The Life of Julia Under Obamacare

The Life of Julia Under Obamacare

Obama's heroine is going to learn that "free" can be very expensive
David Hogberg
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If you paid a modicum of attention to the 2012 campaign, you likely recall the “Life of Julia.” An illustrated feature produced by the Obama Campaign, the infographic followed a fictional single woman at various phases of her life, showing how much better it was due to policies that President Obama supported.

For example, we learn that, at age three, Julia benefits from the Head Start Program that Obama defended (as opposed to the troglodyte opponent, Republican Mitt Romney, who would have cut the program by 20 percent).  At the opposite end, Julia retires “comfortably” at age 67 thanks to Social Security that Obama protected. The only thing missing from the illustration was the glowing visage of the President Obama himself, smiling beneficently down on Julia.

With the impending launch of Obamacare, it’s worth considering: what will Julia’s life be like under the new health care regime?

Age 27

On health care, we learn that Julia has surgery while in college.  She has no trouble paying for the surgery because she is able to stay on her parents’ insurance policy until age 26—thanks to ObamaCare.  At age 27, Julia has become a web developer.  “Thanks to ObamaCare,” the feature says, “her health insurance is required to cover birth control and preventive care, letting Julia focus on he work rather than worry about her health.”

However, the Obama campaign left out some important details of the story.  For example, let’s say that 27-year-old Julia lives and works near Omaha, Nebraska.  She earns about $40,000 annually, a bit low for a web developer, but not unusual given she is only a few years into her career.

Julia’s calm regarding health insurance is short-lived.  Near the end of the year while Julia is still 27, her employer announces he is dropping the company’s insurance plan, citing rising costs in part caused by ObamaCare.  (Forcing insurers to let young people stay on their parents’ insurance until age 26 and provide “free” birth control didn’t help.)  So Julia is now faced with buying insurance on the exchange.

Julia’s income puts her at about 348 percent of the federal poverty level (FPL), which means she could qualify for a subsidy to help her pay for insurance on the exchange (the cut off is 400 percent FPL, or about $45,960).  But will Julia actually get a subsidy?  The subsidy formula is the second-lowest cost silver premium on the exchange minus the amount of money ObamaCare requires a person to put toward the premium, known as the applicable percentage.  However, if an individual’s applicable percentage is equal to greater than the silver premium, then she receives no subsidy.

Unfortunately for Julia, that is exactly the situation she finds herself in.  Her applicable percentage is 9.5 percent of her income, or $3,800 annually.  The second-lowest silver premium on the Nebraska exchange for someone age 27 living near Omaha is $2,795 annually.

Since she is not eligible for a subsidy, Julia looks for the cheapest policy on the exchange.  Being under age 30, she qualifies for the cheaper “catastrophic” plans. These are plans that have the lowest premiums because they also have very high deductibles.  Coventry Insurance provides the cheapest catastrophic policy on the exchange at $113.51 per month, about $1,346 annually.

Initially, Julia leans toward buying the policy.  The monthly premium does seem a bit high for her, especially when ehealthinsurance.com shows she could have gotten similar coverage from $79 a month.  She calculates that her yearly routine out-of-pocket health care expenses would be less than paying the premium.  If she decided against insurance, she would pay a fine of about $300* under ObamaCare’s individual mandate.  That is over $1,000 less than buying insurance.  On the other hand, she would like some protection against very high medical expenses, a concern for her since she did have surgery a few years earlier.  Furthermore, she earns about $2,482 a month after taxes.  After rent, car payment, groceries and other expenses she has enough money to afford the catastrophic plan.

Then a friend tells Julia about a law that governs insurance on the exchanges called “guaranteed issue.”  Guaranteed issue means that insurers must sell a policy to a person during the open enrollment period on the exchanges from October to December, and that policy goes into effect the following January.  Insurers must sell the policy regardless of the person’s health status.

Under current law, if an uninsured person comes down with a serious illness, she runs the risk of no insurer willing to sell her coverage.  Julia realizes that guaranteed issue reduces that risk.  If she gets sick in, say, August, she only has to cover her expenses on her own until the following January.  Although she’s not completely comfortable with being uninsured, she decides to forgo insurance and pay the fine.

