Tag Archives: obamacare subsidies

Ending Health Subsidies: ‘People Will Die’

Six Embarrassing Headlines on Subsidies from October

By Marc Derendinger, Sr.

  • President Trump Ends Healthcare Insurance Subsidy Program – Fortune [October 12, 2017]
  • Ending Health Subsidies: ‘People Will Die’ New York Times-Oct 13, 2017
  • Trump to halt subsidies to health insurers – ABC News [October 13, 2017]
  • Trump’s strike on health insurance subsidies jolts markets, Washington [October 14, 2017] 
  • Trump will end ObamaCare subsidy payments | New York Post [October 12, 2017] 
  • White House to halt health insurance subsidies The Boston Globe-Oct 12, 2017 

This small sample of headlines from October 12th to 14th emblematize a disappointing age in the history of American Journalism, where indifferent editors compete for reader “clicks,” for the purpose of increasing advertising revenue.

“Yellow Journalism” is based upon sensationalism and crude exaggeration (dictionary.com).

After answering several individual inquiries to explain Trump’s decision on subsidies, I feel compelled to put this explanation in public view (if for no other reason, than to catch my breath). The following paragraphs attempt to more accurately explain what Trump did to Subsidies, as it concerns Californians.

Background: The California individual health insurance market is segmented into two halves:

  1. Covered California plans e.g. Kaiser, Blue Shield, HealthNet, Anthem etc., which are potentially eligible for Subsidies
  2. Off-exchange (same plans as above, but purchased directly from the insurers)- Not Eligible for Subsidies

Further, there are two types of subsidies addressed in this article:

  1. The APTC (advance premium tax credit)- Most Covered CA policies enjoy this subsidy (about 5 billion dollars worth*), whether Minimum Coverage, Bronze, Silver, Gold or Platinum (*Source: Covered California Active Member Profile of March 2017, reported June 1, 2017:  estimated using 828,973 policies, $499 average APTC)
  2. Cost-sharing Reductions (CSR)- only Silver Plan policies receive this subsidy

In contrast to recent headlines, Trump’s orders do not impact the APTC subsidy, which are funded specifically from a California health and dental insurance premium tax (of approx. 3.8%) on California insurance companies. (Truly, one could argue greater damage to the market place was done by Anthem, with its plans to pull out of all California counties except three).

“Trump’s recent order does not impact the APTC subsidy”

The APTC funding mechanism was enabled by the original PPACA legislation. However, Congress blew it when they neglected to include funding for the second subsidy, “CSRs,” leading to the current situation.

What are the CSRs? This misnomer is a buzzword for “coverage enhancements” made to a Silver Plan for applicants with household income from 133% to 250% of the Federal Poverty Level. It lowers copayments and deductibles (essentially making a Silver Plan into a Gold or Platinum+ Plan, at no additional premium). The cost for the coverage upgrade has been coming from the feds (until Trump’s orders).

“Enhanced Silver plans include more robust coverage for the price of the same Silver premium. These plans include lower copays, coinsurance and deductibles compared to normal Silver plans.” [Covered California, July 21, 2017]

Of the Silver plan policies issued in Covered California, about three-quarters qualify for CSRs.  It is noteworthy that whether your Silver plan enjoys CSR status or not, the monthly insurance

Subsidies

premium and the APTC subsidy remain the same.

Interestingly, Trump’s order only impacts adults, because children of these households are taken out of Covered California automatically, and sent to a Medi-Cal case worker for possible coverage (all children in households with less than 250% FPL). So what happens to the remaining adults? Assuming Congress does not provide funding, they would likely receive a supplemental premium notice for the extra coverage, with the option to downgrade to the regular Silver 70 plan for no difference in premium. Yet this may be a worst-case scenario, and here the story gets interesting.

A Small Subsidies Surprise

The deeper we dig, the greater the surprise.  The grand surprise follows this paragraph, but first, in a paper commissioned by the public healthcare exchange, Covered California** and published January 26, 2017, researchers estimated if CSR funding were cut-off (presumably by President Trump), overall Silver policy premiums would increase 16.6% for 2018, AND, rather than causing a multitude to lose insurance coverage, this Covered California-sponsored paper estimates Covered California would actually gain a net 20,000 new members!  (**source:  Evaluating the Potential Consequences of Terminating Direct Federal Cost-Sharing Reduction (CSR) Funding, By Wesley Yin, Ph.D., and Richard Domurat, Ph.D. candidate).

