Should I Buy Obamacare Insurance?

[prof61820]

I'm a proponent of the concept of Obamacare but the more I look at the prices and coverage options the less I think it's the best financial move for a healthy, student debt laden millennial with no assets and a job that takes them out of the ACA's subsidies.

For purposes of discussion, let's assume the millennial will pay a $300 per month premium and an annual deductible of $5,000.

Should a single, healthy millennial with no personal assets, $80,000 in student debt and job that pays $85,000 per year (a) purchase health insurance or (b) should they pay the penalty, self insure and take the cash saved on premiums to pay down their student loan debt?

Since the same millennial can now get insurance coverage a month or two after they get ill, it seems to me that strategy "B" is the smarter use of a millennial's money.  Is this correct?

By the way, I truly would love to be proven wrong here - but from a financial perspective...

So as a millenial making $85k/yr, who cares about paying off their student debt quickly, it shouldn't be that hard to throw $20-30k/yr at your debt, even after paying $3.6k/yr in health insurance premiums. So depending on your interest rate, it'll probably take you about 3-4 years to pay that off. If you forego health insurance, thus saving the difference between the premiums and the penalty, you'll pay it off what, 2-3 months sooner?

And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?

If they don't care enough about their student debt to be throwing $20k/yr out of an $85k salary at it, they're probably not going to care enough about it to forego health insurance for it. Also at that point they'd be spending enough that there are far more rational things to cut back on than health insurance.

Great answer - AND THE KIND OF FINANCIAL DISCUSSION I WAS HOPING FOR - and it would work if you were paying $20-30K a year for student loan reduction.  However, does it work if you are paying $12K a year against you loans?  Also,  doesn't your scenario assume absolutely no medical expenses? 

[prof61820]

I'm a proponent of the concept of Obamacare but the more I look at the prices and coverage options the less I think it's the best financial move for a healthy, student debt laden millennial with no assets and a job that takes them out of the ACA's subsidies.

For purposes of discussion, let's assume the millennial will pay a $300 per month premium and an annual deductible of $5,000.

Should a single, healthy millennial with no personal assets, $80,000 in student debt and job that pays $85,000 per year (a) purchase health insurance or (b) should they pay the penalty, self insure and take the cash saved on premiums to pay down their student loan debt?

Since the same millennial can now get insurance coverage a month or two after they get ill, it seems to me that strategy "B" is the smarter use of a millennial's money.  Is this correct?

By the way, I truly would love to be proven wrong here - but from a financial perspective...

So as a millenial making $85k/yr, who cares about paying off their student debt quickly, it shouldn't be that hard to throw $20-30k/yr at your debt, even after paying $3.6k/yr in health insurance premiums. So depending on your interest rate, it'll probably take you about 3-4 years to pay that off. If you forego health insurance, thus saving the difference between the premiums and the penalty, you'll pay it off what, 2-3 months sooner?

And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?

If they don't care enough about their student debt to be throwing $20k/yr out of an $85k salary at it, they're probably not going to care enough about it to forego health insurance for it. Also at that point they'd be spending enough that there are far more rational things to cut back on than health insurance.

(Emphasis mine.)

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Interesting point - and, keep in mind, the hypothetical millennial is not forgoing insurance altogether.  The millennial will do without it until they detect an illness and then obtain coverage.  This strategy will likely be the most cost effective for many expensive illnesses.

[the fixer]

Since you are in patient care, can I ask what you think about another point I made?  How does your hospital/whatever deal with folks who have no insurance?  What do and don't they get?  I've read lots of studies, but would value a boots on the ground opinion. 

Not that kind of "medical provider"... a Wilderness First Responder. At my level, which is similar to but not quite an EMT, we don't care about insurance or what the care costs. I'm also not a paid professional in the field so the cost is always "free."

I would assume that if someone is already in the hospital environment, a DNR would be more effectively communicated.

[ASquared]

Just buy the insurance!  Seriously.  Some things are worth "self insuring" for.  Healthcare is not one of them.

