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.

  • marque2

    I apologize to you for the misunderstanding, but it really looked like you were telling someone else (ohbloodyhell) to delete their post, because you didn't like it, which is not exactly respectful either, and I was 'splainin' why I thought ohbloodyhell's post really was relevant.. You changed your post so it no longer seems like wanted him to delete. Now I know it wasn't your intent to have him delete it.

    And I was helpfully showing you how I get rid of posts that I discover are incorrect, since you said you couldn't delete them. I use a dash. Every so often I think I am posting one topic and the post goes to another, so the dash tip is actually pretty useful, and I thought nice on my part.

    Good luck finding a friendlier Internet forum. Goodness if your that touchy - I think you might want to avoid the Internet all together. I thought I was being nice and having a respectable debate with you when I could have posted all sorts of profanities about you demanding someone else drop a post.

  • And every single one of them is a fellow citizen, maybe even your Next Door Neighbor.Ask a few sometime where they work so you know who has the chains ready to go.

  • The smart money is on lots of folks opting out till needed but it will be a wait and see as to how many are willing to toss the finger at Her Royal Highness Kathy.Most likely not enough to make a statistical difference but maybe.

  • jon

    We pay $2.2k per year for a family of 5 for a high deductible of $10k. We don't visit doctors (except for the dentist). We use a midwife for a home birth. If we needed a doctor it is nice to know that we have the money and insurance. But we try to eat and stay healthy. So Obamacare will make it so we get on the dole it sounds like. To bad. I pride myself on being self sufficient. Maybe I'll have to go and get a real job at a corporation but I'm enjoying the free lance programming gig. Ugh.

  • marque2

    Don't weep for me, I just weep for those who can never admit an idea of theirs was wrong. Yeah I bought into the getting insurance from another state, it is untenable What you really need to do is yell at your own state legislative folk to stop adding all the mandates to your care.

  • fotini901

    I mean this in all seriousness: How is a person in an emergency situation supposed to "shop?"

  • William Bruce

    They aren't; emergency care is *sui generis*. The relevant "shopping" is done through planning, saving, contracts, etc. Moreover, this isn't particularly relevant to the discussion, as emergency care is only a small fraction of total healthcare outlays.

  • bigmaq1980

    Thanks. Looks like we both posted too quickly on a misunderstanding/misreading of the prior post.

    Too sensitive...no. Please don't misunderstand. I just don't want the debate here to devolve into name calling, insults, and profanities as in elsewhere.

    As you point out, we could easily have dished it out quite profusely to each other. But, what does that get us? We wouldn't convince the other about anything as we'd just be talking past one another with emotional tirades, and that would surely not convince anyone else about our ideas or principles - a goal I presume we mutually have.

    I expect that elsewhere, in "unfriendly territory" (where we all need to weigh in to avoid confirmation bias and to turn the tide of thinking today) or "good" blogs where some "crazies" often lurk , and have been called much worse, so have a pretty thick skin. Usually, it is used as a tactic to shut down debate.

    I'll take your advice. I made that one change to my original post and see how it can be interpreted the way you did with the foibles of the English language. Going forward, I shall take your advice and just post a "-" without explanation to avoid misunderstandings.

  • marque2

    You seem like a Gentleman; sorry we got into this row. Look forward to reading more of your posts.

  • LarryGross

    re: " I just don't want the debate here to devolve into name calling, insults, and profanities as in elsewhere." Amen to that but don't get hopes up too high. Only a few do it but they are at times relentless.

  • bigmaq1980

    Cheers! And, hooyah!

  • jakee308

    If Obamacare had just stopped at an income level that would encompass most low income people, this law wouldn't be so bad. It would be a revamping of Medicare and Medicaid. Because folks on the poorer end can't come close to affording a 5,000 deductible. They're lucky if they EARN 2x or 3x that amount as INCOME.

    But to PAY for the new program, they had to bow to the Insurance companies demands. (notice no one makes too much of how well the Insurance companies can do under the law.) The result is the transfer of the cost of medical care from every one by an actual reduction in their coverage with an increase in their costs.

    It was inevitable that Obamacare would be revealed to do this because that's what it was MEANT to do. Cost shifting already occurs. When you go to a hospital and pay the billed rate, you will be taken to the cleaners. Even the lower income but employed were getting the shaft. So more and more started getting "Health Insurance" the issuers of which contract with certain groups of Doctors and Hospitals to deliver care for a reduced amount.

    This was mainly done so that Doctors and Hospitals could take on Medicare and Medicaid patients. (cause if the didn't, gov't health care would've come even sooner by law)

    Now we find that Medicare and Medicaid, even though they don't fully pay the Doctors and Hospitals for their services, is still going broke. (someone once said that if you want to make something scarce and expensive, put the government in charge of it).

