Will “the Bros” Buy Insurance in 2014? If Your Son (or Boyfriend) is Uninsured, Please Send Him This Post

Some young men say they never go to the doctor. Why, they ask, should they buy into Obamacare?

Obamacare saboteurs are urging them to boycott the state marketplaces  (a.k.a. the “Exchanges”) where people who don’t have health benefits at work will be able to buy their own insurance.

What reform’s opponent don’t tell them is that under Obamacare, a 25-year-old waiter who lives in North Los Angeles and earns $17,200 a year will be able to purchase coverage from one of the state’s highest-rated insurers, Kaiser Permanente, for just $33 a month.

How can this be? One word: “Subsidies.”

Next year some 11 million young adults (18-34) who are now either uninsured or buying their own (usually bare-bones) insurance will be able to purchase excellent coverage in the Exchanges. Since some 9 million of the 11 million earn less than $45,960 a year ($62,040 for a couple) they will be eligible for tax credits to help cover the premiums. Fully 96% of the youngest (21-27) will qualify for subsidies, says Linda Blumberg, a health policy analyst at the bipartisan Urban Institute.

Now that states have begun to announce the rates insurers will be charging in their marketplaces, we can move past speculation to discuss what young adults in particular cities actually will be paying, after applying those tax credits.

Fear-mongers should blush.

                             Why Bronze Plans Will Be Popular

The example of a 25-year-old waiter in North L.A. buying coverage for just $33 a month assumes that he purchases Kaiser Permanente’s “Bronze plan.


As you may remember, the Exchanges will offer four tiers of insurance: Platinum, Gold, Silver and Bronze.  Plans in all four tiers will offer free preventive care and comprehensive coverage that includes the 10 “essential benefits.” . The only significant difference is that at one end of the spectrum, Platinum premiums will be higher, while co-pays and deductibles will be lower. At the other end, Bronze plans will cost less, but co-pays and deductibles will be higher.

In the Exchanges, young adults under 30 also will be able to purchase High-Deductible Health Plans (HDHPs). Often these catastrophic plans will be cheaper than Bronze plans. But subsidies cannot be used to buy them. Thus, HDHPs make sense only for relatively affluent young singles earning over $45,960 who won’t qualify for the tax credits.

The good news is that most young adults in that cohort already are covered–either by a parent’s plan or by their employer.  (Thanks to Obamacare, beginning in September 2010, all insurance plans that offer dependent coverage have been required to insure 19-25 year olds at the same price.) Since then, nearly 8 million have signed up. This is one reason why, 91% of young adults 19-29 who earn $45,960 or more are now insured.

Less affluent young adults are not as likely to be covered because their parents are less likely to work for employers who offer health benefits. This year, fully 27% of young adults earning between $17,235  to $28,725 remained uninsured, along with 16% of those earning $28,725  to $45,960.

These are the young adults who will be shopping in the Exchanges, and there, they will qualify for the government subsidies that, at long last, will make coverage affordable.   Meanwhile, as they join the insurance pool in the exchanges, these generally health young adults will help lower premiums for everyone  buying their own insurance .

The subsidies are designed to make a Silver Plan affordable, but young adults don’t have to use the tax credit to purchase a Silver plan. If they choose, they can apply it to cost of a Bronze plan, lowering premiums to a point that virtually every 19-34 year old should be able to manage the cost of health insurance.  

How the Government Will Calculate Subsidies                                 

The IRS will begin by looking at your income. As the table below reveals, the lawmakers who wrote the Affordable Care Act decided that a aiter who earns less than $17, 235 (or 150% of the Federal Poverty Level) should not be expected to spend more than 4% of his income ($689) when purchasing health insurance in the Exchanges.

 

If you earn   . . . .  .                                         You are expected to spend

100%  to 133% of  FPL  ($15,282)           2% of your income on insurance

Up to 150% of FPL ($17,235)                   3%-4% of your income

Up to 200% of  FPL ($22,980)                  4%-6.3% of  your income

Up to 250% of  FPL ($28,725)                   6.3%-8.05%  of  your income

Up to -300% of  FPL ($34,470)                  8.05% to 9.5%  of your income

Up to 400% of  FPL  ($45,960)                  9.5% of your income

When calculating the tax credit, the IRS will make up the difference between the amount you are expected to contribute and the cost of the “benchmark” Silver plan where you live. (In every marketplace the “benchmark” is the second least expensive Silver plan. In North L.A. the benchmark is a Blue Shield PPO which carries a price tag of $2376 a year.) 