[xocotl]

...
And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?
...

(Emphasis mine.)

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Thanks for keeping me honest :). Yes, I realize it could be rational, and was really arguing that it was unlikely to be rational.

I'm a proponent of the concept of Obamacare but the more I look at the prices and coverage options the less I think it's the best financial move for a healthy, student debt laden millennial with no assets and a job that takes them out of the ACA's subsidies.

For purposes of discussion, let's assume the millennial will pay a $300 per month premium and an annual deductible of $5,000.

Should a single, healthy millennial with no personal assets, $80,000 in student debt and job that pays $85,000 per year (a) purchase health insurance or (b) should they pay the penalty, self insure and take the cash saved on premiums to pay down their student loan debt?

Since the same millennial can now get insurance coverage a month or two after they get ill, it seems to me that strategy "B" is the smarter use of a millennial's money.  Is this correct?

By the way, I truly would love to be proven wrong here - but from a financial perspective...

So as a millenial making $85k/yr, who cares about paying off their student debt quickly, it shouldn't be that hard to throw $20-30k/yr at your debt, even after paying $3.6k/yr in health insurance premiums. So depending on your interest rate, it'll probably take you about 3-4 years to pay that off. If you forego health insurance, thus saving the difference between the premiums and the penalty, you'll pay it off what, 2-3 months sooner?

And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?

If they don't care enough about their student debt to be throwing $20k/yr out of an $85k salary at it, they're probably not going to care enough about it to forego health insurance for it. Also at that point they'd be spending enough that there are far more rational things to cut back on than health insurance.

Great answer - AND THE KIND OF FINANCIAL DISCUSSION I WAS HOPING FOR - and it would work if you were paying $20-30K a year for student loan reduction.  However, does it work if you are paying $12K a year against you loans?  Also,  doesn't your scenario assume absolutely no medical expenses?

If you're paying $12k/yr against the loans, then the interest rate is going to play a bigger factor in how much of an effect foregoing health insurance will have vs if you were paying $20-30k. With a relatively low interest rate though, you're still probably looking at only paying it off 2-3 years earlier at that point (the difference between the premiums and the tax penalty is only about $3k/yr). But also in this scenario, you're now going without health insurance for closer to 10 years in order to pay off your loan a couple years earlier. IMO, it's much closer call than if they were paying $20-30k/yr, but I still don't think that would be a good tradeoff, except for people with very low levels of risk-aversion (i.e., they're not very worried about the risk of medical bankrupcty). Personally I would definitely still go with the health insurance (according to some definitions I apparently am a millenial btw).

And regarding my assumption of no medical expenses -- if you have a $5k deductible, then even if things do go badly in the example I gave and you have lots of medical expenses, you're now throwing $15-25k/yr at the loan instead of $20-30k. Which puts it somewhere between the original scenario I proposed and your counter (of $12k/yr going toward the loan). Keep in mind also, that's only if your medical expenses are high, but less than the deductible. If they're more than the deductible, the advantage starts swinging toward going with the insurance again.

[Daleth]

From my reading of the ACA rules, no, one cannot "get insurance coverage a month or two after they get ill" that will cover retroactively.

Say your student gets in a car accident and needs emergency surgery. He regains consciousness a few days later and enrolls in healthcare because he's lucky to have had his accident during open enrollment.

None of the care he has received between the accident and the date coverage starts will be covered. And note that coverage won't being the minute he signs up - it will likely be a few weeks away at best. (Granted, he can't be declined coverage due to his now-pre-existing condition.)

I agree the unexpected visit to the emergency room scenario is the best reason to buy Obamacare, but does this the small chance of this happening to my hypothetical millennial warrant the $300 per month premium and $5000 deductible when they have no assets and a bankruptcy will eliminate the uninsured medical costs for the car accident (and maybe some other consumer debt)?

