Thursday, October 3, 2013

The PPACA at the Edges

Thanks for losing the first version of this post, Blogger. In any event...

[Added: I think on the average the effects of the PPACA will be positive, but we do not live on the average, and there will be winners and losers. This post is an attempt to determine who the losers will be. If the law had been written to benefit people, rather than protect insurance companies, there would be no losers.

Ta-Nehisi Coates reminds us that the people hit hardest by the failure of the PPACA are overwhelmingly the poor in the states where Medicaid has not been expanded and that this group is heavily black and brown. Compared to their problems, the issues I summarize below are minor and I am ashamed of myself for not mentioning it in the original version of this article, though I did write about it last August, when I commented on Virgina v. Sibelius. Mea culpa.]

For some time now, I've been saying that the PPACA, aka Obamacare will be hard on families at the place where they come off Medicaid and go onto insurance, and where the tax credits give out, at 400% of the federal poverty level. I've only recently found specifics. So I can finally write this post. (Brief note: numbers in the thousands have been rounded for convenience; since all the numbers given are estimates, there seems no reason to be over-precise.)

Example one: joining the system at the bottom
My friend T. is a struggling artist and a low-wage worker at, yes, a thrift store. She makes not enough money to begin with, but it is just enough so that she doesn't qualify for Medicaid. Under the PPACA she will be required to buy into her employer's health plan, which will take $45 or perhaps more from her skimpy bi-weekly paychecks. She already has trouble making ends meet. What an additional $1,000 of expenses a year will do to her, I have no idea.

Example two: when the tax credits give out
A couple I know, who will be 57 and 58 in 2014, are currently relying on COBRA coverage from a good but lost job. Their annual health insurance cost under COBRA runs about $10,000 a year; without a subsidy, the Berkeley Labor Center health insurance estimator gives the cost for a silver plan under the PPACA at a whopping $17,000 a year. But wait! They get a tax credit, payable to their health insurance company. If their income is $62,000 a year their health insurance cost will be $6,000 a year. So far, so good. But if their income is $63,000 a year—they don't get a tax credit. So if they have a thousand-dollar windfall; if one of them gets a bonus or a nice big royalty payment, they are on the hook to the IRS for the whole of the tax credit; some $10,000 dollars. Hey-hey, let's hear it for a marginal tax rate of 1,000%! (No, that's not a typo.)

My sympathies to that couple, who is caught between a rock and a hard place; they can take the tax credit and the risk, or accept a $10,000 bite out of their family income during the year, in the hope of a possible reimbursement. They are not well-off; $60,000 a year is a lower middle class income these days. And if they don't fall below the level where reimbursement is offered, if they have, say, $65,000 a year income, they will be paying a full quarter of their pre-tax income for health insurance and nearly half of their income for taxes and health insurance. If they tighten their belts and reject the tax credit—I am not sure if they can accept only part of it—they will be reimbursed at the end of the year, but that is no help when a family needs to deal with a large, unexpected expense during the year. You can bet the Republicans will make sure the country knows about this one in time for the elections. Thanks, guys.

Tune in in 2018, when the "Cadillac Tax" kicks in, wrecking much good employer-provided and union health insurance.

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