Reader Request: Who Will Benefit from ObamaCare?

CBO Estimates vs. Actual Obamacare Premiums

A reader asks: Under ObamaCare, what will happen to the millions of people who don’t file tax returns, are illegals, etc? Will there be more uninsured than before? Will this new law raise the cost of health insurance?

The individual mandate does not apply to undocumented immigrants, who are also ineligible for Medicaid and the subsidies available under the Affordable Care Act. To answer the question that’s really on your mind: The new law does not allocate any of your tax dollars to them.

Where it does allocate tax dollars is to American citizens and legal immigrants who cannot afford health insurance. It’s true that some of these folks don’t file federal income tax returns because they don’t earn enough income. (They still pay a lot, however, in state, local, and payroll taxes.) They will not be eligible for the subsidies offered on the new exchanges because those subsidies come in the form of tax credits. However, if they work for a company that has more than 50 employees, they will be able to receive health insurance from their employer. If not, their fate likely depends on geography. So far, about half of the states have chosen to expand Medicaid eligibility up to 133 percent of the poverty line, all of which will be covered by federal funding. If you’re poor and uninsured and you live in one of the states that refused to expand Medicaid, you’re S.O.L., as the kids say.

By the time the ACA is fully implemented a decade from now, the Congressional Budget Office projects that it will reduce the number of Americans without health insurance by 25 million, leaving 31 million uninsured. That’s not a complete solution, but it sure is a giant leap in the right direction. It will certainly save thousands of lives.

The CBO also predicted that the ACA will lower the cost of health insurance for the individual market, where the exchanges and subsidies are targeted. Critics latched onto the prediction that people will pay 10 to 12 percent more, but that’s a misleading statistic. They’ll be paying more because they’ll be receiving more. The CBO predicts that people will be able to afford better plans; hence, the higher cost. When they compared policies with the same quality, the CBO found that premiums will fall by 14 to 20 percent — and that doesn’t include the subsidies from the government that will make the plans even cheaper.

As it turned out, the CBO was wrong: Under ObamaCare, premiums are falling more than 20 percent!

The first evidence of this success came in May when California announced the premiums that insurers will be charging on the individual market exchange next year. Plans that were supposed to cost $400 to $500 per month are actually going to cost $200 to $300.

And in case you thought California was a fluke, New York just released its individual market premiums for 2014, and they’re going to be 50 percent lower than what they are now!

The New York rates are even more newsworthy because they prove that the individual mandate is essential and cannot be postponed.

In 1993, New York passed a law requiring insurers to charge everyone the same price. As I noted in my op-ed last week, without an individual mandate, this is a recipe for extremely high premiums because healthy people will choose not to buy insurance, leaving only the sick people who are willing to pay high rates because they need the insurance so badly.

That’s exactly what happened in New York. For two decades, they’ve had the highest insurance costs in the country. Currently, only 17,000 people purchase health insurance on their individual market.

But all that will change in 2014 for one reason and one reason only: ObamaCare. The individual mandate and the subsidies will bring healthy people into the market, spreading the costs of health care among less expensive patients.

It’s important to remember that we’re only talking about the individual market. If you get insurance from your employer or the government, these numbers don’t apply to you.

It’s also important to note that someone has to pay for those subsidies. This fact alone has caused some confusion, so let me add one more myth to last week’s listMyth #5: ObamaCare will force everyone to pay higher taxes.

There are a few new taxes under the ACA, like 10 percent on indoor tanning and a higher penalty on non-medical withdrawals from Healthcare Savings Accounts, but the majority of Americans will never have to pay these taxes. The only taxpayers who will definitely face a higher rate are the richest 2 percent, who earn more than $200,000.

In other words, the cost of ObamaCare is far less than its critics would have you believe.