Obamacare Lowest Cost Health Plan at $20,000 per Year?

CNS News reported, and no one in the Obama Administration seems to be denying, that the IRS is assuming the cheapest conforming health insurance policy for a family of four under Obamacare will cost $20,000 per year

The IRS's assumption that the cheapest plan for a family will cost $20,000 per year is found in examples the IRS gives to help people understand how to calculate the penalty they will need to pay the government if they do not buy a mandated health plan.

The examples point to families of four and families of five, both of which the IRS expects in its assumptions to pay a minimum of $20,000 per year for a bronze plan.

“The annual national average bronze plan premium for a family of 5 (2 adults, 3 children) is $20,000,” the regulation says.

Bronze will be the lowest tier health-insurance plan available under Obamacare--after Silver, Gold, and Platinum.

Kevin Drum shot back, saying that Conservatives were essentially out of touch for thinking that health insurance currently, or could ever conceivably, cost much less

So is this unusual? Not really. The average cost of healthcare coverage for a family is currently about $16,000,and by 2015 (the base year for the IRS examples) that will probably be around $18,000 or so. And that's for employer-sponsored plans. Individual plans are generally steeper, so $20,000 isn't a bad guess. It might be a little high, but not by much. And the family in question will, of course, be eligible for generous subsidies that bring this cost down substantially, thanks to the Affordable Care Act. They won't actually pay $20,000 per year.

(We'll ignore that last part as typical Progressive double think -- as long as the government is paying, the costs don't count.  It's like being free!)

I can't believe that Drum has actually shopped for health insurance of late.  The link he relies on for his data is for employer plans only, and Drum makes the unproven assumption that these are somehow less costly than individual plans people have to actually shop for. This is false.  Employer plan averages include a lot of gold-plated policies in the mix driven by noncompetitive union contracts and executives wanting gold-plated plans for themselves at the expense of shareholders.   I would argue that Drum is comparing "platinum" plans today to "bronze" plans under Obamacare, and it should be disturbing that even with this bit of judo, bronze Obamacare plans come out 20%+ more expensive than gold-plated current corporate plans.

But there is an even easier way to solve this, one Drum (who is nominally a "journalist") could solve with a few phone calls or clicks on Internet sites:  we can get some quotes.  Being a blogger with a real job, I do not have time to do this, but fortunately I don't have to because I just did this a few months ago for my family.  Here are a few quotes for a family of four with two 50+ old adults in pretty good health and two teenage kids from Blue Cross - Blue Shield of Arizona:

BlueOptimum- Plus $5000 deductible - $615.45 per mo., 7,385.40 per year>

BluePortfolio-Plus $3000 deductible - $703.80 per mo., 8,445.60 per year  (HSA eligeable)

BluePorfolio-Plus $5500 deductible - $499.75 per mo., 5,997.00 per year  (HSA eligeable)

Note first that these high deductible and HSA policies are ILLEGAL under Obamacare, in large part because they are actual insurance and Progressives don't mean "insurance" when they say "health insurance", they mean fully pre-paid all-encompassing medical care.  I consider the purpose of insurance to be to protect from catastrophes that you can't afford (e.g. your house burns down).  In the case of medical care, I thought about from my financial position, and determined what the largest financial setback I could bear in a year if someone really had a medical problem.  So I set my deductible at that number, and made sure I bought a policy that paid everything else above that reliably, without any low lifetime or maximum payment numbers.

The Blue Optimum above is a fairly standard co-pay plan that covers most doctor visits and drugs with only a copay.  The Blue Portfolio are HSA plans that are pure insurance.  I pay everything (except certain preventative care costs) up to the deductible, and they pay everything else above that.  In this case, note that the deductible is per person but there is a total family/policy deductible of twice that.  In other words, with the second policy, even if everyone in my family gets cancer in the same year, we aren't out of pocket more than $6,000.  So, for this middle policy, in typical years we spend $8,445.60 plus, say, another $1000 on miscellaneous stuff for a total health cost of $9,445.60.  Or half the Obamacare "bronze" or cheapest possible plan.  In the worst possible year, if two family members get very sick in the same year (not a hugely likely event) we are out $14,445.60 per year.  This is the worst case.  Still 28% lower than the cheapest Obamacare option.

In this plan, I am allowed under the HSA provision to bank about $5,000 a year in a pre-tax account.  I can use this money to pay medical bills up to the deductible, or save it.  If money is left over some day, it becomes a retirement account and I can use the money for retirement.  So I have the financial incentive to shop around for best prices, because the residual in the HSA is mine to spend on .... whatever.   I have told the stories a number of times here about my medical shopping experience.  X-rays that were charged to insurance companies for $250 suddenly cost $45 when I said I was paying cash.  My wife got a 70% cost reduction the other day on orthodic shoes when she offered to pay cash rather than put her insurance in play.  So, not only will Obamacare raise the prices of my insurance substantially, it will also raise medical costs in general by stripping away the last incentives for anyone to price-shop for health care.

