



If your boss offers benefits, you won’t qualify, unless …



If I qualify, how much will I receive?










How the government calculates your subsidy



Subsidies assume you buy a Silver plan






Will all states offer subsidies?





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  8. Barry–

    a great deal of effort.
    But we’ll have to see.






  10. Bob–













    Pelosi suggests uninsured are freeloaders



  12. Peter1 —


  13. Bob –










      I’m in Bob, where do I sign up!!

  15. Maggie –



  16. Barry–
    Most families don’t have the cash on hand (or anywhere) to pay premiums covering the years since they first became eligible for insurance.

    The average American family has roughly $65,000 income (joint, before taxes) and very little in savings(because they earn relatively little, they can’t save very much.)

    Subsidized health insurance premiums help them save an amount that they can afford to save.

    Regarding a family involved in a horrific car accident or have child diagnosed with cancer, you write:



    At the same time if my plan prevailed, and people realized that they couldn’t move in and out of the health insurance pool (but had had to stick with insurance once they signed up), I truly believe that the vast majority would sign up for insurance when they were still healthy. The notion that you should wait until you were sick wouldn’t seem nearly as attractive.

  17. Maggie –

    Suppose someone doesn’t buy health insurance for three or four or five years after the ACA takes effect and pays the penalty instead. Then, in 2018, they or a family member is diagnosed with cancer or is in a serious accident. They’re scared and frightened and we’re supposed to come to their rescue and let them buy insurance at standard rates on a guaranteed issue basis? I don’t think that’s fair to the responsible rest of society.

    Even Medicare requires beneficiaries to pay a surcharge of 1% for each month that they delay buying Part B or Part D coverage after they first become eligible unless they meet one of the exceptions like retirement or losing employer retiree coverage. Again, if it’s good enough for Medicare beneficiaries, why the heck isn’t it good enough for the rest of us?

    One alternative for the situation in my example would be to require the person or family to pay premiums for all the time since they first became eligible for coverage but didn’t buy it up to a maximum of three years. They could pay the accumulated premium over time but they would still owe the money.

  18. Peter 1–

    On costs in Mass– see Barry Carroll’s most recent comment.

    He’s right. High-cost academic meidcal centers have the clout to force insurers to over-pay them. This raises premiums.

    Long before health care reform, Mass. had the highest health care costs in the coutry. This has nothign to do with Obamacare

    Finally, as the KFF article says, Mass is just beginnign to tacklet high health car costs. It hasn’t solved the problem . But it is addressing it. (Orignally, the Mass plan didn’t set out to control costs–just to increase coverage. That was my point. Gov. Romney was not about to try to reduce payments to
    hospitals, drug-makers, device-makers.

    Now, Mass. is addressing overpayments to hospitals and has created a state-wide cap on total heath care spending.

    See the “Breakfast with Atual Gawande” link that I included in my last reply.

    (I hope I’m not wasting my time sending you links– I sincerely hope you actually read them.)


    What’s wrong with saying that once people buy insurance, they have made a coomitment to an insurance pool and, while they can switch insurers, they cannot drop out for a period of time ?

    I would much rather “lock in” relatively healthy people (who have had their hip replaced) rather than “lock out” sick, frightened people (who have just been in a car accident or diagnosed with cancer) –even for six weeks.

    • “On costs in Mass– see Barry Carroll’s most recent comment.”

      Maggie and Barry, they don’t say the highest premiums, they say the highest “individual market” premiums. To me that says the Connector is attracting a disproportionate number of pre-exist, high risk and less young healthies.

      “Massachusetts has the highest individual market premiums in the country.”

      MA is also a high union membership state with better than most negotiated employer insurance with family coverage. It’ll be worse in the South and “right to work” states with poorer less healthy populations.

      I’ll sit on the sidelines to see how this “exchange” thing will pans out. My prediction is it WILL be a cruel joke, especially when BCBS is our state’s dominate insurer writing the health insurance policy.

  19. Maggie –

    As I’m sure you well know, Medicare uses annual open enrollment periods lasting approximately six weeks with exceptions for situations like age-ins, retirement or losing employer provided retiree coverage. If it’s good enough for Medicare beneficiaries, why isn’t it good enough for the rest of the population? How many irresponsible people who don’t buy insurance when they first become eligible under the ACA are we supposed to help pay for when they opt to pay the penalty and then try to buy insurance after they or a family member gets sick? I think the open enrollment period approach is reasonable once the ACA is implemented in 2014 or at least starting in 2015.

    Peter1 –

    I think health insurance premiums in Massachusetts are the highest in the country for two reasons. First, medical input costs are high. Second and more important, there are an usually large number of academic medical centers that provide lots of routine care that community hospitals could handle perfectly well and, in the case of the Partners Healthcare System which owns Massachusetts General and Brigham and Women’s, they command much higher reimbursement rates from commercial insurers than their competitors due to their market power, not their care quality.

    Massachusetts, to its credit, now requires every insurer to offer at least one tiered network or narrow network insurance product. In my opinion, though, there is a heck of a lot more that regulators could be doing in the area of price and quality transparency. The availability of actual contract reimbursement rates to both patients and referring doctors would make it a lot easier to identify the most cost-effective high quality providers at least for care that is scheduled well in advance. I’ve said before that there should be special rules limiting the price hospitals can charge for care that must be delivered under emergency conditions.

  20. Bob, Peter 1, Barry


    First– trust me, I’ve never met a mother who would cancel her health insurance after she gave birth. A f mother probably takes her child to a pediatrician 12 times during his first year, (Babies frequently run high temperatures, ear-aches, teething. . . Any mother wants to have someone to call . . .

    One reason so many 20-somethings and 30-somethings will sign up for insurance (now that subsidies are available) are because they have kids. Many young adults would go without insurance for themselves, but not for their children.

    The $800 billion paid by employers is important –but it’s not “the ballast” of the system. Government now pays more than half of the nation’s health care bill.
    Employers pay about 1/3.

    I agree that Americans are not willing to pay higher taxes to divorce health care from employment. Many don’t realize that their wages are lower because their employers pay for health benefits. And, unlike Europeans they are not accustomed to the idea of pooling their resources to pay for health care so that everyone is protected.

    This is one reason why we can’t divorce health care from employment at this time.

    Meanwhile, employers who offer good benefits do get a return on their money–employees retention and employee loyalty ..(This is why the majority of large corporations continue to provide health benefits, despite the cost. Even at a time when unemployment is high, they know that they need to do this if they want to hold onto their best employees. Constant turn-over and training new employees is very expensive.)

    I stayed at Dow Jones for more than six years after my excellent editor was replaced largely because I was a divorced single mother with two kids and needed the generous health insurance that Dow Jones offered. I wasn’t willing to risk not having that protection for my children.


    The piece you cite by Collier is more than two years old. (and he is a business consultant who had an ax to grind.)

    Over time, the Mass. plan has become more and more successful. See this
    May 2012 piece from the Kaiser Family Foundation: (Note the Kaiser Family Foundation (KFF) is not part of the insurance company, Kaiser Permanent. KFF is a non-profit that focuses on improving health care for American families.

    (Peter, If you want up-to d-ate accurate information on healthcare, I urge you to Google Kaiser Family Foundation and the subject you are interested in. )

    Here’s the piece from KFF:

    “In 2006, Massachusetts passed comprehensive health reform designed to provide near universal health insurance coverage for state residents. Building on a long history of health reform efforts, the state embarked on an ambitious plan to promote shared individual, employer, and government responsibility. This brief examines Massachusetts’ implementation efforts over the last six years and looks to what lies ahead under federal health reform.
    Massachusetts succeeded in expanding
    coverage to nearly all state residents.
    Within a year of implementation the
    state experienced an unprecedented
    drop in the number of uninsured and,
    despite the economic recession,
    continues to retain the lowest rate of
    uninsured residents in the country.
    While Massachusetts has sustained gains
    in coverage, the rate of uninsured has
    continued to climb nationally

    Peter1 and Joe Says

    As KFF notes “The state continues to struggle with rising health care costs. State health reform in 2006
    purposefully focused on expanding coverage to residents while leaving the thornier task of cost
    containment for future years”

    Now however, Mass. is putting a global cap on increases in health care costs

    Barry– Rather than limiting the enrollment period (which would close the door to someone who desperately needs access to healthcare because he or his child has been diagnosed with cancer) I would rather see a law which says that once you sign up for health care you are signed up for, say, four or five years. You can switch insurers. But you can’t jump out of the pool once you have gotten the treatment you want.

