According to a recent Kaiser Family Foundation report, tax credits to buy medical coverage next year will average $5,548 per subsidy eligible family under the Affordable Care Act, a benefit that will make the plans more affordable than some critics have predicted.
The subsidy should reduce the cost of the premiums by about 32% on average for people buying the second-lowest priced plans through state-by-state insurance exchanges set for open enrollment Oct. 1 for coverage effective Jan. 1.
Individual premiums in the exchanges are expected to rise in states where individual markets currently insure the chronically ill in state risk pools, partly because of the requirement that insurance exchanges include coverage for the chronically ill and partly because the maximum premium ratio for older individuals can only be 300% more than younger, healthier individuals. The increased premium changes reflect the "sticker prices" and ignore tax credits available to people earning less than four times the poverty level, about $94,200 for a family of four, Kaiser says.
"Tax subsidies are an essential part of the equation for many people who buy insurance through the new marketplaces," says Drew Altman, chief executive officer of Menlo Park, Calif.- based Kaiser. "They will help make coverage more affordable for low- and middle-income people."
HHS has said it wants to see about 7 million people enroll in plans through the exchanges next year, including at least 2.7 million who are young and healthy. That's necessary to balance the cost of covering the chronically ill. About 24 million people are expected to get their coverage from exchange plans by 2023, according to the Congressional Budget Office. If the systems are not too complicated, I would expect to see many more people take advantage of the premium subsidy once they understand how the system works.
About 48% of people who currently buy insurance as individuals, instead of getting it through work, will be eligible for subsidies to reduce their premiums next year, Kaiser says. Those tax credits will average $5,548 per family for that pool of people. If the anticipated 7 million families receive subsidies, and the average is correct the annual costs of the subsidies next year will be $38,836,000,000. If the CBO estimate is correct and by 2023 twenty-four million people are receiving subsidies, the annual costs of the subsidies will be $127,604,000,000.
The reported premiums and subsidies are what customers can expect for plans that go on sale Oct. 1 and take effect Jan. 1, 2014. Expect the number of people receiving premium subsidies to be much higher once employers understand how their lower paid employees can benefit by purchasing insurance in the exchanges. Also, expect the fully insured individual insurance pools to be negatively impacted by the flood of chronically ill patients entering the standard insurance markets.
The long term problem will be how to pay for the increasing number of people receiving Medicaid and premium subsidies, while at the same time paying higher premiums to extend unlimited coverage to the chronically ill. The system could probably absorb one or the other, but both of these massive cost increases simultaneously will require far more funding than the politicians have projected.
