Joe Gibialante’s health insurance premiums are so high that people think he must be fibbing about them.
Before the Affordable Care Act went into effect in 2014, Gibialante, 53, an estate manager who lives in Bethesda, Maryland, paid about $2,300 per year for insurance that covered him and his wife, with a $1,000 deductible for each. Premiums have soared since then, and he now pays $13,000 per year for a plan with a $6,550 deductible per person. “I’m driving an older car than I’d like, we’ve trimmed back on holidays and we’ve cut all charitable giving,” Gibialante tells Yahoo Finance. “What really frustrates me is whenever I get in a conversation about this, I get told, ‘you’re lying. No way.’ People just don’t believe this is the case.”
The Affordable Care Act, aka Obamacare, has helped about 20 million Americans gain health insurance coverage, and lowered costs for others. But the law came with glitches that have caused huge cost increases for a subset of the insured public that numbers perhaps 1 million Americans. Congress could tweak the law to help those being pinched by it. But that’s not on the agenda in the Republican-controlled Congress or President Trump’s White House, where the only options seem to be an outright repeal of the law or a major rollback. If the GOP repeal bills fail, which seems likely, Trump has said bluntly, “we’ll let Obamacare fail.”
The ACA benefits lower-income Americans the most, since they qualify for the most generous subsidies that help cover the cost of insurance. Subsidies decline as income goes up, and disappear completely for people who earn more than 400% of the poverty level, which this year is $48,240 for an individual and $98,400 for a family of 4. There’s another catch above those income levels. Up to 400% of the poverty line, federal subsidies are supposed to cover the incremental cost of a benchmark plan once it exceeds 9.69% of income. Above that level of income, however, there’s no limit on the cost of insurance, even if it were to eat half of your paycheck. This “middle-class cliff” is one reason the ACA began as an unpopular law and still enjoys only tepid public support.
About 28 million Americans buy coverage on their own, without the benefit of an employer plan. Roughly 9 million of those folks qualify for Obamacare subsidies. Of the rest, it’s hard to know how many are grappling with sharply higher health-insurance costs, but health care analysts estimate that it’s 1 million or more. They tend to be middle-class professionals between 50 and 64 who work as independent contractors, small-business owners, or employees of a small business that doesn’t offer coverage. “This is really hitting people between 400% and 500% of the poverty line,” says John Holahan of the Urban Institute. “It’s a real cliff, and if you’re on the wrong side of that cliff, you’re getting hammered.”
Earning too much for subsidies
Jill Ballion, 51, is a certified public accountant in Chandler, Arizona who left a stable job with insurance in 2013 for a position at a startup she felt would be more exciting. The startup didn’t offer insurance, but she found reasonably priced coverage for around $300 per month in the individual market–even though she earned too much to qualify for ACA subsidies. That insurer pulled out of her area in 2015, however, and she spent a year on a plan with a $6,800 deductible that required her to pay for all routine care–including preventive visits–out-of-pocket. Then she left her job to take care of ailing parents. She still does some consulting, and her income last year was too high to qualify for ACA subsidies this year. With a lower income now, she decided to go without insurance in 2017. “I’m just priced out,” she says. “For the first time in nearly 52 years, I don’t have any insurance. I’m probably going to have to find somebody to work for who has insurance, because I need the insurance more than I need the money.”
Obamacare critics argue that the best way to address the high cost of unsubsidized individual plans is to fully repeal the law. That would force millions of people currently buying subsidized care or receiving care through Medicaid into the normal individual market, alongside people like Ballion. A larger pool of people shopping for insurance, in theory, would help stabilize rates. It would also help, critics say, to kill an Obamacare provision requiring every policy to offer a wide range of benefits and let consumers shop for coverage a la carte, paying only for coverage options they want. The problem with this critique is that more people would end up priced out of coverage altogether under the GOP plans, with young, healthy people foregoing coverage. Insurance pools including a larger portion of older, sicker customers would be more costly, by definition.
‘It just needs to be fixed’
But many people struggling with the high cost of individual plans don’t think the solution is repealing Obamacare. “What’s in place does work for some people,” says Kristin, 45, a systems analyst in northwest Connecticut who asked that her last name not be used. “It just needs to be fixed.” Kristin got laid off in 2015, and would have foregone insurance in 2016, except she’s a cancer survivor who needs frequent checkups. So she bought a high-deductible plan and ended up spending about $12,000 out-of-pocket last year—$9,000 more than the year before. She got a new job this year with insurance, which lowered her costs. But she still has friends dangling over the middle-class cliff, including one family paying nearly $20,000 per year for coverage. “I was 100% behind this act,” she says. “My problem is that this act does nothing for the middle class. It needs to be fixed. Not replaced. Not repealed. Fixed.”
A group of six Democratic senators wants to do that. They recently proposed a change to the ACA that would cap the amount any individual or family must pay for health insurance at 9.69% of income—the same level for somebody at 400% of the poverty line. Above that, government subsidies would kick in to help defray the cost. Other Democratic proposals would help iron out inefficiencies in the individual market, to lure more insurers and reduce costs through competition.
Those proposals have a dim future, however, since Republicans show no interest in improving the ACA so it functions better. As the politicians bicker, ordinary Americans improvise. “I have a new mantra for 2017,” says Ballion. “’If I get sick, I hope I die quick.’” No wonder voters are fed up with Washington.
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Editor’s note: This story has been corrected to indicate that approximately 28 million Americans buy health insurance on the individual market, not 9 million.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman