What's In It for Me? (At $45,000 a Year.)

by Tim Foley

categories: For Profit Insurance, National Health Exchange, Public Plan, The Uninsured and Underinsured

Published July 25, 2009 @ 05:08PM PT

On a previous post, Mark Barnes wrote in the comments, “No matter where I go, I never find details pertinent to the individual.  Could someone please tell me what the House Democrat plan will cost me?”  I emailed Mark and asked if I could get some more information in order to answer his question in depth.  The results are below.   Big disclaimer – I only asked enough questions of Mark to get a rough idea of his life situation.  So my answers are about someone generally in Mark’s situation and may not be his exact situation.  I’m applying the most likely -- and usually the most conservative -- numbers in evaluating what health care reform means for Mark based on the House Bill HR 3200.  This is a thought exercise based on the proposals on the table, and a thousand variables could change between now and the implementation of a health care reform bill -- including what's in the bill!

Keep in mind the reason that I was motivated to write about his case is because it’s atypical.  Mark is single and uninsured, but works full time and makes over $45,000 per year, placing him solidly between 400% and 500% of federal poverty.  I’m counting Mark as an individual – if you’re a family of four, it’s the equivalent of making $91,728 a year.  The majority of the uninsured are under 400% of poverty, and the House bill is set up to address their situation directly.  People who make just $3,000 less than Mark does will see huge benefits.

But this is the challenge – what are the benefits in health care reform for someone like Mark?  What’s in it for him?

The Present

First, let’s explore Mark's situation in the here and now.  How atypical is it to be uninsured at this income level, exactly?  Well, there are approximately 2.5 million Americans in the same boat according to the studies done by the Department of Health and Human Services – that’s the smallest uninsured rate for all of the income “bands” measured by HHS.  Nevertheless, you may be surprised that someone so solidly middle class who works full-time is uninsured – so is HHS:  “That the uninsured comprise non-trivial percentages of middle and upper income individuals is surprising. Those with incomes above 300% of poverty should generally find employer insurance affordable.”

Ah, but there’s one of the big problems with employer-based insurance.  Mark is what’s colloquially called a “permatemp” – someone working full-time on an ongoing, permanent basis, but as a “contract” employee.  The number one reason why companies hire permatemps is to avoid giving them benefits, including health insurance.  Why?  The high cost of health care.  Mark is above the age of 50 and lives in San Francisco.  I googled through some online insurance brokers.  To get a comprehensive plan that includes primary care, has a deductible under $2,500 and no office visits, the bids ranged from $4,560 for Kaiser to $7,404 for Anthem Blue.  (By the way, Mark, I’d warn you against buying from Anthem Blue as an individual, as those in the Bay Area were socked with a 30% increase in premiums this year.)  That’s between 10% and 16% of Mark’s salary.  Quick note – I’m not doing a check on insurance plans with super-high deductibles or that don’t include doctor’s visits.  That’s the very definition of “underinsured,” and I want Mark to actually benefit from having health care.

I explicitly avoided asking about the rest of his financial situation, so I don’t know what other factors make getting a good plan difficult for him.  I also didn’t ask about his health situation – suffice to say, in the individual market he could well be rejected on the basis of pre-existing conditions.  If not rejected, he could have his rates raised substantially – as much as $25,000-$30,000 per year, which would clearly be out of reach – to compensate for him being a sicker customer.  The deductibles are in the $2,000 range, but he has no cap on out-of-pocket expenses.  A three-week long hospital stay for a catastrophic illness will wipe him out financially.  And the process of rescissions makes it a little too easy for his insurance policy to be canceled.  His insurance dollars don’t buy a lot of security if worse comes to worst.

All in all, Mark may suck it up and get health insurance, but he won't know how good it is until he gets sick.  One last thing?  This situation is not static -- it's actively getting worse.

The Future

Congratulations!  HR 3200 has passed, the major provisions have all been phased in (it’s probably 2013 now).  What options does Mark have now?  And, more to his question, is it possible health care has made his life worse?

Before we get to how different life is for Mark, the question is how different life is for his employer.  Specifically, the employer mandate has come into play (unless Mark’s employer is a small business).  As a permatemp working more than 35 hours, Mark counts as a full-time employee.  Either the company he’s contracted out to or the placement agency would therefore be on the hook for $3,600 as a fine to the federal government if they don’t offer him insurance.   I don’t have San Francisco-specific numbers, but Kaiser Family Foundation cites the average employer contribution as $4,704 – only an extra eleven-hundred bucks.  Will that change their decision to offer benefits to Mark?

Let’s say that it doesn’t.  Mark will have access to the National Health Exchange.  He’ll have an array of private insurance plans that he’ll be able to get (no pre-existing condition exclusions) and keep (no rescissions).  Let’s say the premiums will be identical to the Kaiser and Anthem options he has now.  His out-of-pocket calculations will change.  He won’t have a deductible, no co-insurance, and he won’t pay a co-pay on primary care, including doctor’s visits.  The private insurance company may charge him more in premiums if he's likely to be sick, but it will be more like $9,000, not $30,000.  His out-of-pocket expenses will also be capped at 11% of his income.  In short, even if absolutely nothing else has changed, his insurance comes with more security.  There’s more value to it.

One of the options for Mark will be the public health insurance option.  The conservative projections for its cost savings (and remember, the Congressional Budget Office has scored it a cost-saver for the reform package as well) suggest it will be 10% less.  So let’s say it’s $7,404 for Anthem Blue, $4,560 for Kaiser, and $4,104 for the public plan ($342 per month, no deductible, no co-insurance, no co-pay for primary and preventative care).  With more bang for the buck, does that change Mark’s thinking on whether it’s worth it to buy insurance?

Last piece of the fiscal puzzle – what’s called the “individual shared responsibility” payment.  If, after all this, Mark does not get health insurance through the Exchange, he’s subject to a fine of 2.5% of his income -- $1,125.  That payment is low enough that Mark may well decide he still can’t afford insurance and would rather take the fine. But he could also apply for a “hardship deferment” based on his individual financial circumstances – and he’d probably get it.  Massachusetts has a similar individual mandate and since their subsidies cut off at 300% of poverty, the number of exemptions is high.

Of course, if Mark does go ahead and purchase insurance, there’s so much we’re leaving out in terms of reforming the health care system, provisions that will bend the curve on costs, lead to more doctors and nurses as well as better-trained doctors and nurses, and create stronger consumer protections -- all of which he'll benefit from.  But I think very few people have a real sense of what those are and how they stand to benefit (but you can start reading about them here).

In a nutshell, if Mark made $3,000 less per year, it’d be a slam-dunk for him to support health care reform in the House bill.  It’s not a slam-dunk, but it’s an interesting world he’d inhabit, where the basis of decisions made by him and his employer would be less simple.  One thing's for sure -- the value of his health insurance would be more -- he'd get more out of the deal than he would get today.

It’s not an easy answer – but if it’s not an easy answer for those above 400% of the poverty line, how much easier is it for those below?

Also see:  Is the House Bill a Good Deal for the Sullivans?

(Photo credit:  punkjr on Flickr.)