Obamacare Follies, An Update

There’s been a lot of interesting news surrounding Obamacare lately. None of it’s good for Obama, though the media is trying to spin most of it as a positive. But the truth is that you can’t hide from reality for very long. Let’s discuss.

● A “train wreck”: Max Baucus, the architect of Obamacare, has decided to call it quits. Baucus sits in what should have been a safe seat, but clearly he couldn’t overcome the public’s anger about Obamacare. It only has 38% favorability in polls. At first, Baucus tried to deflect the blame by claiming that the real problem was that Obama was mishandling the implementation and causing a “train wreck,” but when that didn’t work, he chose to retire. Harry Reid tried the same thing, but gave up. Instead, they’re all looking to Obama to save them with a PR push. Read on...

● Panic!!: The public remains deeply opposed to the law and wants it repealed. They see no benefits, but lots of problems. The Democrats are freaking out and are demanding that HHS “educate” the public about the benefits. HHS claims it would waste money to educate the public before the plans go on sale in October. The Democrats fear that will be too late to change minds. Of course, with the MSM pushing the law for three years solid now, you kind of have to think the “education” plan has already failed.

In fact, the real problem is that the public will never see benefits to this. First, most have insurance, so few will get anything new here. Further, there is no government agency they can point to as helping them and there are no “government plans.” All they’ll see is private insurers doing what they already do. Additionally, the subsidies Obama promised, if there is even money for them, won’t be seen by the public. The public will only see what they are paying and they won’t realize that the taxpayers are picking up the tab. Moreover, since the subsidies are much larger at the bottom than the top, most people will feel they are getting the short end of the stick compared to everyone else. That’s really bad for winning over the public. Beyond that, the other benefits only apply to a few people, like covering the uninsurables and offering drug treatment. So there are no visible benefits. By comparison, millions of people will lose their insurance, millions more will pay a lot more suddenly, and millions more will get fined by the IRS... surprise!

● About the rates: Before the weekend (a bad time for a supposedly positive news drop), the AP began running with a meme that California and a couple states had released their rates and that those rates were “surprisingly” low. Rates in two states went up between 2% and 5%. The third, Maryland could be going up 25%. The other state, Oregon, went down! Take that critics!! Actually, none of that is true.

Here’s what you need to know. First, there is no exact rate as the AP claims. There are up to 13 companies and they’ve all provided wildly different rates. What’s more, I’ve looked at the filing for the low-rate plan they are citing in Oregon, and the company (which is about $100 per month lower than everyone else) is only offering to issue 36,000 policies total. Considering that Oregon will need millions of policies, that can hardly be called representative of what people can expect. Further, in an ominous sign, not only are the low-cost providers no-name companies, but several of the nation’s largest health insurers have refused to participate. United Health Group, Cigna and Aetna all refused to play. Each used different excuses, but this sounds like a vote of no-confidence indicating that they think the system won’t last. This suggests a two-tier system of quality healthcare outside the Obamacare system and fly-by-night insurers inside the system. In fact, there seem to be a lot of jokers in the mix. Thirty insurers applied in California, but only 13 were accepted and some don’t seem credible. And most of the low cost guys are offering to take 0% profit in 2014. In the product world, that’s called “dumping,” with the idea being to pull in customers and then raise rates once you’ve killed off the competition. Hence, between the low number of such plans and their questionable nature, it strikes me few people will get the low rates the Democrats are touting and those rates won’t last... assuming the insurers are even around to pay on the policies.

As an aside, there was an interesting article this weekend by a leftist group that tried to calm the nerves of self-employed people (all 22 million of us). They are recommending that everyone plan for a 15% increase in premiums, despite acknowledging the claim that the California rates only went up 2%. And don't forget, rates are already up 30% in anticipation of Obamacare.

Then it gets worse. Let’s run with the AP’s numbers shall we? They claim that with the full subsidy, individuals will pay “about” $40 a month in California. Without the subsidy, they will pay “about” $300 a month. The “about” is significant when you start multiplying the rate by 12 months. Anyway, here’s are the issues:

● The AP article deceptively said these rates were for a “mid-level” plan. That is false. They are in fact for the bottom plan. These plans only cover 70% of costs and stick you with up to $6,350 out of pocket each year. If you want to switch to the premium plans, then the rates on those are between $300 and $500 a month (post subsidy).

● The AP article very deceptively moves back and forth between singles and families. The policy rates presented are for singles, not families. Yet, they quote family income levels for the subsidies. To get the full subsidy, your income needs to be less than $17,000 a year. The AP article seems to imply that the full subsidy applies all the way up to individuals making $46,000 a year (and families of four making up to $95,000), but that appears to be where the subsidy actually stops, and it phases out along the way.

Using these numbers means someone making $17,000 a year will need to pay “about” $480 a year plus up to $6,350 out of pocket for a total of $6,830 (38% of their income). But wait...

● The policy being reported is for a 40 year old single person. It does not include a spouse or child. Let’s assume 50% additional cost for those. Suddenly, the plan costs $720 a year plus up to $6,350 out-of-pocket. That means they pay $7,070 if they get sick (42% of their income).

● The policy being reported is for a 40 year old person. Old people can be charged up to 300% of what the 40 year old is charged. So an old person in the same situation will need to pay $1,440 plus $6,350 or $7,790 (46% of their income).

● The $40 policy is for a nonsmoker. As we know, smokers can be charged a 50% surcharge. Our 40 year old family man will pay $7,430 if he smokes. Our oldsters will pay $8,510 (50% of their income).

Now look at the numbers for someone who gets no subsidy:

● Single: “about” $3,600 + $6,350 = $9,950
● With family: $11,750
● Old person: $17,150
● Smoker family: $14,450

That’s a lot of money, especially when you realize that, in 2010, the average American family paid about $8,400 on healthcare between their policies and their co-pays. Thus, under these “surprisingly not higher” Obamacare costs, most people will pay dramatically more. Indeed, it looks like the average family is going to see a $3,300 increase (39%). Even the fully subsidized people will barely be below the current national average.

Lastly, keep this in mind... these subsidies aren’t manna from Heaven. They need to be budgeted and as long as the Republicans control the House, I wouldn’t expect a penny to go to cover them. That means those $40 plans the Democrats are hoping will be there in 2014 won’t be there... and everybody will pay full rates.

● Union Oh Hell No!: Finally, a bunch of unions are all upset with Obama. Most of their members get their healthcare through what are called Taft-Hartley plans. These are group plans obtained by the unions and small employer groups. About 20 million retail, construction, transportation and seasonal workers purchase these plans. Well, it turns out that when these idiots supported Obamacare, they were under the assumption that certain parts of Obamacare wouldn’t apply to them – like the requirement to cover pre-existing conditions, eliminating lifetime coverage limits and covering dependents up to age 26. Imagine that. Since these things do apply, these Taft-Hartley plans are about to become obscenely expensive(r) and they think employers will drop them and dump their workers into the exchanges... as conservatives warned. BUT there’s a catch: workers covered by union contracts aren’t eligible for Obamacare subsidies, just like the self-employed aren’t. So all these 20 million workers may soon find themselves paying full rates. . . and the unions are furious. Poor babies.