When lawmakers and the public were debating the Affordable Care Act, details were sparse and widely guarded. Then-House Speaker Nancy Pelosi noted famously that “We’ll have to pass the bill so you can find out what’s in it.” Now, years after the legislation has been passed, does the American public yet know the hidden details of the plan? I didn’t.
Does the American public know that, buried deep in the Healthcare.gov website, the health insurance coverage available to a family gets worse as their income rises? Do people know that a family expecting to earn $51,000 in 2016 is not even allowed to buy the same coverage as a family that expects to earn $49,000?
I encountered this as I researched my family’s healthcare options for 2016—the first year I have been forced onto the exchange following my early retirement.
Up to now, I thought I understood the tax credit subsidies embedded in the legislation. Depending upon family size, the government gives taxpayer money to people to purchase qualifying plans if their household income is less than 400 percent of the nation’s established poverty level.
For example, in Madison, Indiana (my home town), a family of three with a household income of $40,000 would get subsidies of $500 a month ($6,000 per year) in 2016, while a household earning $60,000 would see its subsidies drop to $237 per month ($2,844 per year). Like it or not, those were the rules of the road: the government hands out subsidies to reduce the gross cost of insurance.
The Plot Thickens
But as my research continued, I found something else—something troubling.
Since my early retirement, my income consists primarily of investment income. Through investment choices, capital gain deferrals, and tax planning, my income is variable and, to some degree, controllable. So when the exchange asked what my 2016 income would be, it was a tough question. “It depends” was not one of the possible answers the website would accept.
Instead, I just estimated $50,000—a possible, middle-of-the-road answer—just to see my health insurance options. Choices popped up with lots of metallic names: platinum, gold, silver, and bronze. Each had options, with companies competing for my business.
After taking my family’s needs into account, the one option that appeared most interesting to me was Anthem Blue Cross Blue Shield’s Multi-State Direct Access Plan. No, it wasn’t the best coverage. Its deductible levels ($2,000 individual/$4,000 family) were above what is available to many in the private sector, as were the maximum out of pocket costs ($5,000 individual/$10,000 family). Other important plan factors were equally fair: $15 generic drug charges; $40 brand name drug costs; and a $35 co-pay to see a family doctor. Total gross price tag for the coverage was $1,060 per month. If my income were really $50,000 in 2016, my net cost after subsidies would be $684 a month. Maybe, I thought.
But the website admonished that I could face added taxes (and even penalties) if my actual 2016 income did not match my estimates, so I decided to do a computation with a $60,000 annual income estimate. I searched for the plan I had chosen earlier—you know, the Anthem BCBS Multi-State Plan that cost $1,060 per month before subsidies. That’s when weird starting happening.
Pay the Same for Worse Coverage
The Anthem Blue Cross Blue Shield health insurance plan that had cost $1,060 per month when I said I would earn $50,000 still cost $1,060 per month—but its coverage got worse. Suddenly, annual out of pocket costs soared to $6,850 individual/$13,700 family. Drug costs rose, too: suddenly generics were 33 percent higher ($20) and brand name prescriptions were up 25 percent ($50). What?
Surely, I must have chosen the wrong plan. So I searched for the Anthem Blue Cross Blue Shield Direct Access Multi-State plan with the lower out-of-pocket maximums and drug costs—but they did not exist. I could not even choose that plan if I wanted it. Odd.
Sensing something was wrong, I went back a third time. Perhaps this was just a HealthCare.gov glitch. This time, I put in $40,000 as my estimated income. Suddenly, another $1,060 per month Blue Cross Blue Shield Multi-State plan appeared—a much better one. This option dropped deductibles by more than 60 percent ($750 individual/$1,500 family) from the first plan I encountered. This option’s annual maximum out-of-pocket costs also dropped precipitously—down 70 percent. Everything else in the plan improved, too: generic drugs dropped to $10, brand name drugs dropped to $35, and doctor visit co-pays fell to only $15.
Wow. Now, this is pretty good insurance.
But, wait—how can all these plans have the same gross cost of $1,060 a month? How can a plan with great benefits have a gross cost of $1,060 per month for a family earning $40,000 per year, while a family earning $60,000 per year gets far worse benefits at the same gross cost?
Was this just a problem with one insurance provider? No—I did similar research with other providers, and found the same result. I struggled to believe this until I dug deep into a brochure available from MDWise, another insurance provider. In its brochure, the company shows many attractive Silver Plan options, then notes: “You only qualify for one of the Silver Plan options. It is based on your income.”
Earn More Money, Get Worse Healthcare
Then it dawned on me: the Democrats had struck again. It wasn’t enough to merely grant subsidies to lower-income people so they could buy coverage. No, lower-income earners deserved better coverage, too. The incentive was clear: earn less and get better benefits. Earn more, and pay the price with worse insurance coverage.
I still hardly believe it. I still shake my head. But now that the sun is shining on the rules, the game is afoot. Unfortunately, it is a game with lousy rules that incentivize the wrong actions. What a mess.