    • Maggie, you’re cherry picking. Below is also a quote in your referenced KFF.

      “The state continues to struggle with rising health care costs. State health reform in 2006 purposefully focused on expanding coverage to residents while leaving the thornier task of cost containment for future years. As a result, affordability continues to be an issue. Per capita health spending is 15% higher than the national average and although premium growth has slowed in recent years, Massachusetts has the highest individual market premiums in the country. Legislation focused on comprehensive provider payment reform and endorsed by the Governor is currently pending in the state’s legislature.”

      Do you see the part about MA having the highest individual market premiums in the country.

      THAT’S BEEN THE FOCUS OF OUR DISCUSSION HERE. Getting insurance with a subsidy is a lot different than being forced to get insurance without one.

      Why do you think the individual market premiums are the highest in the country?

  21. Maggie- saying that Mass did not set out to lower costs is blatantly untrue- everyone on both sides of the aisle- including Gov Romney at the time in the WSJ in April 2006 PROMISED lower costs.

    President Obama PROMISED $2500 IN SAVINGS for families by now — they are up by $3000.

    And, again -why will you answer everyone else but me in your comments?

    Your silence on the issues I raise is hurting the great respect I have for your willingness to engage on your opinions.

    • “Your silence on the issues I raise is hurting the great respect I have for your willingness to engage on your opinions.”

      Bingo, ride on the head. Oh, watch out, she tried having me fully censored from the site, but for awhile it was just at her posts. I am surprised I have had comments stay in place for more than a couple of hours, maybe I am sealing my doom writing this now. She is the epitome of what defines the Democrat machine agenda behind PPACA. Truth and sincere intent for the public good, be damned, full speed ahead partisan agendas!!!

      I just don’t pontificate with baseless stats and endless quotes of choir echoes to justify being debated. Nah, I’m just a grunt doc on the front lines, seeing the masses being decimated while the “leaders” and their ilk protected cronies try to profit and stay sheltered behind the public shields. Ugly and pathetic, eh?

  22. Bob –

    Former Harvard Pilgrim CEO, Charlie Baker, commented once that people buying insurance just before they needed an expensive procedure and than dropping it after they got their care cost insurers six times as much as they expected. Such gaming can be largely stopped by limiting the ability to sign up for insurance to a relatively brief annual open enrollment period. Medicare Advantage early on allowed this sort of switching back and forth between MA and standard Medicare but that was eliminated a number of years ago with an exception for moving out of the region you lived in when you first bought the insurance.

    Regarding large employers subsidizing small ones, for 25 years my wife was able to decline her employer’s insurance because she was on my employer’s family coverage. The wrinkle though is that her employer, which had between 25 and 35 employees depending on business conditions, paid her the amount it would have spent for her insurance in additional taxable salary. New employees were told when they were hired that if they didn’t need the health insurance, they would be paid what it would have cost in higher salary. If they needed it later, the cost would be rolled back out of their salary but they would at least be able to pay the premium in pretax dollars. Not every employer, including small ones, is a greedy profit monger.

    For large employers who would like to drop health insurance but raise pay by an equivalent amount, there is a little discussed issue of how to allocate the cost of insurance down to the individual employee level if the increase in wages would be fully subject to income and payroll taxes. At the population level, a twenty something with family coverage cost the employer a lot less than an employee in his late 50’s or early 60’s. Presumably, the most equitable way to handle this issue would be to allocate the dollars based on pure age rating so the imputed value of the insurance for the older employee would be 5-7 times what it would be for the younger ones which are consistent with expected medical claims costs, again at the population level.

  23. 1. Maggie’s description of the subsidies newly available to a younger person is very moving and true. I wish that the sponsors of the ACA had used more examples like this.

    The only fly in the ointment is that some women will decide to buy insurance when they become pregnant, and then drop the insurance after the birth.
    This kind of thing has happened in Mass. for surgeries in general. It is a factor in driving up premiums, though I do not know how big a factor.

    2. Barry’s post just highlights an uncomfortable fact about the financing of American health care.

    The $800 billion paid by employers in premiums is to some extent the ballast of the whole system. These plans tend to pay doctors and hospitals either at or above their costs, even while Medicare and Medicaid cut back.

    In fact the large employers who provide family coverage are subsidizing small employers as well. Millions of spouses are able to take jobs without health insurance because the other spouse has family coverage. I worked for a company that had 12 employees, and 10 of them were on family coverage due to a spouse. My company breathed a huge sign of relief every payday.

    The American people are not ready to pay in taxes what the big employers now pay in premiums. Jeff Goldsmith has commented on this also.

    The big risk of the ACA is that it will offer some employers a way to get out of providing health insurance. This sounds progressive in the sense that health care should in fact be divorced from employment.

    But if big employers can get out of insurance, and Americans refuse to pay higher taxes, the entire edifice of doctors and clinics could be in big financial trouble.


      Bob, there is no argument about the intent of the law, the question is will those young people use it. To be direct on this the entire cost of premiums in the exchanges hinges on young(er) healthies signing on. If they don’t then the ACA exchanges will follow the fate of those in MA and CT.

  24. Barry and Peter 1

    The Mass bill didn’t set out to reduce the cost of health care. It focused on
    unriversal coverage.

    It succeeded in what it set out to do. Tthe vast majority of people in Mass. now have health care.) But it didn’t attempt to tackle ovrpayment to drugmakers, devicemakerse & hospials–or overtretament. (Romney was governor–this was his health care bill.) Nor did it ask drugmakers, hospitals etc. to pay new fees to fund universal coverage.

    Massachusetts now realizes that it has to bring down the cost of care and has begun to focus on that goal.

    Barry– I agree that it will take time for many of the ACA’s cost-saving stratgies to achieve major cost savings. But the point of health care reform is not to achieve short-term savings, but to “break the curve” of health care inflation long term.

    Once we do that, my guess is that we will be able to actuallyl ower the cost of health care as a percentage of GDP. That is the long-term goal–and a very impt. goal.

    You write: ” On its most recent earnings conference call, UnitedHealth Group management stated that 18% of it hospital contracts are already performance based and that percentage is likely to grow quickly,”

    Yes, I agree that private insurers can–and will– follow Medicare in moving away from fee-for service. See what Atual Gawande has to say in this post:
    Most of his hospital’s contracts now reward the hospital for better outcomes-for less. If the hospital fails to meet these target it loses millions.

    The more creative insurers will follow this model–paying providers for value, and some of those insurers will survive.

    • “The Mass bill didn’t set out to reduce the cost of health care. It focused on
      unriversal coverage. It succeeded in what it set out to do. Tthe vast majority of people in Mass. now have health care.)”

      Maggie, prior to the MA bill a majority of people were already insured. The bill was designed to cover the uninsured. Are you deliberately trying to mislead us or is Roger Collier incorrect in his following assertion based on his investigation?

      Only marginally, at best.”

  25. Maggie –

    I’m not questioning that some of the ACA’s cost reduction strategies will work. Indeed, I hope most of them do work. However, I don’t think they will have a significant impact in the short term – first year or two. At the same time, private insurers are also moving ahead with promising approaches that are gaining traction like tiered networks and risk based contracting with hospitals. On its most recent earnings conference call, UnitedHealth Group management stated that 18% of it hospital contracts are already performance based and that percentage is likely to grow quickly. Moreover, there is an article in the most recent issue of Health Affairs which discusses the success Medicare Advantage plans are having in reducing utilization, especially of hospital based services, vs. standard FFS Medicare.