The 25-year old in our example is expected to kick in 4% of his income, or $688 ($17,200 x 0.04 = $688) toward the premium. Subtract $688 from the $2376 premium, and he can count on a subsidy of $1688.  If he chooses the Silver plan, he will wind up paying only $57 a month. ($2376 – $1688 divided by 12 = $57)

He can then apply his subsidy to any Platinum, Gold, Silver or Bronze plan sold in the Exchange. The Bronze plans call for higher out-of pocket spending, but since he rarely visits a doctor, he’s not worried about co-pays and deductibles. The premium is most important.

Moreover, in North LA Kaiser Permanente offers a Bronze plan for just $174 a month $2088 annually). After he uses his tax credit, it will cost him $33 a month, or about $400 a year.

Note to HealthBeat Readers :

I have published a longer version of this post on HealthInsurance.org.  

There, you will discover what young adults will actually have to pay for insurance in cities that have announced premiums in their state marketplaces) including:

  • New York City
  • Washington D.C
  • Rochester, N.Y,
  • Hartford, CT
  • Sacramento, Cal.
  • Portland, Oregon
  • Denver, Colorado

In some cases, insurance will cost less than the penalties they will owe if they don’t purchase coverage.

That post also will explain why some young adults might well prefer Silver Plans.  Just click here and scroll  down to: “Bronze will be popular among 20-somethings, but it won’t best choice for all young adults.”

4 thoughts on “Will “the Bros” Buy Insurance in 2014? If Your Son (or Boyfriend) is Uninsured, Please Send Him This Post

  1. Very good post.

    I know that time is limited, but if you can I would love to see a similar analysis for 50 or 60 year olds. (singles or couples)
    They are the group who court more health disasters if they are uninsured.

    thanks

  2. Bob-

    Thanks much.

    Most of the information we have is about rates is for people 19-34 and for 45-year olds. I think this is because these are the people who will wind up shopping in the Exchanges.

    The Exchanges won’t be as attractive to older Americans Insurers selling plans in the Exchanges can charge them three times as much as they charge a 25-year-old for exactly the same plan.

    As a result I don’t think we’ll see a large number of 50-65 year olds in the Exchanges –UNLESS THEY QUALIFY for Subsidies. But a large share of 50-64 year olds who are working full time earn more than $46,000. . .

    Here’s what I know about this cohort (50-64)
    There are 68 million of them
    Just 8 million are uninsured.
    13% of the 68 million are on Medicaid or Medicare (because they are disabled.)
    Those who buy their own insurance in the private market pay an average of $6500 a year (for an individual)
    I suspect that in most states, a 60-year-old would have to pay at least that much in the Exchange– though they might well get better coverage in the Exchange.
    And at least co-pays and deductibles will be capped, while the insurer could not cap how much he would pay out in a given yea or over a lifetime (v. important when you’re diagnosed with cancer at age 58).
    There are a few exceptions:: in the New York State Exchange, insurers CANNOT charge older folks more. And under Obamacare there are a couple of new non-profit plans in New York that would cost $340 to 390 a month (depending on what city you live in)–much less than the brand-name for-profits. A person could wind up paying, say 4,300 a year rather than the $6,500 a year that they are now paying if they are buying their own coverage in the individual market. (If a 60-year-old is covered by a large employer he typically only pays about 2500 for premiums.)

    California also has done an excellent job of insisting that insurers who sell in the Exchanges keep rates down–as has Maryland. You may well see more older Americans in Exchanges in those states.

    But by and large, I think that Obamacare is likely to help the 8 million uninsured 50-64 year olds most by expanding Medicaid. Low-income 50-64 year olds who earn too much for Medicaid, but qualify for subsidies, also will be helped.

    But there are many more 19-34 year olds who earn less than $4,600 than there are 50-64 year olds in that income bracket. .
    We’ll have to see who signs up, but my prediction is that the percentage of people 19-34 in the Exchanges will be far greater than the percentage of 50-64 year olds.
    Sarah Kliff (Washington Post Wonk Blog) recently did a column about a poll which shows that younger people are much more interested in signing up for the Exchanges than older people. This is good news because it will keep premiums down.
    (I alsoexpect that in some states, premium will be lower in 2015 than they were in 2014 because insurers who over-charge will find themselves sending rebates to customers (under the 80/20 rule.)
    Finally, I think we need to find a way to help 50-64 year olds who earn to much to qualify for a subsidy. I wish more states would follow New York and prohibit insurers from charging older customers more.