Some people are seeing genuine rate shocks from Obamacare. These are people who are seeing big premium hikes for worse insurance. Those of us who support Obamacare can't just pretend this isn't happening.
I know the story. It's getting familiar: some Fox show or some right-wing idiot dredges up people whining that their wonderful health insurance is being cancelled, and they have to pony up the big bucks for new Obamacare insurance. Further investigation reveals that the "insurance" was really non-surance that would pay the first $100 for a hospital stay, or the person was eligible for subsidies, or they had many good policies available for about what they had been paying. And the Fox people look like idiots, once again.
Then when we hear from other people, including some of our own, who had great insurance that was cancelled so now they have to pay way more, we think it's more of the same. We try to find reasons why the old insurance policy was bogus.
Don't fall into that trap. Some older people in high-cost areas who had individual insurance really are getting slammed by huge increases. And even if we think the new system is fairer, nobody likes finding out they suddenly have to pay $4000, $5000 or $6000 more a year for insurance with a worse deductible and fewer providers. Follow me below the squiggle as we look into this.
As we know, insurance companies want to make money, and when they could, they denied health insurance to expensively sick people, and threw expensively sick people off the insurance rolls, to save themselves from having to make payouts. And they paid particular attention to older people, because older people are more likely to have expensive conditions that they insurance company would have to pay for. "In 2008, 29% of individuals age 60 to 64 who applied for non-group insurance were denied coverage based on their health status." [Kaiser(page 3)]
So if you were someone age 50 or over who was lucky enough to have been able to get and keep individual health insurance pre-ACA, you were probably healthy. If you hadn't been healthy, the insurance company would probably have either refused to sell you health insurance in the first place, or raised your rates to astronomical levels, or found some way to get rid of you.
And because you were healthy, the insurance company was able to offer you favorable premiums. Of course they always wanted to squeeze as much money from you as they could, but they also wanted to prevent your healthy non-payout-requiring self from going to a different insurance company, so they had to keep rates lower.
So hypothetical healthy 50+ year-old you were in a good insurance situation.
Now enter the ACA. Now the insurance company not only has to insure you, but also everyone else. Suddenly they have to cover the 20-30% of people aged 50 or over that they had previously rejected for being too expensive.
Let's talk a bit about the distribution of health care costs. Health care costs aren't evenly distributed among the population, which should be obvious if you think about it. Sick people cost a lot, and healthy people don't cost much at all. It turns out that every year, 1% of the people have 20% of the health costs, 5% of the people have 50% of the costs, and 10% of the people have a whopping 65% of the costs [Kaiser (page 8)]. You can't always know who's going to be expensively sick this year, but by getting rid of those 25% or so percent of older people with pre-existing conditions, the insurance company probably was able to reduce payout costs per person by a considerable amount, perhaps as much as a third or more.
This is the key fact. Insurers were able to give low rates to people in their 50s and 60s because they simply wouldn't insure sick people. But if you were in your 50s or 60s and you were one of the people with those low rates (low only by comparison; even "low" rates are high rates) you were probably used to the rate you were paying.
So now, the insurance company has to insure people with pre-existing conditions. And they're going to cost a lot, much more per person than they had to pay out when they were able to avoid selling insurance to those pesky sick people. And that cost has to be paid for by other subscribers. Yep, it has to be paid for by the people who used to be able to buy cheap good healthy-people insurance. Now they can't.
OK, if you are not one of those people, maybe you'll have trouble feeling sorry for someone who has had it good for a while, and now has to pay. But at least you need to realize that couples in their 50s and 60s are seeing premium rises of like $400-$800 a MONTH. That's not the premium; that's the increase. Healthy people in this age group, in expensive coastal areas, are seeing huge increases. Real ones: they had good health insurance, and now to get somewhat less good insurance they have to pay a lot more, so that sicker people can also be covered for the same premiums.
A couple in my area in my age group (let's call them Mr. & Mrs. Chipper) would have to pay $1340 a month/$16000 a year for the second-cheapest Silver plan. $16K a year for a couple is a bundle.
Now let's talk about the cliff, the enormous jump in premiums faced by people who are just above the level where they are eligible for subsidies. People who earn up to 400% of the federal poverty level are eligible for subsidies. That means the Chippers can get a subsidy if their income is less than $62,040/year.