    I am questioning the likelihood that health insurance will be considerably less expensive on the exchanges than comparable coverage is now. As Peter1 noted, the Massachusetts experience in this area is far from compelling to say the least.

    With respect to employers raising wages by the amount that they already pay for health insurance, I wasn’t talking about whether they would be willing to do it or not. I was talking about how employees would think about both the process of purchasing health insurance and its cost if they had to do it with money from wages or pay an equivalent amount in taxes as opposed to the current employer provided benefit approach.

    I think if the cost of health insurance as a percentage of income were more transparent and visible, they wouldn’t be willing to pay nearly as much as they implicitly do now. Currently, lots of employees either think their employer health insurance coverage is free or almost free and most don’t have a clue as to exactly how much the employer is paying for it on their behalf. Once that number starts to appear on W-2 forms to make the cost more transparent, many employees are likely to be shocked.

  26. Barry–

    You write: “Now, suppose the law was changed to make health insurance purchased by the individual fully deductible from wages that determine both income and payroll tax liability. The employer stops offering health insurance but increases the wage by $20,000 and tells the employee to go buy insurance in the private market”

    Employers would never raise wage by $20,000 to match what he pays for benfits.

    Look at what happened in the 1990s: with increased productivity, employers
    profits soared–but they did not share that gain with employees. Employees wages remained flat to down–and rose only a bit in the late 1990s.
    Employers only raise wages if they must–in a tight job market where they
    can’t find enough employees.

    In the 1990s, Wall Street’s analyst Steve Roach wrote about all of this.

    As you know, I don’t suppport a single-payer system, in part because it would be based on Medicare, and Medicare is terribly wateful (30% of Medicare dollars are wasted on ineffective treatments and overpriced products and services).

    But the ACA has already begun to slow the growth of Medicare spending as hopsitals squeeze some of hte waste out of their systems.
    Beginning in 2014,
    the ACA’s financial carrots and sticks will really begin to motivate providers to reduce waste. And Medicare will be slicing fees for “overvalued services” (doesn’t have to get permission from Congress to do this), while insisting that drugmakers give Medicare patients the discounts they now give Medicaid
    Barry- I don’t understand why you don’t believe this. My guess is that you may well have read the legislation. You know that there are many, many ways in which it aims to reduce to cost of health care. Some (not all) of these strategies will work.,

  27. There is an interesting psychology, I think, behind how health insurance is paid for and what some of the alternatives might be.

    Roughly 9% of the commercially insured population younger than 65 buys health insurance in the individual market but these customers account for only about 5% or so of insurers’ revenue. The typical individual policy brings in $275-$300 per month and that’s after relatively hefty administrative costs to pay for medical underwriting, advertising and insurance broker fees.

    For those who get their health insurance through their employer, the total average cost nationwide for family coverage is now a bit over $15,000 per year including any contribution the employee is required to make. Those with generous public sector and private sector plans that are part of collective bargaining agreements often require no employee contribution at all. Nonetheless, these ultra generous polices that can easily cost the employer $20,000 for family coverage are part of the employee’s compensation. For someone earning, say, $60,000 in wages and receiving a $20,000 employer provided plan with no required contribution, in effect, 25% of total pretax compensation is going to pay for health insurance.

    Now, suppose the law was changed to make health insurance purchased by the individual fully deductible from wages that determine both income and payroll tax liability. The employer stops offering health insurance but increases the wage by $20,000 and tells the employee to go buy insurance in the private market. Assume, for the sake of argument, that the same plan is available at the same price and there are no subsidies. How many people are going to be willing to pay 25% or 20% or even 15% of their income for health insurance even if they recognize that it’s important to have coverage for the reasons that Maggie describes – just in case you develop and expensive disease or condition or are involved in a serious accident? When the employer provides the coverage as part of compensation, even if the employee recognizes it as part of compensation, he perceives it as free. If he has to buy it himself, it’s way too expensive.

    Alternatively, suppose we adopt Peter’s approach of a single payer system paid for by a tax on income up to some reasonable cap. This is the German and French approach. We would probably need a tax on income of 15%-20% on the first $200K of all income, including investment income, to insure all Americans, including the elderly and the poor (everyone in one pool) with this sort of financing mechanism. The combined amount paid today by Medicare, Medicaid, commercial insurance, VA care and the estimated cost of covering all of the 45-50 million people without health insurance amounts to 12.2% of GDP for the recently completed fiscal year. Even if everyone paid Medicare rates and we captured $50-$100 billion per year of administrative savings, I don’t think there would be much support for a single payer system once people saw and understood what it would cost in the way of new taxes even with the disappearance of the Medicare payroll tax and assuming everyone with employer coverage received a raise equal to what the employer is currently paying for health insurance.

    • Barry, I assume your calculations on tax rates to support single pay accept our present cost system. Simply trading coverage systems without cost controls would accomplish nothing. Single pay offers better cost control mechanisms and more stable revenue support.

      I generally support a mandate and felt Obamacare offered something better but the actual working of it I believe will turn out like MA and CT due to the small pool size of the exchanges and humane nature – regardless of the fact that Maggie just can’t think outside reading the text of the bill to assure us it will work. If it was going to work why has MA and CT had such low success?

      I won’t buy into the most expensive system in the world and will sit on the sidelines with my good health and put my premiums into my own bank account.

    • Thanks for the link aurthur.
      Here’s a good snippet that combined with MAs experience confirms my mistrust of what the premiums will cost as opposed to Maggie’s glorious expectations.


      When you carve up the risk pool and provide a small pool for pre-exist/high risk then it unfairly drives up premiums for the healthy also needing that pool.

      This is why I’m in favor of single pay. Only one large risk pool to lower and fairly spread the risk cost, and taxes to fund the program so that everyone pays.

      Maybe Maggie can tell us why Obamacare will not suffer the same fate.

  28. Barry, Peter 1, Bob Hertz,

    The Exchanges will draw many young and healthy customers for two reasons:
    First,younger Americans earn less than middle-aged Americans and so the subsidies will cover much of their premium. (According to the Bureau of Labor Statistics “The households of middle-aged people earn about $20,000 more each year, on average, than households of people in their late 20s and early 30s. ”
    Real median Household income (joint for everyone in the household) for 25-34 year-olds is just over $30,000 a year. Half of the people in that cohort earn less. Very few earn enough to make them ineligible for a subsidy.
    By contrast median household income for people 45-54 is about $63,000 a year.

    Thus the subsidies will attract a great many 20-somethings and 30-somethings to the Exchanges.

    See the 3rd graphic that accompanies
    this post on, where it originally appeared

    This chart shows that low-income and midddle-income people are expected to contribute a percentage of their income toward the premium– the subsidy will cover the rest. The percent that they are expected to ante up may be as little as 2%.

    Scroll up and you’ll see a graphic showing that a 30-year-old earning $23,000 a year will have to pay just $1448 for a full year of comprehensiv health insurance. She will have no co-pays or deductible for preventive care, contraception, OB/GYN visits. If she becomes pregnant, maternity and pre-natal care are covered. Her children’s dental and vision care are covered
    until they are 18., Finally, her out-of-pocket expenses (co-pays and deductible) for all care are capped at $2,000. In other words, if she is in a bad car accident, the insurer cannot ask her to pay more than $2,000 total for hospitalization, medication, surgery, rehab etc.

    Who wouldn’t take that deal?

    Secondly, according to the conventional wisdom healthy 20-somethings and 30-somethings believe that they are “immortal” and are unwilling to spend money on insurance.

    As usual, the conventional wisdom is wrong. I once wrote a HealthBeat post that took a close look at young Americans who are uninsued I tturned out that the vast majority were either low-income or lower-middle income. In short they didn’t have insurance becaue they couldn’t afford it–not because they thought they didn’t need it. (unfortunately, I can’t find the post.)

    With the subsidies they will be able to afford it–and all of the evidence suggests that they will buy it.

