If anyone thinks the newly proposed health care reform means “free government insurance for everyone,” think again. While some folks are going to get an amazing subsidy, many others will end up paying more than ever. Evidence for this can be found in the Senate version of the health care bill. Outlined here are two of the formulas used to calculate “premium credit” to help citizens pay for health care. As you consider these premium calculations, see how one family ends up paying over 3400% more for health insurance than another.
 

Understanding Premium Credit

On page, 82, of the proposed bill, it is stipulated that as long as a family’s modified adjusted gross income is less than 500% of federal poverty guidelines, that family need pay no more than 10% of its gross income for qualified health insurance. If the family pays over the 10% threshold, the family may qualify for a premium “credit” on the excess amount.

To translate this stipulation into more concrete terms, you must refer to the federal government’s poverty guidelines. In 2009, the federal guidelines say a family of five is impoverished if the family’s annual income is $25,790, or lower.

  • So, based on the formula, 500% of $25,790 is $128,950. Make less than that, and you may qualify for a premium “credit.”

However, a family with an income of $128,950 can qualify for a credit only if that family’s health care premiums exceed 10% of their income. In such case, 10% of $128,950 is $12,895. The credit amount would only help pay for premiums that are over the $12,895 threshold. So, no matter what, the family will at least be on the hook for the first $12,895 in premiums.

Qualifying for the Lowest Premiums

Now consider the guidelines establishing health insurance premium levels for a “low” income family. In this stipulation, a person (or, family) will pay no more than 1% of their modified adjusted gross income for qualifying health insurance, as long as their income is less than 150% of the federal poverty guideline.

Translating this into real life terms, look again at family of five. As in the last example, the 2009 federal poverty guideline for this family remains at $25,790 per year in income.

  • Based on the formula, 150% of $25,790 is $38,685. Make less than that, and the family gets a health insurance premium equal to no more than 1% of its income!

So, a family of five with an income of $38,685 would be required to pay only $386.85 per year for health insurance. Incidentally, a person has to make over $19 an hour in order to make $38,685 per year – that’s more than two and a half times the current minimum wage.

Comparing the Numbers

 

Let’s compare the numbers between the two families we have just discussed:

  • One family has to pay $12,895 annually for health insurance, while the other family only pays $385.85.
  • One family makes 3.33 times more income than the other, but is required to pay 33.45 times more for health insurance. That’s over 3400% more.

So, who pays in the proposed health care reform? The answer is “working” families – especially those who are college educated, professionals, and /or small business owners. These folks are going to pay excessively for health care premiums under the proposed plan while many lower wage earners will be over subsidized. $385.85 a year works out to be $32.15 per month. This is less than most low wage earners pay for cigarettes, cable television or for cell phones.

In addition, new money will have to be raised to subsidize other elements included in the proposed bill. The bill enacts a tremendous government expansion in current and new health care programs that are well beyond the scope of the basic health insurance premiums we have discussed. Such funds can only come from folks that aren’t in the lower end of the income spectrum. Therefore, not only will many families pay 33.4 times more for the same health insurance as other families, but they will likely pay higher taxes too.

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Filed under: Health Care Reform

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