Over the coming few weeks and months, the focus within our industry will clearly be on the repeal and replacement of Obamacare. There is a tremendous amount of energy being spent on speculating about what might happen.

At present, the Affordable Care Act provides subsidies to individuals who qualify based on their income level and family size at a range of 100% to 400% above the federal poverty level. The table below consolidates information from healthcaremarketplace.com using 2016 data. The table lists the income level, household size and maximum out-of-pocket limits using the ACA's silver plan, also known as the benchmark plan. The key takeaway: A significant amount of an individual’s gross take-home pay will be used to cover their out-of-pocket maximums, assuming they use the plan for medical care.

Household Size

100% FPL

Max out of Pocket

400% FPL

Max out of Pocket

1

$11,880

$6,600

$47,520

$6,600

2

$16,020

$13,200

$64,080

$13,200

3

$20,160

$13,200

$80,640

$13,200

4

$24,300

$13,200

$97,200

$13,200


This table shows that individuals may not have the disposable income to cover their medical expenses, assuming they have other expenses (food, housing and transportation, for example).

This also does not consider if the individual who is purchasing the plan had to use any of their gross income to pay for the premium for the plan. The average premium for the silver plan was $4,583 in 2016 and the average subsidy was $3,492 for the 9.4 million Americans who purchased health plans through the ACA, according to the Kaiser Family Foundation. If we net the two, this means they paid a total of $1,091 from their disposable income.

Bloomberg/file photo

Also see:2017’s toughest jobs to fill.”

Considering the out-of-pocket expenses and the premium costs after subsidy, is this plan affordable to the individuals in the categories above?

Addressing affordability
As a new plan is presented for debate and discussion by the Trump administration — with the goal of building an affordable plan — here are my questions:

  1. With respect to healthcare costs, there are two key drivers. One is consumption, which is defined as the number of medical services and prescription drug services are consumed. The second is the price for each service. The equation is units times price equals cost. How is any new plan going to manage the units consumed — short of rationing or establishing a que system to receive services as a strategy?
  2. Price per unit is a function of costs borne by the provider of a service or the producer of product. Short of price controls as a strategy, what is the detail in the plan to control costs?
  3. As to affordability: What tax credits/deductions or subsidies exist in the future to fund the goal of insurance for everyone? What will be the insurance market reforms (specifically those that address premium rate setting and benefit mandates, which are linked to one another) in the local markets? What will be the insurance carrier reforms (selling across state lines, for example) and the state regulator involvement in the future? How will this affect the networks that consumers/patients can access? What prohibitions will exist, if any, as it relates to health savings accounts?
  4. Employer and employee stakeholder groups: What mandates, regulations, penalties and reporting requirements are they to own and meet?
  5. Individuals participating in the individual marketplace: What financial relief will be provided to purchase a product and to access their benefits? Will they be able to tailor their benefits to fit their needs or are they subject to mandated benefits?
  6. Hospitals and physicians: From the financial standpoint, what impact, if any, will this have on their uncompensated care costs, costs that work their way back into the insurance payment system? How is the ‘patients first’ concept translated in improvements into cost and quality?
  7. State insurance regulators: What level of authority will they have over the insurance reform provisions in their state?
  8. Technology companies (payroll, benefit administration) have made tremendous investments to conform to the rules and requirements. What happens next?
  9. For advisers: How do they adjust to the new world and what is the impact to their business models?

With the new administration committing to repeal and replace Obamacare, we are all left to wait and see the details of the plan — and adjust accordingly.

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Perry Braun

Perry Braun

As Executive Director of the Benefit Advisors Network, Perry is responsible for assisting privately held employee benefit brokerage firms improve their performance and profitability.