    Young women are especially likely to join the Exchanges. The ACA offers so many benefits for women. And young women tend to be healtheir and less expensive to cover than young men. (Fewer bad car accidents; less likelyl to shoot each other, more likely to go for preveventive care–generally more cautious and take better care of themselves)

    Iin addition, did you know that anyone under 30 will be able to buy a significantly cheaper “high deductible policy”? This may appeal to some
    wealthier 20-somethings who can afford a high deductible out-of-pocket but don’t think they need comprehensive coverage.

    Since their premiums will be lower, they won’t be contributing as much to the insurance pool, but since the majority will be very healthy, they probably will use little medical care, bring down the cost of coverage for everyone.

    Finally– will insurers be able to raise premiums as they have in the past?
    Because they have to pay out 85% of premiums for healthcare (or give customers rebates) it really won’t be worth the bad publicity. Say they raise the
    premium on a $6,000 individiual plan by 10%– that’s $600. They have to pay out 85% of that $600 in additional payments to doctors, hosptials, to cover drugs, etc. etc., leaving them with $90. In the past they could keep as much of a premium hike as they wanted to– Now, they can’t. And if they can’t manage to pay out 85% of the $600, they have to send rebates to customers. A real hassle. And more bad publicity. .

    Bob Hertz– You write “The companies that sell health insurance have to make a certain profit, and if they are regulated too much then they will just abandon the exchanges.” This is just what I expect. (And it is what Wall Streete expects.)
    For-profit companies will have a hard time making the profits investors want, and many will get out of the business. By contrast, some very good non-profits will prosper. They will no longer have to compete with
    for-profit offering cheap, Swiss Cheese, high deductible insurance. It will be much easier for companies like Kaiser, Peugot Sound etc. to do well. And, I
    expect that more non-profits will spring up.
    Meanwhile, some of the better for-profits will team up with doctors and hospitals to form Accountable Care Organiations where they will share one goal: keeping customers healthy. In this way they will be very much like Kaiser which provides health care and also insures the patient.
    But what if there aren’t enough insurrer in some states to provide competition in the Exchanges?
    I (and others) believe that this is why we will re-introduce the idea of a public option– a government plan that resembles a much less wasteful Medicare. It will compete, in the Exchanges, with private sector insurers.

    Peter1– I remain mystified as to why you think that if you buy insurance in an Exchange, you will join a particular group. You will be part of the pool that includes everyone in your state buying their own insurancve–young and old, healthy and sick, wealthy and lower-middle-class.
    Note people on Medicaid will NOT be in your pool. they will be in a separate Medicaid pool. With Medicaid expansion, virtually all of the poor will be in that pool , Since the poorest Americans are, far and away, the least healthy, you will
    not have the sickest Americans in the Exchange pool with you.

    Peter 1–

    • Maggie, you are making best scenario assumptions. I predict the exchanges will operates more like this review of Massachusetts Conntector (or worse).

      For some, at least.

      Only marginally, at best.

      Probably not.

      Only to a limited extent.

      Possibly, for the subsidized CommCare plans, but not for CommChoice.

      In a sense, the very existence of the Connector—a pioneering state effort to offer truly competitive—and easy—health plan selection—represents a success. However, this success is due in part to the factor that undermines the Connector’s effectiveness: the very low enrollment numbers. Establishing the Connector would almost certainly have been much more difficult and faced far stronger opposition if Massachusetts had had more pre-reform uninsured, especially those above the 300 percent FPL level, as will be the case in most other states who must establish PPACA insurance exchanges.

      Most states will start out in worse shape than MA prior to setting up their exchanges. More uninsured, lower wages, higher pre-existing, less young people signing on.

  29. Maggie, your presentations are excellent as always, but I think you misfire when you quoted the CBO to the effect that insurance costs will be lower thanks to the ACA. Take it from me, a former actuarial student: being in a large group does not lower your premiums if it is an unhealthy large group.

    It sounds kind of crass to say it like this, but the CBO is not putting their own money at risk.


    As Barry has pointed out above, if the risk pool in the exchanges is relatively old and sick, then premiums will be high. That will make subsidies high. That will lead to governments putting pressure on the insurance companies. That will lead to at least some insurance companies dropping out.

    When Kentucky went to guaranteed issue for a while in the 1980’s, seventeen health insurance companies pulled out of the state in a year.

    I hope this does not happen, but it is possible. It is more than possible, in my view, that 2013 will see horrific premium increases anyways, with no subsidies to counter them until 2014.

  30. The thrust of the recent comments by Aetna CEO, Mark Bertolini, regarding the types of polices likely to be sold on the exchanges were as follows: The offerings are likely to be HMO and other narrow network products. In order to keep premiums as low as possible, provider reimbursement rates will probably be between Medicare and Medicaid which means less than current standard Medicare rates. Moreover, policies will not be offered in every market or state where the company has a presence. While actuarial values will be higher by law than many of the current individual market offerings, a lot of the new coverage is for features that many people would not voluntarily pay for if they had a choice in the matter.

    At the same time, my understanding is that people who qualify for subsidies can only use their subsidies to purchase a policy through an exchange. Those who opt to pay the penalty instead of buying health insurance will presumably be healthier than the general population and probably younger as well. If people purchasing through an exchange have below average health status, even the bronze plans with low reimbursement rates and narrow networks could prove surprisingly expensive to reflect expected medical claims. The industry is also concerned about the high degree of uncertainty around what Bertolini called the three R’s – risk adjustment, reinsurance, and risk corridors. How those will work has not been fully fleshed out yet.

    It sounds from his comments that the broader network PPO products will only be available off the exchanges and through employer self-funded plans on which insurers only earn modest administrative fees which are fixed charges PMPM or PEPM regardless of the ultimate medical claims costs incurred by the employer’s members.

    Additional competition in the health insurance markets is coming in the form of more hospital systems starting to offer health insurance as well. However, these will also be largely HMO and other narrow network products. Outside of Kaiser’s stronghold in Northern CA, HMO’s and narrow network insurance offerings just aren’t that popular in most other places. While they may be fine for primary and routine care, many people believe they are not so fine when they need sophisticated surgery or cancer treatment and want to be able to go to the providers with the best regional reputation and not be locked into a particular hospital system.

    As we get closer to 2014, the health insurance market seems to get more interesting by the day with the potential for lots of twists and turns and unintended consequences.

    • I wonder if Maggie is paying attention any longer Barry?

      As usually happens profit will find a way.

  31. Maggie- given your penchant for long responses to commenters (I trait I respect greatly), it is concerning to me that you will not answer my comments, responses to your earlier statements.

    • Umm, as noted earlier, if you are not with them, you are against them and will not be recognized. Fair and balanced here, NOT!

  32. Regarding health insurance policies and their cost that will be sold on the exchanges starting in 2014, readers should check out comments made by Aetna CEO, Mark Bertolini, at the company’s investor conference recently. The story can be found on Yahoo Finance this morning.

  33. Maggie –

    I would like to relate a personal story that illustrates why I’m less confident than you are that the exchanges will provide meaningful savings to people who currently buy their insurance in the individual market.

    When I retired at the end of 2011, I needed COBRA coverage for my wife for five months until she became Medicare eligible. This was going to cost $437 per month which wasn’t too bad. However, my former employer’s main business is heavy manufacturing and its workforce is older and less healthy than average, I believe.

    So, I suggested to my wife that she call Horizon Blue Cross to see if she could get a better deal there. New Jersey is one of five states that require community rating as opposed to medical underwriting when pricing their policies. Thus, Horizon didn’t have to incur any costs related to medical underwriting. Since she called Horizon directly for a quote, they presumably wouldn’t have to pay a broker commission either if she bought a policy from them. Their quote for a somewhat less generous policy than my former employer plan came in 65% higher at $722 per month!

    The company no longer provides health insurance to non-union retirees either but I was already Medicare eligible. What would be different in this picture for a couple with similar circumstances once exchanges are up and running?