Julia’s decision will be similar to those facing millions of young men and women between the ages of 18 to 34.  Like Julia, over three million of them will save at least $1,000 by forgoing insurance and paying the fine.   A study of 15 exchanges by this author and Sean Parnell found that in 12 exchanges the subsidies for 27-year-olds end before 280 percent FPL, or about $32,170 annually.  Only three exchanges, Connecticut, Maine, and Rhode Island, exceed that level.  In even the most generous of those, Connecticut, the subsidies for 27-year-olds end at 331 percent FPL or about $38,000.

Age 31

Julia remains uninsured until age 31.  Two things change.  First, Julia takes a job with a new company in the previous year, as her reputation as a web developer is growing.  Her new employer pays her $52,000 annually.  Second, according to the Obama Campaign, Julia decides to have a child at age 31.  Having a child changes her perspective.  She now very much wants to have insurance to protect herself and her infant son, Zachary.

She returns to the exchange.  With two people in her family, her $52,000 income means that she is at the 335 percent federal poverty level.  This time, she finds out she will get a subsidy because, perversely, many young people made the same choice she did at age 27 and decided to forgo insurance on the exchange.  This means that the people on the exchange have tended to be older and sicker. Insurance prices have jumped an average of fifteen percent annually in the intervening four years.  The second-lowest silver premium for her and her infant son now costs about $7,984.  The dollar amount of her applicable percentage is $4,940, meaning she receives a subsidy of $3,044.   She chooses the cheapest bronze plan on the exchange, which costs $5,791.  Her subsidy reduces the cost she pays directly to $2,747.  It adds a considerable burden to her budget as she now has to buy food for two, diapers and child care.  But, to Julia, it’s worth it.

Age 49

At age 49 Julia is faced with helping her now 18-year-old son, Zachary, pay for college.  The price of college now averages $40,000 annually due to government-backed student loans and other subsidies.  Julia now runs her own web development company that she started at age 42, according to the Obama Campaign.  She has built it into a success—business is booming and she currently has 20 employees.  However, that also means she earns over $100,000, which will disqualify Zachary from most college aid.  She doesn’t want Zachary to leave college with a huge amount of debt, so she will pay for most of the cost herself.

That puts a considerable burden on her budget, a budget that is already burdened with the cost of health insurance.  As more young people make the decision to forgo insurance on the exchanges, the exchanges have entered a “death spiral” in which the insurance pools have become comprised of people who are older and sicker. This has caused insurance prices to rise precipitously.  As the insurance pool has become more expensive to cover, most insurance companies have been unable to make a profit off the exchanges and have dropped out.  Fewer insurers on the exchanges means less competition which also causes prices to rise.   To cover herself and Zachary costs Julia $12,000 annually.  She receives no subsidy for insurance as she now makes well over 400 percent FPL.  To pay for Zachary’s college, something has to give.  She decides to forgo insurance for herself and only insure Zachary (at a cost of about $4,300 annually) while he is in college.

She hopes she doesn’t get sick in the next four years.

Age 60

At age 60, with Zachary’s college long behind her and her business doing better than ever, Julia thinks she has few worries.  However, her business is fast approaching 50 full-time employees.  She has never provided insurance to her employees as it has become too expensive to do so, as costs escalated under ObamaCare.  She has tried to pay them a little extra to compensate.  But under ObamaCare’s employer mandate, she will have to provide insurance for her staff if her company reaches 50 full-time employees.  If she doesn’t she’ll be forced to pay thousands in fines.  Ultimately Julia decides to stop the number of full-time employees she hires at 48.  Every employee she hires after that is officially part time—less than 30 hours a week under ObamaCare rules.

That doesn’t seem particularly fair to Julia.  Her part-timers are often those who are getting their first jobs out of college.  They need to work more hours to gain experience.  When Julia first started as a web developer, she often worked 50 hours a week.  Unfortunately, the value new employees bring to her company is not equal to paying them full-time and paying the ObamaCare fines.  Julia enters her retirement years with a faint notion that perhaps the liberal policies President Obama claimed would protect everyone now make it harder for younger, inexperienced people to get a job and, once they do get one, to advance in their careers.

When one first looked at the “Life of Julia,” it didn’t seem to have much relevance beyond the Lena Dunham voting bloc.  But, upon further reflection, it was more likely an appeal to any voter who believed in promises of “free benefits” from the government.  As ObamaCare moves closer to implementation, though, many voters will learn the hard way that free government benefits come with big costs.

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