Sunday, August 18, 2013

Why can’t everyone have lower cost medical insurance?

Someone recently raised this question so I am sharing some comments.

The direct answer – federal health reform legislation does not provide a reason why the income based levels for help were selected.

BTW - if you have questions about any part of what federal health reform means to us here in Conn. Post your question.

The premium support program: Section 1401 of the law, which is entitled – Refundable Tax Credit Providing Premium Assistance For Coverage Under A Qualified Health Plan, includes details on the program. Various comments have been made about this since the law was signed in March 2010 and provide some insights. A couple points:

● It’s purpose is to lower the number of uninsured individuals.

● Another focus was to help individuals whose income is above the level for MedicAID eligibility and thus are a big part of the uninsured. The contribution or share of the premium for those with a lower income is smaller than for a person with a higher income.

Note: Perhaps the answer to the question is in the speculation of some - if additional individuals had been included, the cost to the federal government would have been too high to get the law passed. Eligibility was thus limited to people whose income is at 400% of Federal Poverty Level (FPL) and lower. Anyway 400% equals about $46,000 for a single person and $94,200 for a family of four.

The new “help to pay for coverage” program starts January 1st and has two parts:

First - federal funds will be sent each month to the person’s health insurance company. Technically this payment is an Advance Premium Tax Credit, the IRS will record it in the person’s record, and they will include it in their annual 1040 filing.

Second - the amount a person, who qualifies for help, has to pay their health insurance company each month is based on a percentage of their annual income. Their payment amount is subtracted from their plan’s age based premium to determine the amount of their premium support.

The level of help changes with income: The amount individuals who qualify will pay, based on different ranges of household income, is shown in the list below. The FPL percent amount is found in Section 1401 of the law in a chart which shows income ranges “expressed as a percent of poverty”. I converted the percent of annual income amount into the monthly contribution for people with this income. The first amount is what a Single person at that income level will pay each month, next is the payment for a Couple, than for a Family of 3, and the fourth amount is for a Family of 4.

● When at 133% of FPL a person pays 3% or $37 - $50 - $63 - $77

● When at 150% of FPL a person pays 4% or $56 - $76 - $95 - $115

● When at 200% of FPL a person pays 6.3% or $117 - $159 - $200 - $242

● When at 250% of FPL a person pays 8.05% or $187 - $254 - $320 - $387

● When at 300% of FPL a person pays 9.5% or $265 - $359 - $453 - $547

● When at 400% of FPL a person also pays 9.5% or $354 - $479 - $605 - $730

One other point about federal health reform. Regretfully very little in the law addresses the real problem we face today. What is that? Health insurance is expense because the rapidly growing cost of medical treatments is very expensive.

It is also important to understand another big reason medical insurance is so expensive - lifestyle choices. For example, people who smoke have higher treatment costs and big costs result from the obesity problem we face today since many adults and children do not follow an effective diet. Costs from lifestyle choices use up 70% or more of each premium dollar.

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