A Big Subsidies Surprise

Closer inspection of a Covered California report issued July 21, 2017 suggests a contingency plan was conceived last June, in the event CSR funding was ceased.  Taken verbatim from this report:

What happens if the cost-sharing reduction payments are stopped?

“In June, Covered California’s board took steps to protect most consumers from any rate increases caused by the uncertainty surrounding cost-sharing reduction payments. The board acted to place any rate increases caused by the uncertainty only into Silver plans. If the federal government does not act to provide certainty that CSRs will be funded, Silver-level consumers would see an increase in the gross cost of their premiums, they will also see an increase in the amount of  financial assistance they receive, leaving their net payment virtually the same.” [Source: “How Cost Sharing Reductions Work:” Covered California, July 21, 2017]

Recent Headlines

Reflecting on recent headlines, readers beware:  Yellow Journalism is prejudiced, jaundiced, and lurks everywhere…even from the world’s most respected news organizations:

Ending Health Subsidies: ‘People Will Die’  New York Times-Oct 13, 2017

References

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Obamacare Rate Guide

Obamacare Rates and Subsidies (Tax Credits)

27 Year Old Obamacare Rates For Santa Clara County (California)

AGE 27 *                                        CoveredCA-ComparisonChart
2014 Metal Tiers

Least Expensive Insurer

Most Expensive Insurer

Bronze 60

$208/ month

$250/ month

Enhanced Silver 70

$279/ month

$317/ month

Gold 80

$330/ month

$386/ month

Platinum 90

$371/ month

$451/ month

Participating Insurers

Anthem, Blue Shield, HealthNet, Kaiser, Valley Health Plan

*Data estimated with Covered California Rate Calculator- September 2013

Do you want to see specific rates for you and your family? Once of the unique features of the Covered California Obamacare rate structure is each person in your family is allowed to choose a separate plan.  For assistance with calculating rates for members of your family, we suggest you use a local Certified Insurance Agent to save time and avoid costly mistakes.

Obamacare Rate Subsidies (Premium Assistance)

According to Covered California, individuals earning under $46,000 have a chance to receive premium assistance, based on family income, as estimated in the following chart.

AGE 27 *                              CoveredCA-ComparisonChart
2014 Metal Tiers

Monthly Premium Assistance

Premium Assistance Can Be Applied To Any Public Exchange Plan, But Not The Private Market

$10/ hour 40 hrs./wk.

$188/ month

Covers about 90% of lowest cost Bronze Plan.
$12/ hour 40 hrs./wk.

$138/ month

Covers about 50% of lowest cost Silver Plan
$14/ hour 40 hrs./wk.

$84/ month

$16/ hour 40 hrs./wk.

$27/ month

Participating Insurers

Premium Assistance can be applied to all health plans in the California public exchanges, but does not apply to plans in the private marketplace

*Data estimated with Covered California Rate Calculator- September 2013

Who pays for premium assistance?  Federal dollars pay for the first two years.  By 2016, California exchanges must be self-sufficient.  California may charge fees to insurance companies to make exchanges self-sufficient.  Do you qualify for lower rates with a Premium Assistance Subsidy?  Find out here.

Another Form of Obamacare Assistance: Cost-Sharing Reduction

Public healthcare exchanges offer a second type of Obamacare rate assistance, in the form of lower copayments and lower out-of- pocket costs. These are referred to as Cost Sharing Reductions.  For example, if your income falls between 100% and 250% of the Federal Poverty Line and you enroll in the Silver 70 plan, you will receive enhanced coverage ranging from 73% to 94% of actuarial value.  The regular Silver plan provides approximately 70% actuarial value.  The best example of how this benefits you would be the resulting reduction of copayments i.e. your Primary Care office copayment would decrease from $45 to $40, $15, or even $3 based on income.

Do you need help understanding your premium assistance rate subsidy?  Do you want to ask additional questions about the Cost-Sharing Reduction or CSR?

These are questions that are best addressed with your local Certified Insurance Agent. When you seek help through a Certified Insurance Agent, there is no additional cost.  A further benefit to you is access to professional guidance as you use your new plan or in the event you wish to change plans later.   Consider this an essential tool to choosing the right plan, and avoid waiting until the next open enrollment to make things right. 

Did you know certain Kaiser members may qualify for premium assistance, too?  Read the story here.