Heck yes. First off, it would be IDIOTIC to file for bankruptcy over less than at least $100k-$200k in medical expenses; it would trash your credit and darken your job prospects for at least 10 years (many employers pull your credit before hiring, and/or ask if you've ever filed BK). By "trash your credit" I mean seriously interfere with your ability to buy a house or do anything else involving a loan, meaning that for 10+ years you would not be able to leverage your income for real estate or other investments. And I'm saying "10+" because while it's true that after 10 years credit reporting agencies have to remove a BK from your credit report, just removing it doesn't magically pop your credit score back up to 750 or whatever--it'll take a while to build up a good score because while you have a BK on your credit you will have trouble getting loans, hence will not be able to build up your credit much. IOW, even putting aside the ethically questionable decision to skip out on being responsible for yourself, i.e., to refuse to insure yourself and then to file BK because you don't want to pay for the debt you incurred by refusing to insure yourself, it's just STUUUUUPID to use bankruptcy for a debt that you could actually pay. Especially medical debts, since unlike student loans those are interest-free.

And you seem to be forgetting that you can get whacked with big, uncomfortable medical bills that are nevertheless not big enough to even remotely justify bankruptcy. Here are the stories of three people I know, all under 30 when this happened:

(1) She went riding her bike with her dog running alongside (this was always how she "walked" her big athletic dog when it was nice out). Dog saw a squirrel and ran in front of her bike; down she went, and broke her jaw. Within a week of the accident her medical costs had exceeded $30,000 and were still rising.

(2) He went out for pizza and beer with some friends; a random guy at the pizza/beer joint hauled off and punched him for absolutely no reason. Result: for him too, a broken jaw and $30k+ in medical costs. The guy who punched him ran off and was never caught, so all the cost was on my friend--who had just been looking at health insurance policies the previous week, and meant to buy one (he was a student, they were cheap) but forgot!

(3) He felt something weird "down there" and went to the doctor. Turned out he had testicular cancer (which almost exclusively strikes men 15-40 years old; in other words it's a cancer of youth). He needed surgery, hospitalization, chemo etc. He's fine now, thank god. If he hadn't had insurance, he probably would've ignored the problem for as long as possible before going to the doctor because of the cost, and where would he be then?

[Daleth]

Interesting point - and, keep in mind, the hypothetical millennial is not forgoing insurance altogether.  The millennial will do without it until they detect an illness and then obtain coverage.  This strategy will likely be the most cost effective for many expensive illnesses.

That strategy will not work, because you cannot sign up for insurance whenever you want; you can only sign up for it (1) during the annual sign-up period, which tends to be in December-ish; or (2) at some other point in time IF you experience a qualifying event such as getting married (that lets spouse A sign up on spouse B's insurance... IF spouse B has insurance) or losing your job. Getting sick is not a qualifying event. This is true of ANY insurance: employer-provided, Obamacare, whatever.

Let me repeat it one last time so we can get this memorized and move on with a debate that's based on reality: You cannot sign up for insurance when you get sick. There is only one time during the year--generally December--when you can sign up for insurance; Obamacare has a three-month sign-up period this year, but that is not going to last. If you happen to get sick in December (but not so sick that you forget to or are unable to sign up immediately), then great, bro, you gamed the system! (/sarcasm off). But chances are if you have medical needs they're not going to conveniently happen in December.

[arebelspy]

...
And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?
...

(Emphasis mine.)

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Thanks for keeping me honest :). Yes, I realize it could be rational, and was really arguing that it was unlikely to be rational.

Ah, a much more interesting claim.

I'm curious if anyone can find the percent of young people that get quite sick, so we can work some very rough odds and put some numbers to it.

[prof61820]

Interesting point - and, keep in mind, the hypothetical millennial is not forgoing insurance altogether.  The millennial will do without it until they detect an illness and then obtain coverage.  This strategy will likely be the most cost effective for many expensive illnesses.