In fact, if the Chippers earned one dollar less than 400% of the poverty level, that Silver premium would be $490 a month. If Mrs. Chipper then got a $1 raise, they'd step off the cliff: they would lose their entire $850 subsidy, and their insurance premium would be $1340 a month. [Edited to add: In comments, some people point out that the subsidies are sliding. They are; there are sliding subsidies from incomes of 100% of poverty level to incomes of 400% of poverty level. Above 400% of poverty level, the subsidies abruptly stop.]
Especially for people whose unsubsidized premium is large, like the Chippers and like other older people in high-cost areas, the cliff where the subsidies stop is formidably high: earning one dollar more than the subsidy level means you pay over ten thousand dollars more a year for your health insurance. This, by the way, is bad policy: the government shouldn't make it better to earn less than to earn more.
So, to recap: Individual health insurance for older people will cost a ton of money next year in some areas of the country. People who were lucky enough to already have insurance are seeing huge rate increases. The difference between earning just under the subsidy level and just over the subsidy level can mean a ten thousand dollars a year or more increase in the health insurance premium.
Those of us committed to health care reform need to be honest and clear about what is actually happening. Some people are losers under Obamacare.
(Note: in this diary I refer to a couple of different papers by the Kaiser Family Foundation. This is a wonderful source for health care and health care cost information. It's a goldmine, and I heartily recommend digging there.)
(Note 2: If you get insurance from your employer, and you wonder how much your total insurance premium is, look on your 2012 W-2. Box 12, code DD is the total premium cost, counting both what you pay and what your employer pays. Check it out. I bet you'll be surprised how high it is.)
Edited to add: People in the comments wanted further explanation of the math of the cliff. It's a little complicated, so bear with me.
The ACA established affordability by dividing people into three income classes. People who make less than 138% of the federal poverty line were to get Medicare, which is free. Sadly, that isn't happening for everyone.
People who make 100%-400% of the poverty line get subsidies, on a sliding scale. (Yes, there is a crossover with Medicaid.) If you make 400% of the federal poverty line and are buying individual insurance, the law says you don't have to pay more than 9.5% of your income for the second-lowest Silver plan. As your income goes down, the percentage of your pay also goes down; at 133% of the poverty line it's 3%.
People who make more than 400% of the poverty line get no subsidies. In 2014, 400% of the federal poverty line is $45,960 for a single filer, $62,040 for a couple, $94,200 for a family of four.
If you are in an area, or you are at an age, where 9.5% of 400% of the federal poverty line is bigger than the premium for the second-lowest Silver plan, then you have no cliff. In that case, the subsidies slowly slide to 0 as income rises to 400% of the poverty line.
On the other hand, if you are in an area and you are at an age where 9.5% of 400% of the federal poverty line is smaller than the premium for the second-lowest Silver plan, then the difference will be the cliff. At 400% of the poverty line you'll get a subsidy, and at 401% of the poverty line, you'll get none.
Let's do an example. You are a single person. You earn $45,959. You don't have to pay more than 9.5% of your income for the second-lowest Silver plan on the exchanges. That comes to $4366, so you don't have to pay a yearly premium bigger than $4366 if you buy that second-lowest Silver plan. Let's say that plan costs $5366; then you have a $1000 subsidy, and you can use it for any plan on the exchange. If you buy that Silver plan, you pay $4366. Suppose a Gold plan that costs $7366 catches your eye. You can buy it, but you still only get the $1000 subsidy. Suppose you are frugal, and want to buy the Bronze plan that is $3000; it'll be $2000, because you get a subsidy. But if your income is $45,961, instead of getting a $1000 subsidy, you get no subsidy.
But suppose you are young, and so your premiums are cheaper. Suppose the second-lowest Silver plan for you is $4000. You get no subsidy, even though you earn less than 400% of poverty. For the younger buyer, there is no cliff. The subsidies decline slowly to zero as income rises toward 400% of the poverty line.
For older people, the cliff can be big. If I were buying insurance on the exchanges and earned exactly the subsidy level, I'd be entitled to a $3600 subsidy. If I earned one penny more than the subsidy level, I'd get nothing. A $3600 cliff. If my husband and I bought insurance together, we'd have a $10,000 cliff.
We cover our young adult son on our plan. For the three of us, if our income were exactly at the federal poverty level for a family of three, we'd get a $12,000 subsidy; one penny more and we'd get nothing. That's a twelve thousand dollar cliff for my family. (As it happens, we don't buy individual insurance, so it is irrelevant for us. But there are families in our area for whom it is not irrelevant. For them, the cliff is real.)