Saturday, November 12, 2016

The Terror of Repealing Obamacare

"Repeal and Replace" he said.  But what does that mean, exactly?

One of the asinine aspects of Obamacare was forcing everyone to sign up during a year-end "window" all at once.  This places a burden on insurance companies who have to hire part-time help during "signup season" and then lay them off the rest of the year.

It also means that we sign up at one of the busiest times of the year - the holiday season, but before tax season when we know what our actual income was or tax bill will be.  

(And gee, it doesn't help your re-election chances when the premium increases come out right before election time, does it?)

Right now, Millions - tens of millions - of Americans are trying to figure out what to do with their Obamacare plans.   If Trump follows through with his "repeal" promise in the "first 100 days" of office, it could literally bankrupt millions of Americans.

Let me explain.

Say a family of four makes $50,000 a year.   This is the median household income in America, so it represents a lot of people, some of them Trump voters.

Without the Obamacare subsidy, the actual premium cost of their health care plan would run about $20,000 a year, at least in States like Georgia.   With the subsidy (which is a tax credit), they may be paying next to nothing or only a hundred or so a month.

So they renew their Obamacare plan for 2017, which now has a premium cost of $25,000 with the rate increases.   But again, the subsidy covers most of this cost.

Halfway through 2017, Congress "repeals" Obamacare, or repeals at least the tax subsidy part.   At the end of the year, our family of four has a nasty $25,000 surprise tacked on to their tax bill.   This is half their gross income and they literally can't afford it.  Not only that, like most Americans, they have a mortgage, car payments, credit card payments, and other debts - and not much in savings - and thus are now literally bankrupt.

Oh and yes, the IRS can get really, really aggressive about collecting unpaid taxes.

So repealing Obamacare is going to be tricky.   A straight "repeal" effective immediately, in the middle of 2017, could have disastrous effects on the pocketbooks of most Americans.  Including mine.  A better choice would be to have the repeal effective Dcember 31, 2017.    And some in the Trump camp are saying that plans will be in effect through the end of 2017.   Let's hope they don't change their minds!

I did an estimate on my taxes (again, this is frustrating, as Turbotax won't have its forms ready until December, and the cutoff for renewing Obamacare is December 15th) and it appears that given my paltry income this year, I will get a tax credit almost equal to my premium costs..   Without this tax credit, I would be looking at $13,000 in premiums for 2016 and over $16,000 for 2017.

(I should also note that when I go to the Obamacare signup site or even the Blue Cross site, they show my plans at 2016 rates.   So it is hard to figure out what the actual costs will be.  I already received notice that my existing plan will be $1398 a month in 2017, but the BCBS site and the Obamacare site still show the premiums as $1098.   This is madness).

So to "repeal" Obamacare without screwing a lot of people (millions of them) you'd have to make it effective at the end of 2017 at the earliest.   Repealing Obamacare is not as easy as it seems.

It also means a huge tax hike on the middle class, at least for folks making under $63,000 a year.   If they want to keep their health insurance after Obamacare is repealed, they will lose their tax credit, and their tax bill will skyrocket.   And since premiums are not likely to go down (as explained below), it means tens of millions of people will lose health care coverage in the next few years.

But wait, it gets worse.  Trump has said that he "likes" certain aspects of Obamacare.   Problem is, Obamacare is an interlocking set of rules and laws that like a Jenga stack, can't be pulled apart without the whole thing falling down.

Consider, for example, pre-existing conditions.   Trump says he likes this aspect of the law and wants to keep it.   However, it is one of the problematic aspects of Obamacare.   Without the subsidies to make the plans affordable and without the "penalty" tax forcing people to sign up, the pre-existing conditions portion would be unworkable.

Let me again explain.

One criticism of Obamacare is that many folks still haven't signed up.   If you make more than $63,000 a year, you get NO subsidy, making a $20,000 plan kind of unaffordable.   So many are making the logical choice, if they are healthy, to simply go without a plan, pay the "fine" and then sign up for Obamacare if and when they get sick.   Since there are so many exceptions to the "signup window" this is a somewhat feasible, if not risky option.

Now, say we get rid of the subsidy and the fine, but leave in the pre-existing conditions, as Trump said he wants to do.   Now there is literally no point in getting health insurance whatsoever, so long as you are reasonably healthy.   If you get cancer or hit by a bus, you simply sign up for a health insurance plan and since pre-existing conditions have to be covered, you are covered.

As some have noted, this makes as much sense as selling life insurance to dead people.   You have to pay out 100% of the time.

The net result is, if we abolish Obamacare, but keep some aspects of it such as pre-existing conditions, not only will costs not go down, they will skyrocket.   Insurance companies will charge the same sky-high premiums as before, but now, without subsidy, no one will be able to afford them.

(Oh, and since everyone is losing their Obamacare plan, anyone with a pre-existing condition will find themselves shit-out-of-luck if they try to sign up for a new non-Obamacare plan, if we don't preserve the pre-existing conditions aspect of it.   We are literally "damned if you do, damned if you don't".  Governing, it turns out, it a lot harder than tweeting).

It makes no sense.   You can't just pull this thing apart piecemeal or take what you want, cafeteria-style.  And sadly, that is exactly what Trump now wants to do.   A total repeal, effective December 31, 2017, would be a better choice.

Of course, his followers will have none of this.  They want Obamacare repealed right now!   Which is fine for them, because they are (as the lady quoted in the article linked above) on Medicare, which isn't socialized medicine and donchuforget it, buddy!

Obamacare was an incredibly complex little clockwork mechanism, and the GOP wants to "repair" it with a hammer, but keep some of the broken pieces as keepsakes.   It will spell disaster for middle-class Americans, who once again must struggle to figure out whether they can afford health insurance at all.

Myself, this is giving me ulcers, which is why I am writing this at 3:00 AM instead of sleeping.   How do I prepare for this?  Should I cancel my plan?  Should I sign up for a new one?   Suppose I ring up a $15,000 health insurance premium bill for 2017 and then the GOP pulls the rug out from under me by cancelling the tax credit halfway through the year?  Would the credit be pro-rated?  Completely abolished?  What?

And the answer is, well, we simply don't know as our elected officials don't seem to understand how these plans affect ordinary Americans.   Obamacare is like a roller coaster - you can't just get off halfway through the ride without some dire consequences.

Simple solutions to complex problems are usually the wrong answers.   And the idea of "repeal and replace" sounds like a simple solution, but it could literally bankrupt millions of people unless it is enacted in a way that allows people to exit the roller coaster in an orderly manner.

Keeping some but not all of the Obamacare provisions would be a disaster as the "pre-existing conditions" limit would drive premiums through the roof, resulting in more people dropping health coverage (unless they get sick) which means premiums would spiral even higher as only sick people would have health insurance.   It simply doesn't make any sense.

But I am expecting sense from Donald Trump.   And that is what is giving me ulcers.