    • Yes Barry this is why I questioned, “What group will I be in?”

      I’m concerned the exchanges will attract a disproportionate number of high risk and preexisting, which will unfairly upward load the rates, while young healthies will not opt-in to balance. As well I wonder if businesses will use the exchanges to off load their expensive sick employees to save their own low (tax subsidized) rates.

      As well there is only rate increase oversight over 10% which is not really oversight. When I was insured with BCBS they typically would raise my yearly premium 6% to 10% (compounded) as well as the age rating every so often. I also predict that any oversight past the 10% will be just for show as it is for utilities applying for their rate increases. The game is to ask for a larger increase than you need, then the commission reduces that to what you wanted in the first place. Concentrated ownership of insurance companies also puts upward pressure on rates.

      There will a be a great deal of gaming the system.

      The fault of Obamacare is it still leaves a fractured health care system where winners and losers are segregated.

  34. Peter 1–

    You’re not “forced” to buy insurance. You can pay the penalty –which isn’t that high. Especially since you earn enough that you don’t qualify for a subisdy, it
    shouldn’t be a hardship.

    Then when you become sick, society will take care of you–even if you’re very very sick. That’s why you’re asked to at least pay a penalty so that you’re making some contribution to health care funding.

    Yes, health benefits are not taxable. Wages are. But why are you so concerned that some people are getting something they need and aren’t paying taxes on it? It’s never a good idea to look into other people’s pockets.

    It sounds as if you’re doing okay, (I also am self-employed, pay for my own insurance, spend rougly 9.5% on premiums, won’t qualify for a subsidy and don’t resent people who have health benefits at work or who will get subsidies.
    I’m lucky to be doing what I do–enjoy my work & am better off than many people. I’m glad that under the ACA they’ll be getting a break.


      Because I have never been able to deduct any medical expenses, not even health insurance when I was buying it.

      Do look into the pockets of people getting an unfair tax advantage you are not? Are you in favor of getting rid of the bush tax cuts for the wealthy? Do you have an opinion on tax loopholes?

  35. Maggie- can you comment on my points and references re:

    1. decreasing subsidies after 2018
    2. Democrats’ revolving door with health industry
    3. and, to add one more, how could Obama admin outsource management of much of HIE to a United Healthcare subsidiary????

  36. Barry, tomd39, Peter 1 –

    Barry– For the first two months of this year Medicare & Medicaid may be growing faster than GDP, but for the past two years, Medicare spending has been growing only slightly little faster than GDP–and GDP growth has been very slow. AS former CBO director Peter Orszag had pointed out, the Affordable Care Act has already begun to slow the growth of Medicare spending, and major provisions haven’t yet been implemented.

    As you know, Medicare and Medicaid are very different programs. We’re just beginning to address the problems with Medicaid. Too many Medicaid patients get most or all of their care through an ER— which is very expensive. As community clinics expand (under the ACA their capacity doubles) they will get more and more of their care there (much less expensive.)

    In addition, Medicaid expenses are high because unemployment is so high. We need to create jobs. This is a major reason why we need to raise taxes.

    The money has already been allocated to cover the subsidies. It comes from the increase in taxes for the wealthy (that’s in the legislation–I’m not talking about letting the Bush tax cuts expire) and the fees that drug-makers, device-makers and hospitals are paying. (In return they get many new customers)
    Finally, I’ve talked to people who are knowledgeable about the IT needed for Exchanges—entirely doable.

    tomd39– Why don’t we separate health care insurance from employment?
    Because the majority of voters have health insurance through their employer.
    Try to take it away and they will vote you out of office.

    Secondly, you are right: large employers contribute a large sum to the cost of care. If they didn’t , do you think they would raise wages by an amount equal to what they now spend on care? No way. That money would go into even higher wages for executives, profits for shareholders, etc. And if individuals bought their own insurance it would be more expensive than the insurance that large corporations provide. Most self-insure–they have the deep pockets to take this risk. If they have thousands of employees, it’s not a big risk. The healthy ones will pay for the very sick ones.In a large pool things even out.

    Peter 1 If you buy your own insurance and it costs significantly less than 9.8% of your income, either you have a very high income (top 10%) or insurance that isn’t very good — many things not covered, holes, probably a cap on what they will pay out in any given year or over the course of a lifetime.

    If that’s the case, then you are relying on other people to pick up your medical costs when your insurance doesn’t cover what you need. Let’s say you are diagnosed with cancer and receive very expensive treatment for three years. Meanwhile, your insurance has an annual cap so it covers your treatment only for the first 4 months of each year. Unless you are very wealthy and have the $$ to pick up the rest of the cost, the hospital will wind up eating it– which means they charge other people more to cover your unpaid bill.

    Or let’s say you are in a terrible car accident and wind up in the hospital for 5 months, rehab for another 3 months. But your insurance doesn’t cover rehab, and covers only half of the hospital bill. Unless you have the savings to cover the costs, someone else pays it–whether it’s taxpayers (because you wind up on Medicaid) or other hospital patients. .

    It’s not a matter of what you decide “allocate” to health care. We want everyone to have comprehensive insurance so that they are fully covered–and the rest of us don’t wind up paying their bills. No “free riders.” (Btw, I buy my own insurance and it costs roughly 9.5% of my income. It’s good insurance.)

    I’m glad that your hip replacement in India went smoothly. (Also glad that you have the cash to go to India.) But you were taking a risk. Sometimes hip replacements done in other countries turn out badly. Patients develop infections. The doctor had little experience with that particular hip. If there were complications you probably wouldn’t have been able to afford to stay in India to have another operation, see other doctors, etc. You wouldn’t be able to sue for malpractice. You would wind up coming home, knowing that if you can’t walk, you could always go to an ER, they would admit you to the hospital, and someone else would pay for it.

    The 9.8% refers to your premium. But deductibles are capped at $2,000 and there are no co-pays for preventive care. Out of pocket expenses are capped. No one goes bankrupt or loses their home because they had the bad luck to become very ill. There will be good policies available that cost no more than 9.8% of your income. (If there aren’t, the mandate that
    you buy individual insurance won’t apply to you.)

    And when you buy insurance in the Exchange you don’t “join a group” –you are automatically part of the very large group of people buying insurance in the Exchange. Some will be old, some will be young. Some will be suffering from
    pre-existing conditions. Some won’t. At some point in time, you will probably be one of those suffering from two or three chronic diseases. You will be old.
    Your care may well cost more than your premiums. If you live into your mid to late 70s the odds that you will develop Alzheimer’s rise. With Alzheimers you could easily need 7 or 8 years of full-time care. The younger, healthier people in the Exchanges will be paying for that care.

    Insurance is all about “pooling” our resources so that those of who are lucky enough to be relatively healthy cover those who have the bad luck to be diagnosed with Alzheimer’s. No one knows who will need expensive medical care. You need to think in terms of “we”–not “I”

    Finally, those people who have health benefits at work earn lower wages because of the benefits. They’re not “free.”


      Higher wages in lieu of benefits are taxable. High wages also come with tax free health.

  37. It’s amazing to me to see the paradigm “blindness” that doesn’t see separating health care and insurance from employment. You want to drive costs down? Have everyone shop for their own coverage. It would still fit under ACA. We’re not talking about cutting any part of the health care establishment, but I’m sure this is something the insurance industry does NOT want. Large employers are their cash cows. And who wants to deal with directly with patients? I see this as an important first step for lower healthcare costs.

  38. While the exchanges offer the potential to save money on administrative costs vs. the current individual and small group markets, I think they’re more complex to set up and run than people think which suggests they won’t be cheap operate. The complexity, potential cost and lack of clarity from CMS about all the rules that will govern them account for why many states are opting to let the federal government run and pay for the exchanges in those states.

    The unknowable factor that will drive insurance premiums is the average age, health status and medical claims of the people who opt to purchase health insurance through an exchange. There is clear potential for adverse selection which is something the industry is concerned about. While I don’t know for sure, in the small group market, it seems that the average age of a particular group combined with expected medical claims per person across the entire group will be the primary determinants of the rate any given group in a state will be charged.