That strategy will not work, because you cannot sign up for insurance whenever you want; you can only sign up for it (1) during the annual sign-up period, which tends to be in December-ish; or (2) at some other point in time IF you experience a qualifying event such as getting married (that lets spouse A sign up on spouse B's insurance... IF spouse B has insurance) or losing your job. Getting sick is not a qualifying event. This is true of ANY insurance: employer-provided, Obamacare, whatever.

Let me repeat it one last time so we can get this memorized and move on with a debate that's based on reality: You cannot sign up for insurance when you get sick. There is only one time during the year--generally December--when you can sign up for insurance; Obamacare has a three-month sign-up period this year, but that is not going to last. If you happen to get sick in December (but not so sick that you forget to or are unable to sign up immediately), then great, bro, you gamed the system! (/sarcasm off). But chances are if you have medical needs they're not going to conveniently happen in December.

I believe that the March 31st deadline only applies to State and Federal exchange insurance policies.   There are some exceptions that allow you to enroll any time of the year such as marriage, divorce, birth of a child or job loss.  Also, those eligible for Medicaid or the Children's Health Insurance Program (CHIP) can also sign up at any time of the year.

My understanding is that individuals - especially those that won't get a subsidy -  can enroll in individual policies outside of the exchanges at any time.  These "outside" policies also cannot discriminate against those with pre-existing conditions.

[xocotl]

...
And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?
...

(Emphasis mine.)

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Thanks for keeping me honest :). Yes, I realize it could be rational, and was really arguing that it was unlikely to be rational.

Ah, a much more interesting claim.

I'm curious if anyone can find the percent of young people that get quite sick, so we can work some very rough odds and put some numbers to it.

The most relevant data that I can find from some quick googling comes from here:
http://meps.ahrq.gov/mepsweb/data_files/publications/st73/stat73.pdf

It doesn't give exactly the information that I want, but it has a couple relevant pieces of info:
As of 2002, 9% of the top 5% of medical spenders (>$11.5k in medical expenses in 2002) are in the 19-34 age range. That means about 0.45% of the country was both 19-34 years old and had over $11,500 in medical expenses in 2002. From quick googling also, it seems that about 10.5% of the US population is aged 19-34. This implies that about 4.3% of the 19-34 years olds in 2002 had > $11.5k (2002 dollars) in medical expenses. Given the rate of health care expense inflation, that would probably adjust to almost $20k today. That's close, but still not quite the territory I would consider catastrophic. But if we extrapolate a little, with the help of some of the other figures in the linked report, I'd say based on this data, that there's a pretty high chance that the number of 19-34 years olds with catastrophic medical expenses lies somewhere between 0.1% and 0.5%.

If anyone else can find more useful info to go off of, or thinks my estimates here are wildly inaccurate, let me know :).

So, back to my original scenario, that would mean you're trading a few months of earlier student loan repayment for a chance on the order of between 1 in 200 and 1 in 1000 of crushing medical debt. (The odds are actually probably a little higher than that of having crushing medical debt, because the percentages I gave are for within a particular year, whereas you'd be going without insurance for a few years... unfortunately though, we can't really calculate the odds of having high medical expenses over a multi year period from the data I cited, because medical expenses are highly auto-correlated -- if you're healthy the first year you skipped out on health insurance, you have better than average odds the next year).

Note my numbers above are also a little off because the data is for all 19-34 year olds, whereas the OP was talking about a healthy 20-something. Once again, if anyone else can find better data, I'd appreciate it.

[prof61820]

...
And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?
...

(Emphasis mine.)

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Thanks for keeping me honest :). Yes, I realize it could be rational, and was really arguing that it was unlikely to be rational.

Ah, a much more interesting claim.

I'm curious if anyone can find the percent of young people that get quite sick, so we can work some very rough odds and put some numbers to it.

