-road value.

Level Full Premium/month (median) Net cost after subsidy/month
$40k/year income $25k/year income
Platinum 577 529 356
Gold 486 438 265
Silver 419 371 198
Bronze 340 291 118
Catastrophic 218 218 218

In fairness, many of the provisions of Obamacare that will drive up premiums in other places (no exclusion for pre-existing conditions, equal premiums for men and women) were already law in New York State.  So I wasn’t expecting much change from the status quo, and I was right.

What about not carrying insurance?  In 2014, the penalty will be $95 or 1% of income, whichever is greater.  For an individual with an income of $40,000/year, that works out to $33/month, well below even the ‘catastrophic’ plan.  In 2016, the penalty will be $695 or 2.5% of income, or $83/month for a $40,000/year income: still cheaper than real insurance.

The one good thing that I can see, for where I live, is that an individual can buy comprehensive health insurance for a premium that is comparable to an employer’s group plan.  (A while back, when I was between policies, I asked about the premium for an individual health insurance plan for myself and my wife.  The agent was ashamed to tell me.  “Be brave,” I told her.  Her shame was justified: the premium was $2500/month.)

But even with subsidies, it’s still God-awful expensive.  And I still don’t understand how making everyone pay for it–mobilizing more dollars to pay for the same finite resource–will not raise costs through simple supply and demand.