Why are 10.5 million Americans who are without health insurance coverage that qualify for Affordable Care Act subsidies willing to pay a minimum $695 fine?
The answer is simple. It comes down to money.
Here’s an example of a local 22-year-old. He works in the biggest combined source of private sector jobs in the area— retail, service industry, and food service. He got hired two years ago after searching for steady employment for nearly as long. He got a pay raise to $12 an hour. That’s $3 an hour above minimum wage for California and is considered decent pay for relatively low-skilled jobs in the region.
He has been averaging 33 hours a week and is on target to gross $20,592 for the year. He will end up paying just over $2,600 in income and payroll taxes bringing his take home pay down to $17,992. He qualifies for a $1,514 ACA subsidy. If he chose the middle of the road silver plan costing $2,535 with the insurer paying 70 percent of medical costs based on the Kaiser Family Subsidy Foundation Calculator, he will pay $1,021 for coverage. That would bring his available income down to $16,971 a year or $1,414 a month.
Since he lives in Manteca, renting an apartment on his own is out of the question. If you can find one, the cheapest one-bedroom is going for $900 a month with the majority pushing $1,100. And if he did rent, he’d enjoy paying some of the nation’s highest electrical rates via PG&E. Instead he rents a room for $400 a month. That brings him down to $1,014.
He spends just over $100 a week on food, dropping his available money down to $600. Then there is his cell phone and Netflix. That leaves him with $525. Insurance for his car brings him down to $450. He’s not a monk and he’s a 22-year-old so there’s entertainment expenses to consider. This easily eats up another $200. Then there is the issue of gas, occasional car repairs, clothing, personal hygiene products and what’s left over is well under $100.
Then there are eye glasses and dental care not covered by the basic silver plan.
So the way he looks at things are as follows:
— He’s healthy and young.
— If he did need medical care he has no money to pay for his 30 percent share even if out-of-pocket costs are capped at $6,000 a year.
— He doesn’t really feel the pain of the $695 penalty for not having insurance as it simply reduces the amount of his federal income tax refund.
— He’s $326 ahead by not buying insurance.
— He wants to save up money to rent his own place to live or at least be able to do so with a friend. But even having a buddy share an apartment with him will increase his monthly housing costs by at least $150 a month.
You and I may look at his situation and think you never know when you are going to need insurance, and believe he spends a tad too much on entertainment.
But even more practical are the folks at the Health Human Services Department. This month they put out a revised projection of enrollees in state insurance exchanges for 2016. Originally the current 9.1 million enrollment was expected to reach 10 million by the end of 2016. Now that number is being placed at between 9.4 million and 20 million.
Without those people — more than half between the ages of 18 and 34 — premiums for those currently in state exchanges are expected to skyrocket. That’s because just like the local 22-year-old, they are young and healthy and indeed rarely need medical care. Their premiums are critical to offset the costs of caring for others that are older and tend to need to see the doctor more often as well as those with ongoing health problems that are now covered by the ACA exchanges.
Basically, we have another federally mandated program in place that is a ticking financial time bomb much like Social Security. It is not sustainable without large increases in revenue or decreases in benefits or services.
The ACA wasn’t what one would call well thought out. It was pitched as making health care coverage affordable but in reality it is simply a way to bring payment certainty to hospitals and others that provide medical care.
Nothing was done to address costs that come down to basic supply and demand: There are too few general physicians and too many patents. Ironically with the way insurance has been changed, it creates an atmosphere that isn’t conducive to making being a medical doctor attractive. Putting further financial squeezes and even more bulky paperwork on primary care providers isn’t exactly the best way to improve or expand health care.
Then there is the issue of fairness, of which the ACA subsidies are not. If you live in Manteca under the shadow of the most expensive metro region in the country — the San Francisco Bay Area — your cost to cover the basics such as shelter and gas is significantly higher.
The lowest one bedroom apartment in St. Louis listed on Internet sites, as an example, is $390 a month. The lowest is Manteca is $755. The person making $20,000 a year gross in St. Louis is going to have $365 more in their pocket each month, making the $85 a month to match the ACA subsidy to obtain healthcare much more affordable.
As Ollie might say to Uncle Sam, “Well, here’s another fine mess you’ve gotten me into.”
— This column is the opinion of Dennis Wyatt and does not necessarily represent the opinion of The Journal or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.