    I know that in the large group market which is self-funded, at least for the most part, some companies with relatively young workforces can insure their employees and their families for $4,000 per member or even less while those with older and sicker workforces can easily spend over $6,000 per member. The fact is that we just won’t know what insurance will cost within the exchanges until we get some real world claims experience with them.

    Separately, with regard to subsidies, I saw an article on the Kaiser Family Foundation website that cited a CBO estimate that subsidies were predicted to cost $350 billion between 2010 and 2019. However, the subsidies don’t kick in until 2014 which implies that the entire $350 billion will be paid out between 2014 and 2019, a six year period. With aggregate GDP in today’s dollars estimated at $95 trillion cumulatively over that timeframe, it implies CBO estimates the subsidies will cost a bit over 0.35% of GDP. My gut tells me that if this estimate is wrong, it’s much more likely to be too low than too high.

    For the first two months of the new federal fiscal year, both Medicare and Medicaid costs are again growing materially faster than the economy. There will be tough choices ahead beyond just squeezing provider reimbursement rates if we’re serious about bending the medical cost growth curve.

  39. “Finally, under the ACA , the administration can do many things without going through Congress.”

    That is a good thing? Oh yeah, if we live under a tyranny. Nice revelation.

  40. Peter 1–

    Here are some things that you may not know about the ACA and may make you feel better:

    1) No one will be forced “to pay through the nose for insurance” . No one is expected to pay more than 9.6% of income on health insurance– and for that, you’ll be getting a comprehensive, rich insurance package that will protect you against financial and medical catastroph while providing free (no co-pays) preventive care that should help keep you healthy. If you can’t get insurance for less than 9.6% of your income, the mandate does not apply to you– no penalty)
    (In Europe, people normally pay 10% of income for health insurance–usually in taxes.)

    Secondly– I have no idea what you mean when you say ”
    “I think the insurance exchanges will be a cruel joke especially for those not part of a related group who will have to stay in the individual market”
    NO ONE WILL HAVE To Stay in the Individual Market. I don’t know what you mean by a “related group.” Any individual can shop in the Exchanges (unless his employer offers him comprehensive insurance that costs less than 9.6% of his income.) In the Exchange people who are now in the individual market will automatically become part of a large group (everyone in the Exchange) and thus they will be eligible for the much lower premium rates that large corporations get today. (Administrative costs are much higher when an insurance company hand-sells policies to indiividuals or small firms. Economies of scale make an enormous difference)

    So, even if you earn too much to be eligible for a subsidy, you will find your premium significantly lower than it is in the individual market today

    You ask whether young , healthy people will buy insurance in the Exchanges or will they chooseinstead to pay the penalty? First, anyone under 30 can buy an inexpensive “high-deductible” policy in the Exchanges. If he or she feels that they just don’t need or use much medical care, they may choose to do this.. Many others will purchase comprehensive low-deuctible insurance with the help of a subsidy.
    Today many 20-somethings are having a hard time finding a good full-time job.
    As a result, they will qualify for generous subsidies, and will be attracted to the
    Reserach shows that today, the vast majority of young people who choose to go without insuarnce are low-income. 20-somethings and 30-somethings. Young people who can afford inisurance buy it. Everyone understands how dangerous it is not to have insurance.
    What about upper-income young people who aren’t eligible for subsidies?
    Research shows that they have insurance today– often they work for large
    employers who offer good benefits.

    On who benfits under the ACA– It is not just “low-income” Americans and people with pre-existing conditions who will benefit.

    Both median income and upper-median income Americans are eligible for
    subsidies (a family of four earning up to $92,000 can get a susbsidy A household earning $90,000 is not low-income.

    In addition, alll women will benefit. Today they often pay 30% more than a man for the same policy– and I’m talking about policies that don’t include maternity.
    (Insurers say they charge women more because they use more healthcare) Under the ACA insurers can no longer gouge women.

    Under the ACA all policies sold in the Exchanges have to offer maternity and pre-natal care.
    In addition, they must offer preventive care–including Pap smears and contraceptoin with no co-pays or deducitibles. (The “Pill” has become qutie expensive and reserach shows that a fair number of unplanned pregancies are the result of a woman not buying the pill because she cannot afford it.

    All of us benefit from the fact that there will be no co-pays or deductibles for preventive care.

    Kids (and their parents) benefit because policies sold in the Exchanges must cover dental care and vision care for kids under 18.

    All of us benefit becuase there are caps on how much insurers can ask us to pay out of pocket in the form of co-pays and deductibles.

    All of us benefit because insurers can no longer cap how much they will pay out in a single year, or over a lifetime.

    –On whether premiums will go down::
    The Congressional Budget Office (CBO) has been less than enthusiastic about the Affordable Care Act but even CBO it says that there will be big savings for small businesses (and theri employees).
    Small companies (with fewer than 100 employees) will have their own Exchanges where they can buy insurance for their employees. In many cases, they will be eligible for tax credits when they buy insurance in the Exchanges. (Note these are separate from but similar to the Exchanges where all individuals can buy insurance unless they have insurance at work that costs less than 9.6% ofo their inccome.) Both in the
    Exchanges for individuals and the Exchanges for small companes everyone become part of a large group (with everyone else in that Exchanges) and so
    eligible for the much lower ‘large group rates” that large corporations enjoy.

    HERE’s what CBO says about how much lower premiums will be:
    “Without health care reform, current data suggests that by 2016, average health insurance premiums for a single policy in a firm with less than 50 employees will be approximately $6,700

    “According to the Congressional Budget Office, under reform, the premium for an policy that pays for 70% of the cost of covered benefits policy for the average individual will fall to $5,000..

    (The employer and employee would split that $5,000 cost. And the employee woudl have insurance that is much more comprehensive than the policies that most small firms offfer today. IN addition, if the owner of a small company has fewer than 25 full-time employees, and covesr at least half the cost of their insurance, he’ll be eligible for a tax break.”

    CBO continues “This means that under the ACA, the average small business could save 25 percent on the premium of a single policy. For smaller firms with less than 10 employees, the savings could be even higher, at 28 percent.

    Peter I wonder if you know that when creating the Affordable Care Act, the
    White House insisted that drug-makers, device-makers and insurers pay very large fees to fund the Affordable Care ACt? The administratoin pointed out that the ACA would bring them many new customers and thus they should help pay for the ACA. (As I recall they’re paying about 1/3 of the cost). They were NOT happy about this. The Device-makers are still protesting. But since Obama was re-elected, they have no hope of getting the law changed.

    Peter, I am Not naive. I know a great deal about how wealth and power affects politics. For more than a dozen years I was senior Editor at Barron’s, covering both Wall Street and Washington while doing investigative reporting.

    The parallel you try to draw between the “financial fiasco” on wall Street and the creation of the ACA is naive. The bankers on Wall Street have great power and wealth.
    By contrast, the health care industry is at the mercy of government because
    Medicare/Medicaid and other government insurers are the industry’s biggest customers. If Medicare decides to pay hospitals less, it can. If Medicare decides that it wants the drug industry to give Medicare the same discounts that it gives to Medicaid, it can. (This is actually happening.) If Medicare decides not to pay for preventable re-admissions to hospitals, it can.
    No hospital could stay open without Medicare’s business. Most doctors couldn’t keep a practice going without Medicare’s business. If Medicare decides to cut what it pays them for doing tests in their office (which it has), it can.
    Right now, government pays for more than 50% of all health care (this includes the health insurance it provides to government employees.) This puts govt in the driver’s seat and, in contrast to the Bush administratoin, the Obama administration is using that power.
    Right now, as politicicans negotiate the budget, Obama wants to cut Medicare spending by reducing what drug-makers, device-makers and hospitals receive from Medicare. In many cases they are overpaid– or are paid for products and services that provide no benefit for patients. This is a major reason why healthcare in the U.S. is so expensive.
    Finally, under the ACA , the administration can do many things without going through Congress. This is an enormous change, and means that lobbyists will have much less power to block reforms that will make health care better and more affordable.

