Are Obamacare “Subsidies” Fair?

TrapBoy, am I sick of hearing how low the price of health insurance is going to be after government tax-credits!

Why is it that the president and his supporters cannot be completely truthful?  Are they physically incapable of telling the truth?

The fact is that middle-class Americans are about to be “hosed” by high health insurance premiums and there is not much we can do about it until 2016.

Here are the facts, as I see them.


Obamacare established a provision that limits the amount insurance companies can charge for health insurance.  It is called the Medical Loss Ratio.  Depending on the type of health insurance plan you have, the insurance company must spend at least 80-85% of your health insurance premiums for medical bills or send you a rebate.

State laws, however approach things differently.  They do not limit the amount that an insurance company can charge.  They leave that up to market forces.  What state laws require is that insurance companies collect enough money each year to pay all of the medical bills for their members.

The insurance companies are caught between state and federal laws.  They have to collect enough money to pay for all the doctor and hospital bills they get but they are limited on how much they can collect to pay those workers who make the system function.

Obamacare mandates that all insurance plans cover maternity and substance abuse coverage with no limits.  For many Americans, with individual insurance, those are new benefits.

In my state, individual health insurance plans do not cover substance abuse counseling at all.  As for maternity, they only cover complications of pregnancy.  They do not cover pre-natal and normal delivery.

Juvenile dentistry is also a new mandated coverage.

Every time a new benefit is added, the insurance actuary (the professional who determines the odds that an individual will experience an event) must add the cost of anticipated doctor and medical bills to the premium calculation.

With the addition of 3 new mandated benefits, it is understood that the gross cost of health insurance premiums for individual plans will increase.

If you get your health insurance through work you will not see as great an increase in your health insurance premiums.  That is because your group plan is more likely to already cover maternity benefits.

People who live in states that do not already mandate maternity and substance abuse will see the largest increases.  Their health insurance premiums will more closely resemble the group health insurance premiums their neighbors are already paying.


Mr. Obama, Ms. Sebelius and the media are talking like the tax-credits to help with health insurance will help all Americans.  They will not!

Yes, the working poor will benefit significantly from getting government help with their premiums.  (Ironically, these are the same Americans who tend to vote for one major political party.)

Not only will they get help from the government to pay their premiums.  They will also be able to get help from the government to pay their deductibles and co-insurance if their household income is less than 250% of the Federal Poverty Level.

Unfortunately, many middle-class Americans will be penalized for owning successful businesses or earning a decent income.

The subsidies phase out as a household’s income increases.  By the time that an American household earns greater than 400% of the federal poverty level, they will get no help with the higher premiums.

That means that families where both spouses are successful may be forced to pay the 100% of the higher premiums, even though they are not in the top 2% of America’s wealthiest people.

Mr. Obama promised that he would not do anything to increase the financial burdens on Americans who earn less than $200,000.

Unless my math is wrong, 400% of the Federal Poverty Level is way short of the $200,000 annual income.


The politicians and pundits are correct in one area.  It is impossible to compare health insurance plans that are available in 2013 with those that will be available in 2014 in every way.  The Affordable Care Act requires plans to cover risks that were formerly not provided for everyone.

For example, in my state, Texas, individual health insurance plans are only required to cover “complications of pregnancy.”  Under Obamacare, all health insurance plans are required to cover full maternity.

That is wonderful for those women who become pregnant.  However, I don’t understand how it is fair to force a woman who is not able to have children or a male to pay for maternity benefits.

The only criteria that both pre-Obamacare and post-Obamacare plans share is the co-insurance ratio.

The most popular co-insurance ratio today is 80/20.  That means that after the insured has paid his deductible, the insurance company will pay 80% of future medical bills until the insured’s has paid an additional amount of money, known as Maximum Out of Pocket.  At that point the insurance company will pay 100% of medical bills for the rest of the year.

Unfortunately, the prices that the insurance companies need to charge so they can pay for all the new taxes and benefits mandated by the Affordable Care Act are coming in so high that middle-class Americans who either do not qualify for any “subsidies” or those who only qualify for a small percent of “subsidy,” will have to make a tough choice.

They will have to choose to either pay the additional premium to keep a plan that will cover 80% of medical bills (Gold Plan) or pay close to what they are paying now for a plan that only pays 60% of their medical bills (Bronze Plan).

Alternatives 2