The Affordable Care Act, or “Obamacare,” goes completely into effect in less than a year. Unfortunately, large parts of the American public still don’t know what’s going to happen. As a result, rumors and misleading news stories are sending people into panics.
For example: Last week CNS, Conservative News Service, released a story headlined “IRS: Cheapest Obamacare Plan Will Be $20,000 Per Family.” Countless websites and internet forums promptly caught on fire, so to speak. Many people assumed the story was telling them they would be forced out of whatever insurance they already had and compelled to spend $20,000 a year for the “Obamacare” policy. Is that true?
The $20,000 figure came from an IRS brochure explaining how penalties for not purchasing insurance will be calculated. The $20,000 figure is a round number used to explain the calculation, not a determination that’s what the insurance would cost. The brochure assumed that in 2016, an average individually purchased policy for a family with two adults and three children would cost about $20,000 a year.
If that sounds like an outrageous amount of money, you are right. But that’s because health care in the United States costs an outrageous amount of money. And in some states the cost of privately purchased family HMO plans already far exceed $20,000 a year.
Nearly a year ago, the consulting firm Milliman reported that in 2011, healthcare costs for a family of four covered by a preferred provider plan (PPO) were $19,393, and projected those costs would exceed $20,000 in 2012.
Workers with health care benefits paid an average of $360 a month in premiums for a family of four in 2012, according to the Kaiser Family Foundation. But the actual cost of an average policy for a family of four in 2012 was $15,745 a year; employers paid for most of the costs of the policies (which is why it’s called an “employee benefit”).
Many employees are unaware that their employers are paying 75 to 85 percent of the cost of their health benefits. So panicky bloggers feared “Obamacare” would take away their $360-a-month benefits and make them pay $1,666-a-month for an “Obamacare” policy.
But “Obamacare” won’t be selling health insurance policies. These are the prices the private market is setting for insurance, not the government. And in spite of a lot of other rumors to the contrary, most employers offering health care as a benefit this year will still be offering it next year, and for the foreseeable future.
The fact is, people who don’t get health insurance through employers or through some other group plan already are paying as much as $20,000 or more for private family insurance. Right now, a family of two adults and three school-age children living in Westchester County, New York, must pay a whopping $4,754.66 a month — $57,056 a year — for an Empire Blue Cross HMO plan.
Costs of private plans usually are much higher than group plans, although by how much varies by state. One reason New York insurance is expensive is that under most circumstances companies selling health insurance in New York cannot refuse to insure someone with a pre-existing condition (although costs to treat the pre-existing condition may not be paid by insurance for the first few months of the new policy). But even someone with a life-threatening condition such as mesothelioma usually cannot be turned down for private health insurance in New York. In other states, even comparably trivial and temporary medical conditions can make one un-insurable.
However, beginning January 2014, insurers throughout the United States will no longer be able to refuse to insure people with pre-existing conditions. Does that mean your insurance will go way up, too? We’ll look at that in the next post.