The most relevant data that I can find from some quick googling comes from here:
http://meps.ahrq.gov/mepsweb/data_files/publications/st73/stat73.pdf

It doesn't give exactly the information that I want, but it has a couple relevant pieces of info:
As of 2002, 9% of the top 5% of medical spenders (>$11.5k in medical expenses in 2002) are in the 19-34 age range. That means about 0.45% of the country was both 19-34 years old and had over $11,500 in medical expenses in 2002. From quick googling also, it seems that about 10.5% of the US population is aged 19-34. This implies that about 4.3% of the 19-34 years olds in 2002 had > $11.5k (2002 dollars) in medical expenses. Given the rate of health care expense inflation, that would probably adjust to almost $20k today. That's close, but still not quite the territory I would consider catastrophic. But if we extrapolate a little, with the help of some of the other figures in the linked report, I'd say based on this data, that there's a pretty high chance that the number of 19-34 years olds with catastrophic medical expenses lies somewhere between 0.1% and 0.5%.

If anyone else can find more useful info to go off of, or thinks my estimates here are wildly inaccurate, let me know :).

So, back to my original scenario, that would mean you're trading a few months of earlier student loan repayment for a chance on the order of between 1 in 200 and 1 in 1000 of crushing medical debt. (The odds are actually probably a little higher than that of having crushing medical debt, because the percentages I gave are for within a particular year, whereas you'd be going without insurance for a few years... unfortunately though, we can't really calculate the odds of having high medical expenses over a multi year period from the data I cited, because medical expenses are highly auto-correlated -- if you're healthy the first year you skipped out on health insurance, you have better than average odds the next year).

Note my numbers above are also a little off because the data is for all 19-34 year olds, whereas the OP was talking about a healthy 20-something. Once again, if anyone else can find better data, I'd appreciate it.

I think the operative term here is "medical spenders."  These won't all be folks getting into car accidents and breaking jaws...many of the high spenders will be dealing with an illness that you can purchase insurance to cover it AFTER a bad diagnoses is made but BEFORE major medical expense is incurred (like testicular cancer).

[Jamesqf]

i'd look for a cheaper plan. surly $300/month is not the best you can do for a very healthy, young individual? id pick something with lower premiums and a higher deductible.

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You also have the fact that healthy people, particularly healthy younger people, have to pay quite a bit more than what would be a fair price, given their actuarial risk, in order to subsidize the unhealthy who now can't be denied "insurance".  (In quotes because it's hardly insurance if you're expecting it to pay for something that's already happened.)  The price also has to cover those extra services that many of us have absolutely zero chance of ever needing.

[the fixer]

Something else wrong with just looking at stats of medical spenders is some of them have conditions they knew about before entering their 20s, so the scenario doesn't apply to them. I'm thinking Type I diabetics who've had it since childhood (there's a very small percentage of people who develop type I in their 20s, that would instead count toward the catastrophic need for coverage). So I'd say it's lower than 9%, but I can't say how much lower.

Something else that hasn't been considered here is a psychological aversion to preventive care that comes from not having health insurance, and this should factor into the financial decision. If I choose to go without insurance, or to some extent if I'm on a high deductible plan, I would be less likely to go to the doctor for something that seems wrong, and instead just live with it. When treatment is finally received the problem can be much worse and more costly. Someone with more time on their hands could study the financial impact of this phenomenon. All I know is one anecdote from about 10 years ago of a kid who died of a tooth infection that spread to his brain. All he had to do was go to a dentist to get that toothache looked at for ~$200 and he'd have been fine. Instead he died, and racked up thousands in medical bills in the process.

[mpbaker22]

i'd look for a cheaper plan. surly $300/month is not the best you can do for a very healthy, young individual? id pick something with lower premiums and a higher deductible.

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You also have the fact that healthy people, particularly healthy younger people, have to pay quite a bit more than what would be a fair price, given their actuarial risk, in order to subsidize the unhealthy who now can't be denied "insurance".  (In quotes because it's hardly insurance if you're expecting it to pay for something that's already happened.)  The price also has to cover those extra services that many of us have absolutely zero chance of ever needing.

