Friday, March 21, 2014

Average Family Health Insurance Cost: $16,351; Obamacare $2,085 Penalty Weak/Unenforceable

Greg Scandlen at the Federalist has an eye opening analysis of the enforcement problems with the individual mandate.

First the penalty even at maximum is a small percentage of the actual cost of healthcare. So, if a young person does not think paying inflated healthcare premiums is a good investment or a family has other places to spend $16,000, the penalty is not a major deterrent.

The penalties are:
2014 - $95 per person or 1% of household income
2015 - $325 per person or 2% of household income
2016 - $695 per person or 2.5% of house hold income
with the maximum family penalty capped at $2,085 (or 300% of the minimum penalty - 300% x $695)

The Kaiser Family Foundation (KFF) study found that in 2013 employer insurance policies averaged $16,351 for families and $5,884 for singles.

The difference between maximum penalty of $2,085 and average family insurance costs of $16,351 is a hefty $14,266. That's a chunk of change, but of course, just making sure you don't have an income tax refund will mean you won't even pay the $2,085.

Scandlen then points out the really big problem with the individual mandate: it is impossible to enforce.
"It isn’t just in health insurance. Auto insurance is mandated in almost every state, but the rate of non-compliance is about 14 percent nationally and in many states the rate of non-insurance for auto (which is mandated) is even higher than for health (which is not). Similarly, with other mandates — child support, helmet laws, seat belt laws, even taxes. Non-compliance is always about 15 percent, even when there are severe penalties such as jail time for violation."
Veronique de Rugy details the political problem with other than the current almost voluntary (via tax refund) penalty. It was specifically designed that way because politicians couldn't stomach the political outrage that would ensue if liens were put on people's property or wages garnished or the non-insured were carted off to jail. If people don't like Obamacare now, imagine the response if they saw their kinfolk, friends or neighbors facing big fines or jail.

The individual mandate is a lose-lose political proposition. It doesn't force compliance, and it irritates and incites defiance of government policies all at once.

The Obama administration delays on enforcing the employer mandate and sections of the individual mandate are creating another problem. With not too many young people signing up to pay a good deal more than their fair share in order to cover older, sicker people, premiums for everyone, as well as deductibles, are expected to take a significant jump.
A survey by found the deductibles on the exchange plans were 42 percent higher than employer based policies. But now, insurers say Obamacare consumers can expect to experience sticker shock from both premiums and deductibles.


MAX Redline said...

Excellent post, TD!

This outlines why I've been saying that if you're relatively healthy, there's no point in signing up for Obamacare; the premiums will eat you alive, while the penalties are insignificant. Moreover, the deductibles, co-pays, and other add-ons increase the financial hit.

There is one positive aspect to Obamacare, however: co-pays and other out-of-pocket expenses were generally not considered as part of your individual deductible, whereas now they are. For many people, a deductible of, say, $6500 is pretty easy to hit when you're paying $50 co-pays to see a doctor and co-pays on prescriptions. To say nothing of specialist rates.

But again, if you're healthy and you play the tax game correctly, you'll come out thousands of dollars a year to the good by not enrolling.

T. D. said...

Exactly right, Max. Unfortunately for the young it's like immensely jacking up life insurance premiums. You probably want something, especially if you have a family, but if you have to pay two or three times as much as it is really worth actuarially, it is not a wise investment. Sure, you may be one of the unlucky few, but the vast majority will save by not getting it--especially if they can set the actuarially sound amount aside.

The same thing with auto insurance. If my rates were jacked up to pay for the young, it wouldn't be a good deal for me--especially if the only penalty was a voluntarily imposed one of taking it out of my tax refund. As it is I've paid in a lot more than I've taken out, but the peace of mind is worth the reasonable monthly rate I pay.

In 2009 the government estimated average 2014 out-of-pocket health care costs per household at $3,300. I'm not sure how accurate that is.

MAX Redline said...

I suspect that's why in a bronze plan, deductibles are $6350 per person.

T. D. said...

Like when social security retirement age was 65 and average life expectancy 58 for men and 62 for women? Planning on a lot of people not getting real use out of their coverage.