When I read my Bastiat, I am always reminded how humans tend to insist on adopting the same myths and fallacies about the economy.  The myths he busts in the 19th century can be seen on the pages of our newspapers every day of the 21st century.   But one unique idea we have spawned since Bastiat is this bizarre notion that somehow it is wrong to pay for ones own medical expenses out of pocket.  It took forever to convince even my very smart HBS-educated wife that it was a much better deal to go to a high-deductible health plan.  Since we did so, we have saved a ton of money, and by the way done our small bit to keep prices down for the rest of you by actually shopping for things like x-rays (you can thank me later).  I don't know why this fallacy is so entrenched and hard to change, but we have built the entire edifice of Obamacare on top of it.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    LMGDFAO – Kevin Dumb, Journalist. Good one.

    Here’s the rub – the actual cost of the programs will be far HIGHER than this “lower bound” $16 - $20k cost (rounding error for leftists).

    Not only will Obamascare not save money, it will cost 3 – 5x more than originally predicted.

    Bye bye USD, bye bye Mediscare, bye bye just about everything.

  • obloodyhell

    It becomes rather clear, given the price, that EVERYONE will opt out of having insurance until something catastrophic happens -- and pay the fine. Then, since "prior issues" can't be denied coverage, if anything happens, they'll pick up the coverage if something catastrophic happens.

    The fact that this will be ruinous for the insurance industry is pretty much the point. When there are no more insurance companies offering health insurance, that's when the Gummint will step in, as it does with "flood insurance", and "offer" policies at a fraction of their true cost (just as it offers a "pension plan" at a fraction of its true cost).

  • mole1

    "I don't know why this fallacy is so entrenched and hard to change, but we have built the entire edifice of Obamacare on top of it."

    A big part of it is nanny-statism. They fear people, if they have to pay out of pocket, will not see doctors as much as they should to maximize their health. Therefore, they will be less healthy, which is bad. So, government should step in and change the incentive structure to make sure people see doctors as much as they should, since health is good.

  • Paula

    Love to live in AZ. Plans like that in Pa. DO already cost more than $20,000/year. Not that I think the ACA is affordable. I think the answer for affordability is opening it up so people can shop across state lines. If I could purchase that policy from AZ, that makes insurance much more affordable. Definitely more affordable than Obamacare.

  • obloodyhell

    }}} But there is an even easier way to solve this, one Drum (who is nominally a "journalist") could solve with a few phone calls or clicks on Internet sites: we can get some quotes.

    NAWWWW. Why should an "investigative journalist" ever do anything
    so ***(GASP!!)***boldly innovative as ... investigate??

  • obloodyhell

    GOOD government would step in and give said idiots a whack on the side of the head.

    Instead, all we've got is this BAD government.

  • epobirs

    And then, because people are overusing a resource they view as free, the government reduces skyrocketing costs by reducing access to the resources. Long-term effect, more people have less quality medical intervention available to them.

    A good competent doctor should be paid for his services. This is more likely to happen if cost filters out the time-wasting hypochondriacs.

    I'd rather throw a trillion dollars, once, in a massive effort to advance technology for automated testing and diagnostics. Actually advancing medical science will achieve far more for the money than buying health care for a bunch of people. That is, if we must burn a trillion bucks anyway. You would think there was more than enough profit potential to make this something private enterprise would avidly pursue. Which they are in fact doing. The cost and effectiveness of health care would improve if we would just let a normal market do its job.

  • obloodyhell

    .

    Completely OT:

    How the hell is it you regularly keep complaining about that ephwit Arapaio (sp?), but are ignoring your own senatorial pinhead McCain's latest idiocy?

    Jus' wonderin'...

    .

  • http://profiles.google.com/maruadventurer john mcginnis

    Two other factors to consider ==

    * Being federal, costs are always featherbedded.

    * The plans for the PACA are kitchen sink. So you pay for mental health care regardless that is an option under most commercial insurance. The list of services you would pay for you might never use and get no option to opt out of.

  • http://profiles.google.com/colomon Solomon Foster

    Holy crap! My family's insurance bill is about $11,000 a year, so I hadn't taken the $20,000 a year thing seriously -- just assumed it was IRS rounding very generously up to make a nice even number. The idea that, according to one of the bill's supporters, the "affordable" care bill is likely to nearly double my insurance bill is kind of stunning.

  • mole1

    "Long-term effect, more people have less quality medical intervention available to them."