Presumably the OP is under 30?  I can't register for an exact price in the 61820 zip code, but the 'see plans now' option shows estimates between $120 and $160.  That's still a lot more than the $70 premiums pre-Obamacare, but a lot less than the $300 stated.

Assuming you are under 30, and you're a professor at U of I?  ... You should be able to get that $120-$160 plan with a $6,350 deductible.

[prof61820]

i'd look for a cheaper plan. surly $300/month is not the best you can do for a very healthy, young individual? id pick something with lower premiums and a higher deductible.

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You also have the fact that healthy people, particularly healthy younger people, have to pay quite a bit more than what would be a fair price, given their actuarial risk, in order to subsidize the unhealthy who now can't be denied "insurance".  (In quotes because it's hardly insurance if you're expecting it to pay for something that's already happened.)  The price also has to cover those extra services that many of us have absolutely zero chance of ever needing.

Presumably the OP is under 30?  I can't register for an exact price in the 61820 zip code, but the 'see plans now' option shows estimates between $120 and $160.  That's still a lot more than the $70 premiums pre-Obamacare, but a lot less than the $300 stated.

Assuming you are under 30, and you're a professor at U of I?  ... You should be able to get that $120-$160 plan with a $6,350 deductible.

The hypothetical millennial did not have a zip code.  The level of the plan was not designated but it's probably more of a "Silver" rather than a "Bronze."  Other posts have pointed out that some bronze plans (with a $6,350 deductible/pays 60% of costs) in certain States/Counties/Zip Codes are cheaper than the $300 monthly premium but other posts have pointed out that $300 is an accurate number in other states.

That said $120-160 per month for a 29 year old does seem like a lot more reasonable expenditure to avoid catostrophic medical Bills...however I suspect that also depends on your income level and other debt.

Also, a word of caution on using the Healthcare.gov estimator: http://money.cnn.com/2013/11/07/news/economy/obamacare-prices/index.html

From the article: "The plan browser on healthcare.gov was added a few weeks after the launch of the federal exchange, and was meant to help Americans shop after technical problems made it tough to log in. But the feature that allows visitors to see insurance plans without creating an account provides only limited information, and may lead users to think they will pay less than they actually will... If a visitor is looking for coverage for himself, the browser feature only asks if he is younger than 50 or age 50 and older. For younger folks, it spits back prices for a 27-year-old. For older people, it provides premiums for someone age 50.
Unless you happen to be one of those ages, you're likely getting a lowball estimate of the actual rates, said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities."

[Daleth]

i'd look for a cheaper plan. surly $300/month is not the best you can do for a very healthy, young individual? id pick something with lower premiums and a higher deductible.

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You are if you're under 30--that is, people under 30 (or perhaps it's 30 and under) who shop on the exchanges have a "catastrophic care only" policy available in addition to the bronze/silver/platinum ones. The OP is, as I understand it, in this age range.

You also have the fact that healthy people, particularly healthy younger people, have to pay quite a bit more than what would be a fair price, given their actuarial risk, in order to subsidize the unhealthy who now can't be denied "insurance".

Bear in mind that Obamacare only covers people up to age 65--from that age on, if you don't have private insurance then you're on Medicare. So it's not like 25-year-olds are subsidizing intensive care for 80-year-olds.

[Daleth]

My understanding is that individuals - especially those that won't get a subsidy -  can enroll in individual policies outside of the exchanges at any time.  These "outside" policies also cannot discriminate against those with pre-existing conditions.

My understanding is that, either legally or practically, they can't. By "practically" I mean that even if the ACA doesn't require insurers to only permit new enrollment at certain times of year, insurers will do that themselves precisely because they aren't allowed to exclude preexisting conditions anymore, and they don't want to get suddenly hit with massive expenses from people who go uninsured until they get a bad diagnosis.

[Jamesqf]

Presumably the OP is under 30?  I can't register for an exact price in the 61820 zip code, but the 'see plans now' option shows estimates between $120 and $160.

