Under new law, health coverage might still be unaffordable

From The Fort Worth Star-Telegram, By Brian Faler (Bloomberg News) December 2, 2012 –

Barack ObamaWASHINGTON — To Megan Hildebrandt, President Barack Obama’s Affordable Care Act means that she can no longer be denied health insurance because of her lymphatic cancer.

There’s a catch: Coverage for the 28-year-old Texan and many other Americans without insurance will come at a potentially unaffordable cost.

Hildebrandt, who relies on hospital charity, will face more than $1,000 in annual premiums, by one estimate, and probably more in out-of-pocket expenses, even with new federal subsidies. She and her husband have a combined income of $25,000.

“It’s great that I’m not going to have to pay some hugely impossible amount,” said Hildebrandt, an artist who lives in Austin. “Though now I’m in the healthcare system and still have to pay money that we can’t really afford.”

The landmark law, which survived the threats of repeal and a Supreme Court review, now confronts another hurdle: living up to expectations.

As the administration spells out the details, many uninsured people will be surprised at how much they will have to pay. It may involve “very substantial amounts,” and “there still will be a significant number of people who can’t afford health coverage,” said Ron Pollack, head of Families USA, a consumer group that backs the law.

A family of four earning $75,000 will pay $7,125 in annual premiums and up to $8,333 in co-pays and deductibles, according to a preliminary estimate by the Kaiser Family Foundation.

A single 40-year-old earning $30,000 will pay $2,509 in premiums and up to $3,125 in cost sharing. For a 60-year-old making $40,000, the amount will be $3,800 in premiums and up to $4,167 in out-of-pocket costs, according to Kaiser.

Those costs will come even as the government spends about $1.16 trillion over a decade to expand coverage to 30 million uninsured people.

“People are often surprised at how expensive health insurance is once they have to pay for their own,” said Karen Pollitz, a senior fellow at Kaiser Family Foundation. “The subsidies will make that better, but they won’t make the cost disappear.”

The administration recently unveiled regulations to implement the ban on discriminating against those with pre-existing conditions. Insurers would be limited to varying premiums by age, family size, geography and tobacco use.

To be sure, the costs will be far less than what many with pre-existing conditions would pay without the overhaul.

The law is also designed to reduce expenses for those who already have insurance because hospitals providing charitable care make up those costs by charging others more.

“While we’re only dimly aware of it, we all pay,” said Robert Reischauer, former director of the Congressional Budget Office. “There shouldn’t be free riders.”

What’s more, provisions in the law cap the financial burden the requirements will impose on the uninsured.

If costs exceed 8 percent of their income, they are exempt from the individual mandate to buy insurance. And people can choose to pay a penalty instead of buying insurance.

The fine would be $695, or 2.5 percent of a person’s income, whichever is greater.

The law, enacted in March 2010, requires virtually all Americans to have insurance by 2014.

It will expand coverage to the uninsured by offering them subsidies to buy policies through health insurance exchanges and making it easier for lower-income people to qualify for Medicaid, the federal- and state-funded insurance system for the poor.

Consumers’ expenses may climb because of a cost-cutting provision inserted in the law that will reduce federal aid to the uninsured if the subsidies exceed a certain threshold — defined as 0.504 percent of the gross domestic product. The Congressional Budget Office says it expects that to happen.

In 2019, some families could see their premiums climb four times as quickly as the help they receive from the government, according to the CBO.

That means they will have to bear a larger share of the burden of buying coverage.

“That will be a major challenge,” said John McDonough, a professor at the Harvard School of Public Health.

“It makes the affordability picture far worse.”

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