    This is true. But different people balance societal and individual needs and desires differently. There are some who are willing to sacrifice the availability of some health care services in order to ensure that more people actually see doctors for other health care services. Where you fall in the debate depends on how much you think the government should structure things to minimize the ill effects of human irrationalities.

  • bigmaq1980

    This is just like cable TV, only the government is saying everyone is on the premium package.

    Of course, the electorate will think it is "fair" because why should only "executives" get such a package and not them?

    Whether it is smart or not, or whether it makes sense or is affordable is not a consideration...after all, someone "else" is paying for it.

    That's what we get with a "majority rules" political system that has unlimited ability to borrow and tax.

  • bigmaq1980

    Reread your post and deleted comment.

  • epobirs

    Which means a bunch of bureaucrats will be deciding what your health care needs are instead of you. Enjoy your stroll on the Liverpool Path everybody!

  • marque2

    When exactly do the HSA's become illegal. They are not illegal now. I have one, and some leftist on my facebook pointed out they were still legal.

  • Daublin

    Based on these numbers, in the course of twenty years, a family will pay $400k into insurance. You could by a house for that. Under what conditions would the insurance be a smart move, compared to putting the money aside in a savings account and paying as you go?

    I would think practically none. If you are unlucky enough to get a treatable ailment where the treatment is expensive, then which would you prefer to have on hand--$400k, or an insurance plan? I suspect you would prefer the cash. While the insurance plan has a slim possibility of paying out more than the cash can pay for, there are a number of ways it can fail, including IPAB rulings.

    The only way you really come out ahead with the insurance is if you have a double whammy--one rare expensive event followed by another. Such occurrences though, are the *square* of unlikely. They are far less common than risks of life we just accept and live with, such as hospital negligence.

  • marque2

    I don't know, at companies that offer low deductible plans usually they have no fees taken out of the paycheck, if you take them. I know most people with families did not take them, but many young employees who were relatively healthy, and didn't have families yet flocked to the programs, since they didn't have to pay anything out of pocket.

    Not everyone wants the super duper egalitarian plans.

  • marque2

    And governor Brewer just capitulated and is now all excited about a state Obamacare exchange! So lets bash a bit more on Arpaio!

  • marque2

    Speaking of hypochondriacs. Apparently older retired folk sometimes get board, and it has been found that quite a few try to relieve the tedium by making doctors appointments, which turn out to be unnecessary. But since the cost is relatively low. May as well have human interaction with the doctor and staff.

  • marque2

    This is what insurance should be about. I could cover the first 10K of my family expenses, and if one of us gets cancer or a heart attack, then cover the rest. Such a plan would probably cost me 2 grand a year vs the 11K or so I normally spend. It is hard to find real health insurance. HSA comes closer, but now Obamacare has forced free appointments and free tests - so the rates have gone up some 30% in the last two years.

  • marque2

    GOP had the idea of allowing cross state insurance purchases, but that doesn't work. Much of the reason the insurance is lower in one state than another is the state mandates. Yes maybe I can find a cheap insurer in say Georgia, but by the time they add in all the PA mandates, the rates will actually be higher, because the Georgia agency doesn't have the bureaucracy to deal with the PA system.

  • marque2

    Why? The whole purpose of Obama care is to make it so onerous on insurance companies and hospitals that they mostly close down, then the government can step in and save us. Then Viola! national health insurance.

    They are following the same template as they did for student loans.

    His comments do not seem that unreasonable. - I read EVERYONE as a bit of hyperbole, but agree that lots of people will do this very thing.

    Instead of writing something stupid yourself, maybe you can just counter his argument?

  • perlhaqr

    I dunno. Drum's numbers don't make a lot of sense to me. My health insurance costs ~$10,400 a year, between what my employer pays and what I pay. And that covers myself and my wife.

    Still, I have no idea what the max catastrophic deductables are. So my yearly max "something bad" might be more than Coyote's, under the plan he has. And of course, the total payment for the insurance is higher, though since my employer covers ~60% of the bill, my personal out of pocket is lower than his.

    It probably helps that my employer owns a hospital, though. ;)

  • randian

    Obamacare doesn't make HSA plans illegal per se. What it does is mandate a maximum deductible, one too low to allow a policy to qualify as an HSA-eligible policy. If your policy isn't HSA-eligible, you aren't eligible to establish a Health Savings Account, nor may you make further contributions to an existing Health Savings Account.

  • marque2

    Thx for 'splainin' to me!

  • nehemiah

    How much do I think the government should structure things to minimize the ill effects of human irrationalities???? This government is irrational! Do you believe we should turn everything over to our betters (the political ruling class). Move to NYC, they are very much willing to structure things to minimize your irrational behavior. They are even happy to tell you which of your behaviors are irrational which saves you all kinds of anxiety.

