Earlier this week Jonathan Cohn wrote a piece titled “Two Key Facts That Are Overlooked in the Obamacare Debate.” This was a response, in part, to recent disputes over policy cancellations in the individual market and rate shock. The first fact is that many people purchasing policies on exchanges established by the law will qualify for subsidies, of which a not-insignificant portion will be able to buy coverage with no premium.
Here I believe the competency of the debate has actually been raised. Subsidies seem to be more often raised when relevant, or at the very least briefly acknowledged. This is a good thing because when we think about how people are going to gain coverage under the law, getting money to help pay for it is a crucial component. Of course it’s probably dismissed too easily thereafter, but on the whole it’s inclusion in arguments is more prevalent. The same cannot be said of Cohn’s second fact.
Fact two: Those ultra-cheap policies are pretty threadbare. They might keep people out of bankruptcy, but they still would leave beneficiaries exposed to thousands of dollars in out-of-pocket expenses a year.
I had some remarks on this second observation on Twitter, and I’d like to expand on them somewhat.
According to Kaiser’s subsidy calculator if I bought coverage on the exchange as a single, childless, adult I would qualify for a bronze-level plan with no premiums. Yet describing such a policy as ‘free’ is, to put it charitably, inaccurate. I would still be liable for an out-of-pocket cost of up to $6.350 in any given year, in addition to other eligible costs. That number alone represents a little over 45 percent of my annual wage.
To put this in the perspective of how we often discuss health care reform, you could think of that number as my potential “skin in the game” — a term of solidarity among conservative health reformers. That is the aspect of their reform proposals they appreciate the most, and it accounts for much, if not the majority, of their theoretical savings. If people have skin in the game, so the thinking goes, this will drive down the cost of health care because people will (rightly) discriminate against purchases. Yet this is often presented, or at least inferred, as a factor absent from our current health care system. Undoubtedly they would admit when asked that cost-sharing already exists, just that it’s not enough to ‘bend the cost curve.’ Which is to say, the contention comes across as meaning that there is so little skin in the game as to be unimportant, or effectively non-existent in the mind of the right.
Now it’s important to note that reforms like the kind they propose, to increase cost-sharing in this way, wouldn’t actually address the disproportionate distribution of personal health care spending. Still, even entertaining that argument leaves much to be desired. For people such as myself there are quickly diminishing returns to increased cost exposure. I’d go so far as to say that increasing my liability to, say, 65 percent of my annual income would have negligible disincentive effects beyond what already exists.
To bring it back to Cohn’s emphasis it is true that ACA will help, though not completely inoculate, the insured from being exposed to potentially devastating medical costs. To illustrate this point, under a bronze-level plan on the exchange, even one with no premiums, a hospitalization that incurred the full out-of-pocket maximum would, at worst, bankrupt me. Easily. It’s not a stretch of the imagination to assume I’m not unique in that regard. So while the law raises the floor for many, including myself, at poverty-level wages people with insurance may still need to hold fundraisers and raffles to avoid financial ruin. That strikes me has having plenty, if not too much, skin in the game.