Real Costs Of Obamacare And Where Are They Going?

The following article was written by a Quinnscommentary regular reader and a man knowledgeable on the subject. READ THE FACTS and then decide if Obamacare as structured is “affordable” and sustainable. Are we headed for another Social Security type crisis?

Government Report From Last Year – Issued in March 2015:

In 37 States using the platform, 87% qualified for advance premium tax credits averaging $263/month (72% of cost), leaving $101/month of participant paid premium (28% of cost) after taxpayer subsidy.

Expect in 2016, the percentage of those receiving subsidies to be even higher, as others exit the public exchange in search of individual coverage outside the public exchanges. At the same time, based on data known, the CBO estimates that the premium subsidies will cost taxpayers $56 Billion in 2016 – or ~$4,300 per enrollee. 


If that is an accurate estimate, it means that the actual cost (once the premium credits are adjusted for actual 2016 earnings, and, I assume, including the point of purchase subsidies for those at 250% of FPL or less) will be $359 per month, or a 36% increase in one year (comparing guesstimated 2015 cost with guesstimated 2016 cost). 

 For comparison, March 2010 CBO projections were that the average per enrollee cost would be $2,810 in 2016 – meaning that the current projection for 2016 of $4,300 is 53% higher than the March 2010 CBO projection (after only three years of PPACA – year, 2014, 2015, 2016).

But, the real number to be on the lookout for is the taxpayer subsidy in 2017. In 2017, there is no more transitional reinsurance. So, insurance companies will have to price out coverage based on actual and anticipated experience. Can’t wait to see how many blow out well past a 10% increase – since the transitional reinsurance won’t be there as a risk corridor. Note that UHC, which waited a year to enter the public exchanges, posted a $720MM loss in 2015, and has kind of announced plans to walk away after 2016.

So, once those kinds of losses are priced into the total premium in 2017, and given that PPACA sets the individual’s premium as a percentage of the individual’s household income (not a percentage of the cost), expect two things to happen:

(1) The per person taxpayer subsidy will blow out in 2017, to cover the added cost, and
(2) Expect to see an INCREASE, not a reduction, in the percentage of public exchange enrollees who receive taxpayer financial support – because the coverage will be all but unaffordable for those who do not have taxpayer subsidies.

Bottom line, the $695/person penalty tax will be more attractive than the cost of coverage where it is not subsidized by the federal government. So, expect also to see lots of waivers of the penalty tax for 2017 – can’t wait to see the excuses that will qualify. JT

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