Actually, before I get started on that… please watch this related ad on Terry McAuliffe, and his uncritical – not to say, slavish – devotion to one of the greatest American civic disasters since Prohibition. I refer, of course, to Obamacare:
Got that? Good. Go help Ken Cuccinelli.
Anyway, NBC has the scoop: the administration has been planning since 2010 to kill between 40% to 60% of the 14 million individual health insurance policies then in existence. In fact, they’ve apparently gone above expectations; some estimates give the current percentage of soon to be destroyed policies to be between 50% and 75%. The assumption of the administration was, of course, that those policy holders would simply acquiesce to higher premiums and higher deductables… but will it work?
George Schwab, 62, of North Carolina, said he was “perfectly happy” with his plan from Blue Cross Blue Shield, which also insured his wife for a $228 monthly premium. But this past September, he was surprised to receive a letter saying his policy was no longer available. The “comparable” plan the insurance company offered him carried a $1,208 monthly premium and a $5,500 deductible.
And the best option he’s found on the exchange so far offered a 415 percent jump in premium, to $948 a month.
“The deductible is less,” he said, “But the plan doesn’t meet my needs. Its unaffordable.”
“I’m sitting here looking at this, thinking we ought to just pay the fine and just get insurance when we’re sick,” Schwab added. “Everybody’s worried about whether the website works or not, but that’s fixable. That’s just the tip of the iceberg. This stuff isn’t fixable.”
You see, George Schwab can do math. Let us assume, for a moment, that his household income is $100K (it’s almost certainly not, but bear with me). That works out to a Obamacare tax of $900 (remember, it’s 1% of household income above $10K) per year, which is less than one month’s payment on the best exchange plan that he could find. That saves him ([$948 x 11] + $48), or $10,476 per year. Speaking bluntly, unless Mr. Schwab has chronic medical problems (his current policy suggests that he doesn’t) he’s better off not throwing away that ten grand a year. But “Subsidies!,” I hear somebody cry. OK, fine. Since Mr. Schwab in the above scenario would be ineligible for the subsidy anyway, let’s reduce his household income to $60K and assume two people in the household. That puts his tax at $500, but there’s a subsidy, so no worries, right?
Wrong. At $60K Mr. Schwab is just below 400% of the federal poverty level, which means that he is expected to pay no ‘more’ than 9.5% of his household income. That means that his post-subsidy insurance per year is $5,700, or $475 a month. Which means, hey, Mr. Schwab’s insurance only doubled! – And, remember: this number puts the man just below the 400% level. If his income goes up $2,041 per year… his insurance liabilities go up more than $5,000 per year*. Or Mr. Schwab can eat the $500 and use the other $5,200 to pay his out of pocket medical costs… which, given that the man was content to have a $5,500 deductible, isn’t that far a stretch. He’s obviously considering it.
Are there many people like Mr. Schwab? I don’t know – but here’s the problem for the administration: they need the people like George Schwab to join the exchanges. We’ve been concentrating on the so-called ‘young invincibles,’ because they were widely believed to be least likely to sign up for the Obamacare exchanges… but it turns out that other categories of potential Obamacare exchange users were as just as vulnerable to the same gruesome math. Doubling premiums (and, unlike George Schwab, many people are getting horrible deductible increases as well) is making people reassess just how good a deal the exchanges really are. And the more people that decide that it’s a bad idea, the closer to total destruction the whole thing gets.
And, again, the Obama administration knew that they were going to shut down millions of policies through fumble-fingered technocratic social engineering. That they might have misjudged just how badly the Obama administration would mess things up is very cold comfort.
Moe Lane (crosspost)
*This should sound familiar.