Ten years ago some of us were discussing the need to create access to “affordable” health insurance. I raised the point that if we were going to use that term, and we used it a lot, we probably needed to define what an affordable policy was.
We never defined it, but the Affordable Care Act did by arbitrarily asserting that an affordable policy is one that costs less than 8 percent—now 8.13 percent—of a person’s income, after all taxpayer-provided subsidies were included.*
So what would happen if a person couldn’t find affordable coverage as defined by the Affordable Care Act? The individual would be exempt from the mandate to have coverage.
The Democrats and bureaucrats who drafted Obamacare thought insurance premiums would go down, not up, and that so many insurers would be rushing to compete for patients—including those with chronic illnesses and very high costs—that the effort to define affordable coverage was mostly a thought experiment. People wouldn’t have to actually face that dilemma.
But here we are nearly four years after Obamacare took effect in 2014, and it is likely that millions of Americans buying their own coverage (i.e., not employer-provided group coverage) will face exactly that problem—if not now, then soon.
The ACA provides taxpayer-backed subsidies up to 400 percent of the federal poverty level—which is about $98,000 for a family of four. But those subsidies are based on a sliding scale. So a family making, say, $80,000 a year will receive a much lower subsidy that one making, say, $50,000.
About 7 million people buying individual coverage do not receive a subsidy, while several million more receive a small subsidy.
And premiums are rising so quickly in the individual market that even with some subsidy, families might not be able to find coverage.
For example, the Miami Herald recently ran a story of a family who received no subsidy that faced a $40,000 a year premium. That family would have to make north of $500,000 a year for a $40,000 premium to be considered affordable under the ACA definition.
Fortunately—if that’s the right word—there was a bronze level policy they could choose that only cost $29,000, with a $12,800 family deductible. If that’s the best price they can get and they are making less than about $350,000 (which they probably are) they might be exempt from the individual mandate.
The House and Senate conference is putting the finishing touches on its tax bill. The Senate included a provision ending the penalty for not having Obamacare-qualified coverage. The conference report should retain that provision eliminating the mandate penalty.
More and more people will be exempt from the mandate in the near future anyway, as premiums continue to rise. Ending the mandate is cleaner and means millions of people won’t have to prove they are exempt.
*Some reporters claim the exemption figure is 9.5 percent of income, but that refers to the cost to employees with employer provided coverage.