Monday, March 22, 2010

Health Plan Details - When Being Uninsured is Cheaper

The Chicago Tribune has posted brief synopsis of the major points in the health care bill. These are all useful things to know. Something to note for everyone - paying the 2.5% penalty for not having insurance may cost you much less than buying insurance. Here's why;

First of all, those who fall in the Medicaid target zone are not considered here. Now, run your salary and expense numbers on a spreadsheet. Insurance premiums for individuals are estimated to run from ~$2,600-$7,900/year. Family premiums are estimated at ~$7,000-$21,000/year. The penalty for not having insurance is either 2.5% of income or $695 (and the article doesn't say whether 2.5% or $695 is the ceiling). If you don't qualify for a subsidy (individual or family), or even if you do, it may be to your financial advantage (if you are healthy and want to take the risk) to just pay the penalty if it is substantially less than the best premium you can get.

Given the downward pressure on compensation, I think we are going to find a solid number of working poor who won't qualify for a subsidy, aren't terribly healthy, and are unable to afford the premiums. I can think of at least one person in my family that this might apply to. These folks will pay the penalty instead, and for what? For occupying the Twilight Zone by being too rich to qualify for a subsidy and too poor to pay for it on their own?

It will be very interesting, as time goes by, to see how many people (and businesses) decide that paying the penalty is what they can live with. I am not making odds here or proposing numbers, but I don't think it will be insignificant and I do think that a thorough analysis of that demographic will be called for as it emerges. The rest of us will continue to pay for the uninsured, and there will still be plenty of uninsured to pay for.

I have to believe that a single payer option would avoid all this complexity. I wonder whether a public option would make a difference. Perhaps we'll find out one day.

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