    • Maggie, 9.6% of my income would over double what I allocate for my health care. I won’t qualify for a subsidy so how will my insurance costs be limited to 9.6%? How will co-pays and deductibles mix into your 9.6%?

      Will hospitals charge less for care? Will specialists charge less for care? Will drugs dispensed by hospitals cost less? Will devices cost less?

      What type of “group” will I be able to join in the exchange? The old sick group, the young healthy group or the pre-existing condition group?

      This year I needed a new hip. Paid cash in India for less than half what I would have had to pay here (including air fare & hotel). None of it will deductible from my income tax, as usual. Yet employed people with employer coverage still get their health care subsidized tax free.

  41. Isn’t the idea to eventually have some sort of universal coverage – even if it is just for what is sometimes called major medical expenses? Does anyone disagree that every American has the same likelihood of needing health care during their life? Why does a 65 year old have 80% coverage for their CABG while a 64 year old still has to purchase a policy they cannot afford that “covers” services they do not need just to have insurance against catastrophic illness such as acute CAD?
    So yeah, PPACA was all that could get passed, and it was a compromise of sorts – there would not have been enough Democratic support for more universal type of coverage. But now that it is the law, and now that it remains a highly polarizing and for the most part disliked law, why are we still trying to put lipstick on a pig? Why not use the momentum to push for something better? Why do we have to wade through years of apologists extolling its virtues while waiting for the whole thing to collapse all the while watching billions of dollars disappear into the greedy outstretched hands of the insurance/medical-industrial complex?

    • Agreed. The notion that political leaders would bite the hand that feeds them for the public good is indeed “absurd”.

      The same absurdity was the aftermath of the financial meltdown when Obama and Democrats let bank/financial executives (who engineered the crisis) off the prosecutorial hook and preserved their bonuses. The financial fiasco was an inside job – to think the ACA was not also influenced by connected insiders is naive at best.

      Look at how the Bush presidency solved the drug price debate when seniors had to take buses to Canada to buy drugs – Medicare Part D, the gift to Pharma that preserved their financial hold on legislators.

  42. Maggie- premiums are capped at 0.50% GDP in 2018 — they will decrease from there…

    Fixing that is not ‘a tweak’…

    The ‘pays for itself’ nonsense — only if CLASS Act implemented over first 10 years (it could not be made to work by many people paid to figure out the math)

    Only pays for itself if Medicare doc fix is simply abandoned ($300+ billion)

    ONly pays for itself if IPAB, 1099 filing, surtax on higher cost policies, etc… all go into effect…

    AND, if the 2.3% tax on medical devices goes into effect — and, some of ACA biggest supporters now want THAT eliminated to help their WEALTHIEST 1% campaign contributors.

    link to cuts after 2018:

    • “The exchanges will only work to spread risk if the relatively young and healthy remain in the risk pool with the older and less healthy. But if premiums get too expensive — and far more costly than the individual mandate penalty capped at 2.5% of income — those low risk exchange members may bolt and raise costs for everyone else.”

      I’m a bolter, even though in theory I favor a mandate. Some will be rescued by being allowed in the lifeboat while others will still need to tread water – all witnessed by those protected who can afford the security of the cruise ship.

  43. Peter1 –

    The best estimate I’ve seen over the years is that there are between 4-5 million people in the U.S. who are either uninsurable due to pre-existing conditions or would be charged extremely high and unaffordable rates for coverage. In theory, they could be served with much less disruption to the rest of the market with more robust (and expensive) high risk pools. Their healthcare costs might average $20K per person so to provide insurance at standard rates currently available to healthy people would require $16-17K from taxpayers plus $3-4K from the insured, possibly including a subsidy to help lower income people afford the coverage. For simplicity sake, if the entire cost were covered by taxpayers, it would cost $80-100 billion per year but would ensure lower premiums for everyone else.

    In practice very few politicians would be willing to vote to spend so much money on so few people many of whom are too sick to even vote. The other problem with high risk pools is that we would implicitly be telling insurers that they can insure all the healthy and mildly sick people while taxpayers will pick up the tab for the high cost folks. Even a fiscal conservative like me would find it hard to support that.

    Since I’ve had my share of costly health issues over the years, I know I wouldn’t want to have to face them without health insurance. I don’t think anyone else should have to either. Our challenge should be finding ways to make the healthcare system more efficient and affordable. Democrats, for their part, need to understand that will sometimes mean telling patients no, they can’t have everything they want when they want it and expect someone else to pay for it. That’s especially the case when it comes to futile or low value high cost end of life care.

    • Barry, I think you know me well enough that I do not think pre-exist and high risk should be left on their own. I am in favor of one big pool where risk can be spread over a larger area, but what I object to is business (land owners) getting their price/profit risk protected by government while the rest of us (sharecroppers) are increasingly tapped for rising costs and therefore held in a constant state of never being able to pay off the company store.

  44. Barry–

    Good to hear from you.

    I agree that the “cliff phase-out” was bad idea.
    As you say, people who earn 400% of FPL can get a substantial subisidy People who earn 401% get nothing.

    This will make people at the cut-off angry, and in this case, it is likely to lead to people under-reporting income if they (or an accountant) can figure out a way to paid their deducttions or whatever. If people feel that something is truly
    unfair, they will feel justified in cheating.
    This is just one example of many things in the ACA that will have to be tweaked.

    Whenever Congress passes major legislation changes have to be made in the years that follow. We’re still making changes to Medicare.As I’ve said before
    “health care reform is a process, not an event.”

    Did you know that when we passed Social Secuirty legislation, it didn’t cover African-Americans? Blatantly unfair, and both FDR and Eleanor were unhappy about this, but FDR knew that this was the only way he could get the legislation through congress. Later, of course, this was fixed.

    Barry, I tried to find the NYT article saying that if subsidies exceed a certain percentage of GDP, the subsidies issue will be “revistited.” I couldn’t find the article anywhere. Also, there’s nothing that I can find in the Affordable Care Act that talks about reconsidering subsidies if they cost more than a certain percentage of GDP.

    The ACA the law of the land. Saying that something in it will be “revisted” sounds like someone’s opinion, rather than a fact–unless I missed something in the law , which is quite possible. (So many details- most of them entirely necessary to make the law fair and attempt to guard against unintended consequences–but I can’t carry all of them in my memory.)

    Moroever, the Affordable Care Act pays for itself–which means it will cover CBO estimates of the subsides. In fact, the Affordable Care Act more than pays for itself. (Higher taxes for the wealthy and the fees that drug-makers, device-makers etc. will be paying fund the subsidies and reduce the deficit.
    See this White Paper that I wrote for TCF

    That said, since insurers can charge older Americans 3 times more than they charge younger people.I suspectwe may need to make more older Americans eligible for subsidies, raising the bar for that age group above 400% of FPL. (This is particuarly true because these days, more and more people in their late 50s and early 60s are losing their jobs, and in many cases, will never find full-time employment again. Many may work part-time, or become independent contractors, but they won’t have health benefits at work.)

    If so, this will mean more tax increases. But even if we let the Bush tax cuts for the wealthy expire, tax rates for the wealthier Americans are still historically low.

    There is room to make more adjustments (inheritance taxes, tax breaks for hedge fund managers will probably disappear, tax rates on short-term capital gains could /should be lifted to discourage speculation.) . . and my guess is that eventually we’ll lift marginal rates on everything that an individual earns above, say, $150,000, and what couples earn above, say $200,000. As you understand (but many people don’t) they won’t be payinig a higher rate on their entire income, just on the part of their income above $150,000 or $200,000. So this won’t create a serious hardship or change someone’s lilfestyle.

