What is the health care debate all about? When Obamacare was passed in 2010 tax credit subsidies were limited to low-income individuals between 100 and 400 percent of the federal poverty level. Some of those in the lowest income range also have access to Medicaid. Under the American Rescue Plan Act of 2021 (ARPA), the premium tax credits were enhanced well into middle class territory, while those with lower incomes were relieved of paying almost anything. The following is a list of household income required as incomes rise, both before and after the ARPA:
100% to 133% Premiums of no more than 2.1% to 3.14% of household income enhanced to 0% under the ARPA.
133% to 150% Premiums of no more than 3.14% to 4.19% of household income enhanced to 0% under the ARPA.
150% to 200% Premiums of no more than 4.19% to 6.6% of household income enhanced to 0% to 2% under the ARPA.
200% to 250% Premiums of no more than 6.6% to 8.44% of household income enhanced to 2% to 4% under the ARPA.
250% to 300% Premiums of no more than 8.44% to 9.96% of household income enhanced to 4% to 6% under the ARPA.
300% to 350% Premiums of no more than 9.96% of household income enhanced to 6% to 8.5% under the ARPA.
350% to 400% Premiums of no more than 9.96% of household income enhanced to 8.5% under the ARPA.
400% and above Premium tax credits phased out under ACA but were enhanced to no more than 8.5% of income under APRA.
Expanding premium tax credits made an enormous difference in enrollment. Prior to the ARPA enrollment in Obamacare was concentrated among lower income groups, because ACA plans were such a bad deal for those not getting a subsidy. The following is Obamacare enrollment by year from the Kaiser Family Foundation:
2014 8.02 million
2015 11.67 million
2016 12.68 million
2017 12.22 million
2018 11.75 million
2019 11.44 million
2020 11.41 million
2021 12.00 million
2022 14.51 million
2023 16.36 million
2024 21.45 million
2025 24.32 million
The Congressional Budget Office (CBO) estimates enrollment will fall by 4 million if the enhanced subsidies are allowed to expire. A back-of-the-envelope calculation based on historical enrollment would suggest the real number is closer to 12 million. Enrollment about doubled between 2021 and 2025, after enhanced premium tax credits were passed. The cost of extending the premiums tax credits for another 10 years is estimated at $350 billion by the CBO. That estimate is probably too low.
The problem: just because Obamacare is heavily subsidized does not make it any more affordable. It merely shifts costs to taxpayers. Obamacare is a bad deal for roughly 80% of enrollees, who find themselves paying nearly all their medical bills out of pocket. Some estimates place the proportion of enrollees who surpass their deductible at only about 10%. Even with enhanced subsidies premiums are so high that most people choose bronze plans (30%) or silver plans (56%) that only cover 60% and 70% of costs, respectively (once they meet their deductibles). The average deductible for silver plans is more than $5,000, while bronze plans average deductibles are nearly $7,000. Anyone enrolled in Obamacare with significant health problems will find themselves on the hook for substantial cost sharing.
Without enhanced subsidies the middle class will likely drop coverage unless their health needs are significant. For that matter, so will a lot of healthy young people whose income falls among the lower middle class. Congressional Democrats want to keep Obamacare afloat even if the government must heavily subsidize marketplace plans. Regardless, they are still a bad deal for enrollees.
By contrast, Senate Republicans propose to give qualifying individuals cash in a health savings account:
Republicans on Thursday backed a proposal from Sens. Bill Cassidy, R-La., and Mike Crapo, R-Idaho, to scrap the subsidies in favor of health savings accounts that would be funded for the next two years.
To be eligible, people would have had to choose a lower-cost, higher deductible bronze or catastrophic health insurance plan and make less than 700% of the federal poverty level. Those aged 18 to 49 would have gotten $1,000 a year, while those 50 and up would get $1,500.
The money could have been spent on health costs but not premiums. Health analysts warned that could have posed a problem when low-income Americans were already struggling to afford monthly fees.
Neither proposal got the required 60 votes to pass a bill. Although neither bill is perfect it is beneficial to have discussions about ways to make health care more accessible to millions of people who find medical care under Obamacare unaffordable. Subsidizing health coverage people cannot afford to use is not a valid plan. It would be far better to subsidize care directly.
I like the direction you are going. For a person with no major health problems currently, building an HSA makes a lot of sense. For a person who does have problems, both the silver and the bronze plans currently offered are just junk.