    The interesting point to ponder is whether we would be at this place if Medicare and Medicaid had never been enacted. I'm guessing; NO. Because the market would have a greater affect to keep costs lower. Their would still have to be gov't. watchdogs to keep the Medical profession from gouging the public but that's a little less intrusive than actually mandating what will be paid out and collecting the money to do so from taxpayers.

    It's a convoluted and snaky situation and no one, no one has clean hands. Especially the Medical Profession and Medical Industries and Medical Insurers.

    It's all going to burn soon anyway.

    Cheers.

  • LarryGross

    perhaps it all started when health insurance was given as a tax free compensation?

  • No, that was done when wage controls were enacted (30s?). Health care costs started really skyrocketing in the late 1960s, when it became "free" (Medicare/Medicaid).

  • You don't. You shop ahead of time, like any responsible adult.

  • LarryGross

    didn't it become "free" when people retired and employers stopped providing the same level of health insurance than when people were working?

    Even the Military and Civilian DOD make their retirees go on Medicare.

    Medicare is not free by the way and it's totally voluntary. you have to sign up for it. Anyone
    who has employer provided health insurance into retirement does not need Medicare.

  • In Soviet America, insurance shops for you!

  • It makes contemplating what they are going to follow up with when Obamacare fails...

  • slocum

    Actually Medicare is no longer voluntary -- the administration has made the decision (with no real legal support) that if you decline to accept medicare, you'll also forgo social security payments. The Supreme Court declined to review a court decision upholding this interpretation of the laws, so that's the way it is now:

    http://www.cato.org/blog/supreme-court-snubs-citizens-whose-social-security-will-be-confiscated-they-refuse-government

  • LarryGross

    that's only true for Part A - not B, C and D which are all voluntary and require premiums. The problem with your info is your references which are propaganda-based and not really interested in clear facts - just sound-bite info that ignores all the facts. That's the problem in general with much of this issue. ObamaCare is not govt insurance. It's private insurance. There are a wide variety of private insurance providers in the Exchanges offering everything from bare-bones catastrophic policies to gold-plated policies. If you go to healthcare.gov you will see this - unless of course you believe the govt is lying or some such.

  • Another way of thinking about it is that if you did have an HSA-eligible policy, it isn't Obamacare compliant, so you'd still pay the Obamacare penalty for not having compliant insurance.

  • Mike

    Last year, my premiums for our family of four was $5500 with Blue Cross Blue Shield. Obama wants you to think the usual cost of insurance is $20K so that when premiums increase to these amount - they will because you'll be paying for your family and the families of those who chose not to work - you won't revolt. ObamaCare is the biggest tax increase ever imposed on the people. It will absolutely destroy the middle class working families and reward the moochers.

  • slocum

    I didn't say that all parts of Medicare are mandatory or anything about premiums. But it is true (not propaganda) that you are now required to enroll in Medicare as a condition of receiving social security. And even if there are no premiums for part A, this does not mean there's no possible downside -- it can effect eligibility for other available coverage (e.g. people who are 65 but not yet retired and have employer-based coverage available).

  • LarryGross

    When Medicare was originally created - People took it because they often lost their employer-provided insurance (or had none at all). That's what caused Medicare to be created in the first place.

    It's propaganda is the organization that is making the statement is opposed conceptually to Medicare AND they selectively omit relevant info that would render their general statement implication about (all) Medicare to be more accurate and admit that it's NOT ALL Medicare.

    I did not say there was no possible downside but most people who are in need of Medicare can take it when eligible and that's what is important. It's almost a quirk that one part of Medicare that is associated with FICA is linked to SS but it has no affect on the other Medicare and the vast majority of people who wanted their SS but not the pre-paid (from payroll FICA taxes) would have no real problems resulting from having it.

    What is the specific downside to the individual who would want SS but not Part A? I don't see any and certainly not enough to write an anti-govt article railing against some unspecified harm being done by a rule.

    at the end of the day, what is the CATO article really about? Isn't it just another in a series of articles to speak against the general concept of Medicare?

  • marque2

    It isn't the easiest thing to find on the Internet of I wouldn't have asked. I am aware of the power of google. And the alleged power of Bing.

  • phil

    I work full time and due to illnesses that my children and i have had each of the last four years i have had medical bills of between $11,000 and $12,000 a year. That number is my insurance premiums and out of pocket bills. I make less than $30,000 a year so roughly a third of my income has gone to medical bills. Obama care means my children and I may actually have a future!