  • Curtis

    My INSURANCE is currently $4200 a year ($350/ month) for a family of fours ages 51, 47, 11 and 9. We have a $10,000 deductible per person. We generally have medical bill of around $3000 per year. One year, one of us got sick enough to go over the $10,000 deductible. But our medical bills still did reach $20,000.

  • marque2

    I was paying 550 for myself and 305 for the wife and kids. 10,000 per year. I was able to get on a company plan this year, but both the plans raised rates significantly. $650 for me and 355 for the wife and kids, if I had chosen to remain on the plans. Obamacare has caused a painful 5% a year increase in premiums to go to 25% a year average - at least for me. I can see how that will get you to 20K pretty quick with 25% annual increase. Plus we had $3000 deductibles, a bronze plan. Supposedly we will all have to upgrade to gold plans, which cost significantly more. .

  • jaed

    "Much of the reason the insurance is lower in one state than another is the state mandates." - That's exactly the reason to be able to purchase insurance from another state: to escape the state mandates. If your state insists that companies in that state must sell expensive insurance only, going out of state lets you buy cheaper insurance.

  • http://twitter.com/ThePoliticalHat The Political Hat

    Does Obamacare actually outlaw plans that don't meet Obamacare standards, or does it just declare that you have to pay the fine if your plan does not measure up? I realize that healthcare companies would end up dropping any non-Obamacare standard plans anyway, but still...

  • marque2

    But then your plan wouldn't be legal in your own state, so you would only be able to do out of network medical raising your costs anyway.

    I thought it was a great plan at first, and it was actually tried, and no out of state companies offered anything. I actually thought about it and came to the conclusion I stated above.

    What I find irritating about my current HDP/w HSA is they penalize me for using out of network, even though I have found services that cost half of what they want me to pay in network with their 25% discount. So instead of 3K of expenses per year I would need 6K in expenses. I think this defeats the purpose of a HDP.

  • Curtis

    This is typical shoddy reporting. The IRS did NOT say $20,000 is for the bronze. It is not an average. It is an example:

    http://www.irs.gov/PUP/newsroom/REG-148500-12%20FR.pdf

    "In 2016 Taxpayers M and N are married and file a joint
    return. M and N have two children, P and Q. M, N, P, and Q are ineligible to enroll in
    minimum essential coverage other than coverage in the individual market for a month in
    2016. The annual premium for M, N, P, and Q’s applicable plan is $20,000."

  • LarryGross

    if you REALLY want to know what ObamaCare offers go to healthcare.gov and stop wasting time listing to the propaganda sites such as CNS.

  • bigmaq1980

    Not sure who you are responding to. I almost immediately overwrote (cannot delete) my comment as I misread the original post.

  • John VI

    Dont forget, If you didnt want to or felt no need to buy insurance previously, your cost was $0. Now that that option has been removed, I suppose Obamacare imposes an INFINITE tax on the healthy? Or is that more of a "divide by zero" problem where it makes the economy blow up?

  • marque2

    I am responding to you -
    and when I write something and want to delete it, I replace all the text with a - Like my next post, watch

  • marque2

    -

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    He's writing an article on the subject,Not a book.Write your own damn book then.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    YES .IT.DOES.They Decide what qualifies,Not You,Me or the folks at the insurance company. This was called Fascism in the 1930's.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    Ah, the good old days before the Lightworker came to earth. Sing a song my friends,those days are Long Gone.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    But all these people here above you said otherwise so YOU must be lying to us because those folks are SO DAMN sure they can't be wrong.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    House, retirement account,2nd car, European vacation,,ALL GONE NOW.But you will be SO healthy you can run around the neighborhood to your hearts content.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    You will Taer what KATHY offers you and LIKE IT.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    The internet is a wunerfull thing aint it?

  • bigmaq1980

    I came to this blog because I found that folks here were (largely) respectful to each other. Guess you don't feel the need to be. Hope you feel superior for it.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    That's right, they just take the magic beans out of your paycheck,in other words; You make Less Money.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    Well, settle down there pardner, when its all said and done the folks here standing up for this gem of a law will be there subsidizing your plan just like us all through higher fees and taxes on Everything imaginable.It's called moving FORWARD.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    That's right Comrade, head of the line for you.Matron, this man gets extra loaf of bread.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    Don;t feel bad buddy, I live in Oregon and we haven't seen a Republican in office since the eighties.And we are in the same boat,the slowly sinking boat.

  • http://www.facebook.com/people/Rich-Knudsen/100002271627293 Rich Knudsen

    This fellow my friends is the definition of a Slave.Do what you are told and never fight to fix a bad situation.Go along to stop the beatings. I weep for you marque.