Thursday, April 1, 2021

In the Name of COVID Relief: People Making $350,000 a Year Can Now Claim $20,000 from Taxpayers to Buy a PPACA Exchange Plan (with Armstrong & Getty)

People who make $350k can now get $20k from taxpayers so they can afford a $51k exchange plan. That looks like this:
  • $51,059 is the cost of the benchmark PPACA Premium in Prescott, AZ for a family of 5 with a 60-year-old household head; 
  • $37,874 is the amount of subsidy they qualify for if they make $150,000 a year; 
  • $20,294 is the amount of subsidy of subsidy they qualify for if they make $350,000; 
  • $8,559 is the amount of subsidy they qualify for if they make $500,000; and 
  • $580,876 is the annual income at which this family no longer qualifies for a subsidy. 
Thank you to Brian Blase and Michael Cannon for doing the heavy lifting on most of the above numbers and pointing me to them, respectively.   

This is because, as Shepard Mullen explains
The [American Rescue Plan Act of 2021] provides for premium subsidies for the 2021 and 2022 calendar years. It completely subsidizes health insurance premiums for individuals who earn up to 150% of the federal poverty level for the second cheapest silver plan by area – a change from before where individuals up to 150% were only partially subsidized.... Premium tax credits also apply to, and provide considerable changes in premium contributions by higher earners. For example, individuals making 400% of the federal poverty level previously paid up to $5,017.  Under the Act, such individuals will max out at $4,338 for premiums. Individuals who earn more than 400% above the federal poverty levels will also receive premium subsidies, such that they will pay no more than 8.5% of their annual incomes for their marketplace health insurance premiums in total. These subsidies are retroactive, and thus may be claimed by individuals who have already enrolled....

Lastly, while typically individuals must repay any excess premium tax credits if their annual income exceeds 400% of the federal poverty level, the Act waives this repayment requirement for 2020.
And yes, these newly added subsidies are supposed to phase out after two years, but, as our President might say, "c'mon man."  We all know that will never happen.  These will become permanent as eloquently explained by healthcare expert Bob Laszewski in "The Democrats Are About to Set a Whopper of an Obamacare Political Time Bomb for Republicans."   

Keep in mind that back in 2016 before these latest changes happened, 70% of all healthcare in California (and about 64% nationally) was paid for by taxpayers.

Also keep in mind that folks paying for healthcare privately, such as on an employer plan, pay 240% more than those on government plans for hospital services.

And now, Hospitals Using Computer Coding Tricks to Evade Transparency Rules: WSJ Investigation. Hospitals and insurers are horrified at the thought of people starting to see the true prices are for procedures.  

What this means:
  1. As more are funneled into taxpayer funded plans, fewer care what healthcare actually costs.
  2. As hospitals are further squeezed by taxpayer-funded plans, they will require increasingly higher reimbursement rates from private/employer plans. 
  3. Reference Based Pricing (RBP) will become more popular for large employers wishing to keep health insurance.  Yes, this is a contentious route for employers as hospitals detest RBP, it confuses employees and can result in costly and time-consuming litigation.  Nevertheless, once RBP is in place, employers will only see 1.7% trend numbers as their plans can only inflate at the same pace as Medicare.  In RBP, large, self-funded employer plans eliminate their hospital networks entirely and agree to reimburse for hospital procedures at a fixed percentage above Medicare; for example, 140% of what Medicare pays.  This represents huge savings under the 240% employers pay now.  Often the first year in RBP saves an employer plan 20% to 30% overall.  I've written on this extensively here in "America Will Dramatically Change the Way It Provides Health Care by 2030"  
  4. The practical solution for many employers, especially those with less than 250 to 500 employees, will be to join into that 70%, drop health insurance and push employees to the exchanges. In fact, it will not surprise me if we see members of both political parties craft legislation that will eliminate PPACA's employer mandate paving the way for this to occur.  Democrats could support the concept as it would work to acclimate more people to government subsidies to buy healthcare.  Republicans could support it because they see the writing on the wall and realize that more government spending and greater deficits are a federal inevitability.  Hence, the GOP could see this as a way to, at least, launder those taxpayer funds through the enormous insurance lobby before doling it out to enrollees.