Tuesday, March 23, 2010

How the Individual Mandate Will Affect the Newly Unemployed

CNN does a great job at looking at some of the cost cutting measures that were included in the health care bill. They also broke down how the individual mandate will work. More after the jump.

Penalties for those who don't get coverage: Like the Senate bill, the reconciliation bill would impose a financial penalty on most Americans who don't buy health insurance.
Come 2015, individuals who choose not to buy insurance would pay the greater of $325 or up to 2% in income ($695 or up to 2.5% in income thereafter). Those whose incomes are low enough that they are not required to file a tax return would be exempt from this requirement. The CBO estimates this provision would raise $17 billion over 10 years.
It'll be interesting to see how the penalty for not having insurance is assessed on those who are recently newly unemployed and unable to afford COBRA. Would those individuals have to pay a fee for lacking insurance even though they had it and lost it through no fault of their own? There should at least be a window in which an individual could transition from their employer-based plan to a self-funded plan and avoid the fee in the process. They shouldn't be penalized twice - once for losing their insurance and again when not having it.

Also, will COBRA be improved, or will the portability issue be addressed in a worthwhile manner later on? Sure, the health exchanges  will ensure that folks can receive coverage (and that pre-existing conditions will not prevent them from being insured). But what about the costs? What about the transition from employer-based care to self-funded care? Aside from the window preventing a fee from being assessed, there needs to be clear cut bridge from one to the other. The exchanges will have four different levels of benefits and costs. However, what if there is a level that is unaffordable but is needed? Let's say it includes a "benefit" that is a necessity due to a pre-existing condition (which was previously covered under the employer-based plan without any additional fanfare), what is a family in that situation to do?

This is where the subsidy comes in. The Christian Monitor writes:
Uncle Sam would help many lower- and middle-income Americans purchase their health coverage. The cutoff level would be an income of four times the federal poverty level. For one person, that’s about $44,000 a year. For a family of four, the comparable figure is about $88,000.
Subsidies would be figured on a sliding scale, with those who make less getting a bigger boost and those nearer the top getting a smaller one.
The formula is pretty complicated. Basically, though, people who make three or four times the poverty level would get enough federal money so that they would not have to pay more than about 10 percent of their income for a decent health insurance package.
People who make less would have to pay a smaller slice of their income for coverage. For instance, individuals who make about $14,000, and four-person families with incomes of about $29,000, would not have to pay more than 3 to 4 percent of their incomes for insurance.
 And those who make even less – under 133 percent of the federal poverty level – would be able to enroll in a newly expanded Medicaid program. The federal subsidy would go straight to the insurer. It would look like a discount on the policy to the customer.
So unless a family made more than the cutoff they would receive assistance that would guarantee they pay no more than 10 percent of their income. How their income is assessed - whether by looking at the previous year's tax return or current wages is another matter.

The bridge from employer-based insurance to self-funded insurance isn't as clear cut as it could be. But this is a great start. Much much better than COBRA, which is unaffordable for most families. This is probably why some Democrats (Dennis Kucinich comes to mind) preferred universal health insurance and voted against the current bill (before being personally persuaded by Obama).

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