    • “Under the ACA they are heavily regulated. They can no longer charge you more if you suffer from a pre-existing condittion. They can no longer raise premiums and use the increase to boost salaries for excutives or profits for investors. They have to pay out a certain % of the premiums for medical care–if they don’t they have to give customrs rebates.”

      Maggie, I agree I have not read the entire legislation and there are some clear winners who will benefit, pre-existing, low income, those who will receive a subsidy. But there is nothing in the legislation (unless you can show me) that says premiums will cost less.

      I think the insurance exchanges will be a cruel joke especially for those not part of a related group who will have to stay in the individual market. And me, who are part of the “cliff” group who will be held hostage and have to pay through the nose for insurance – especially for the pre-existing group which we’ll all pay for.

      This legislation provides subsidies and protects some outliers but does not reduce prices. Insurance companies will get 1000s more clients through the mandate and here in NC, where BCBS is the dominate insurer and writes the insurance policy, we will not get any advantage from any exchange. The exchange WILL be BCBS.


    You may notice that this post refers to a chart– but there is no chart.

    when THCB staff cross-posted this post from where it originally appeared, they probably couldn’t make the chart work in THCB’s format. (This is perfectly understandable–every blog has its own style and format requirements.) .
    Also in the original post there is a “subsidy calculator” that lets you figure out
    what your subsidy would be based on your income, family size, age .

    If you’re intrerested in the chart & calculator, go to the original–

  46. Peter1 and tom d 39

    The legislation was Not wirtten by and for the special interests.

    If you read the legislation, you will find that there are many things in it that make insurance companies, hospitals, drug-makers, device-makers and some doctors very unhappy.

    I realize that few people have the time to read the ACA–it’s very long., and all of the good stuff is in the details.
    But I’ve read it more than once (that’s my job) and believe me, insurers are not happy.


    This part of law has already kicked in–and insuers have been giving out substantial rebates.

    They can’t sell “Swiss Cheese” pollicies filled with holes that you don’t know about until you get sick and fall through all of them.

    They will have to sell comprehensive insurance which covers a substantial list of essential benefits.

    Some hosptials are unhappy that, under the laws, infection rates at hospitals will be published–so patients will know which hospitals to avoid.You’d be surprised to discover how high infection rates are at some of our most expensive academic medical centers.

    Under reform, doctors and hospitals that want to earn more will have to
    show that they are achieving better outcomes at a lower cost. Today, they are paid “fee-for-service” which means that they are paid more if they “do more”.
    Under reform, both Medicare and insurers will be moving away from paying for ‘volume” Instead they’ll pay for value (‘better care for less.”)

    Under reform, the Secretary of HHS has the power to cut the fees that Medicare pays for specific services if she feels that they are overvalued.
    And she doesn’t have to go through Congress–so lobbyists can’t get in her way.

    Medicare has already cut the fees it pays to doctors who buy or lease testing equipment and do tests in their offices. Resarch shows that in these cases, they do many more tests. this is how they pay for the equipment.

    Medicare has sliced those fees and these doctors are doing fewer tests. Both the doctors and the folks who make the testing equipement are unhappy about this, but there was nothing they could do about it.

    It’s becoming clear that Medicare will be asking drugmakes to give Medicare the same discounts it gives Medicaid.

    People who know the legislation well are impressed because it is actually all about protecting patients and making care affordable.

    Of course, it could be and should be improved. Over time, as we see what works and what doesn’t, improvements will be maide.

    But you’re wrong to think it was written by the special interests.

  47. Correction: Documentation must be filed with the SSA to receive an exception, not an exemption and use a different income year to calculate the IRMAA surcharge to be added to the standard Medicare Part B premium. There are four IRMAA surcharge tiers so a year other than the one two years earlier than the upcoming year may result in a lower surcharge. IRMAA stands for income related monthly adjustment amount.

  48. It’s interesting that the IRS will advance subsidies based on estimated 2014 income and attempt to settle any difference between actual and estimated income for that year in 2015 when the tax return is filed. When the Social Security Administration calculates its IRMAA surcharge that high income people must pay on top of the regular Part B premium, it uses actual income from two years earlier. So, IRMAA surcharge for 2013 will be based on income reported in 2011. There are exceptions for what the SSA calls life changing events such as retirement but documentation must be provided to receive an exemption.

    Also, I read recently in a New York Times article that if the subsidies turn out to cost more than 0.51% of GDP or about $75 billion in 2014, the issue will be revisited. Either the income band to qualify for subsidies would be narrowed or the percentage of income individuals must pay themselves toward their health insurance premium will increase or both. I’ve written before that there is a lot of room for mischief here in terms of unreported and underreported income.

    Finally, those with income right around 400% of the FPL will still qualify for a meaningful subsidy. People with income of 401% of the FPL or more receive nothing. This is called a cliff phase-out as opposed to a gradual phase-out such as losing $1.00 of subsidy for each $2 or $3 of income above a certain level. The cliff phase-out will not be well received by those just above the cutoff. Complex laws like the ACA usually come with plenty of unintended consequences. We’ll see how it plays out.

  49. tom d 39–

    Actually insurance becomes less expensive for individuals and small businesses that buy it in the Exchanges because there they become part of a large group, lowering administrative expenses significantly.

    Secondly, under the Affordable Care Act more and more doctors and hospitals will no longer be paid fee-for-service—which rewards them for “doing more.”
    If they want to earn more they will have to achieve better outcomes at a lower cost.

    Both Medicare and private insurance will pay them based on outcomes and a lower total price, sharing the savings with the providers.

    Moreover ever since we passed reform in 2010, both doctors and hospitals have become more aware of costs. I know of one doctor who wrote up a
    report for his residents, showing how many tests their hospital was ordering per patient–and showing that the number was excessive.

    At good teaching hospitals, residents will find that they are no longer praised for ordering a battery of tests.

    Growth in Medicare spending has actually slowed considerably in the past 2 years because hospitals are preparing for 2014 when they know they will no
    longer be rewarded for volume. They’ll be paid for value. (Better care for less.)


      Maggie can you explain how unrelated and disassociated individuals working for different companies and living in different areas will be brought together to be included in a group for lower group rates?

      Will a business with 2 employees be a group? Will unrelated businesses with small workforces be able to form into a large group?

  50. Peter1, I am aware of the magnitude of the healthcare structure and I honestly don’t see a way to change it without pulling the plug on somebody. Those same lobbyists were part of the process in coming up with ACA in such a way that protected their interests. Pretty sad.

  51. None of this lowers the cost of healthcare. In fact, it just feeds the parasitic relationship between service providers and insurance. Think about it. If a patient comes in with symptoms A, B and C. The doctor simply orders test X, Y and Z. No thought to cost … unless … the patient says they are not insured or has a high deductible. Now what? Ruin the patient and their family financially or go to plan B, which might be simpler and less costly. In other words, we need to cut the cost of healthcare in the U.S. before we start pouring tax dollars down the rat hole of the ACA healthcare system.

    • tom39, I agree, but cutting the cost of health care would mean attacking too many constituents – providers, insurance, drug companies, health care suppliers, and lastly but less important patients.

      Tell us how you would circumvent all those 1000s of lobbyists marching to DC and threatening no support for re-election and not hiring politicians relatives?

  52. Joe–

    The government is willing to advance the subsidy to you at the beginning of the year (say January ’14 ) based what it seems likely you will earn. But neither you or the govt. can know for sure. You get might get a new job in June, and a 8,000 raise. If you did you wouldn’t qualify for such a high subsidy and would pay back the extra money you received when you filed your taxes in April ’15

    On the other hand, you might lose you job in June–and remain unemployed for the rest of the year. In that case, you would be due a higher subsidy, and again, the IRS would settle up with you when you filed your taxes in April 15–

  53. More and more citizens sucked in to the vortex of needing the government: How quaint.

    If only they knew they do not need all this “coverage” in a sane world.

    When China has had enough of our debt, then who writes the check, Maggie?

  54. Maggie- did you mention the ‘clawback’ provisions that people will have to pay on their taxes if their income should go up during the year?

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