As others have noted, prices do vary a lot depending on where you live.  (While I've never compared medical prices, my neighbors' kid moved to Iowa, and bought a house similar to his parents' - worth maybe $350K in the current market - for under $100K.)

That's still a lot more than the $70 premiums pre-Obamacare, but a lot less than the $300 stated.

Sure, but still, the price increase for what should be a similar product is the result of two factors: first, the mandated coverage of things that the great majority would have no chance of needing, and the need to subsidize those with pre-existing conditions.  The price difference should be seen as a tax, pure and simple.

Assuming you are under 30, and you're a professor at U of I?  ... You should be able to get that $120-$160 plan with a $6,350 deductible.

OK, so I move to Illinois and lie about my age - problem solved!  Except that then I'd have to live in Illinois :-(

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You are if you're under 30--that is, people under 30 (or perhaps it's 30 and under) who shop on the exchanges have a "catastrophic care only" policy available in addition to the bronze/silver/platinum ones. The OP is, as I understand it, in this age range.

I suppose I wasn't precise about what I consider a high deductible: to me, that would be something in the $10-20K range.  If I haven't been misinformed, the ACA limits deductibles to $6350.

It's also a fact that while the OP may be under 30, many of us - myself included - are not, yet we're in good health, but still will be required to pay higher rates, and for coverage we've no chance of needing.

[xocotl]

Something else wrong with just looking at stats of medical spenders is some of them have conditions they knew about before entering their 20s, so the scenario doesn't apply to them. I'm thinking Type I diabetics who've had it since childhood (there's a very small percentage of people who develop type I in their 20s, that would instead count toward the catastrophic need for coverage). So I'd say it's lower than 9%, but I can't say how much lower.

Something else that hasn't been considered here is a psychological aversion to preventive care that comes from not having health insurance, and this should factor into the financial decision. If I choose to go without insurance, or to some extent if I'm on a high deductible plan, I would be less likely to go to the doctor for something that seems wrong, and instead just live with it. When treatment is finally received the problem can be much worse and more costly. Someone with more time on their hands could study the financial impact of this phenomenon. All I know is one anecdote from about 10 years ago of a kid who died of a tooth infection that spread to his brain. All he had to do was go to a dentist to get that toothache looked at for ~$200 and he'd have been fine. Instead he died, and racked up thousands in medical bills in the process.

Yep. Definitely another problem with them. I think they're still around the right order of magnitude though, as my understanding is that there aren't that many people with chronic medical conditions that regularly produce > $100k annual bills, because they tend to die rather quickly. There are still some though, and of course someone with diabetes who normally has a few thousand dollars/yr in medical expenses is more likely than average to have a year with > $100k medical expenses, so maybe it's a bigger factor than I give it credit for. I was mostly using those stats as a starting point in the hopes that other people would have ideas for how to get better data.

Of course there are so many other factors in deciding to get insurance that are even harder to quantify -- like the issue you point out where going without insurance probably increases your chances of dying. Even if the increased odds of dying are much more remote, death might be a sufficiently worse outcome than crushing medical debt that it's at least as big of a factor.

[prof61820]

I suppose I wasn't precise about what I consider a high deductible: to me, that would be something in the $10-20K range.  If I haven't been misinformed, the ACA limits deductibles to $6350.

I'm not sure you can even consider a $10-20K deductible for an individual insurance...what are the premiums?  With an individual policy that has a $10-20K deductible no one with low income would be able to pay it (and save for retirement) so BK would be their only route in a catastrophe - might as well not waste the cash on the premiums.

[prof61820]

Bear in mind that Obamacare only covers people up to age 65--from that age on, if you don't have private insurance then you're on Medicare. So it's not like 25-year-olds are subsidizing intensive care for 80-year-olds.

This isn't true because a 25 year old pays medicare taxes and cannot access the health care provided by medicare.  I'm not opposed to this subsidy, however, and it may be better (and cheaper) to just allow everyone buy into medicare rather than have the piecemeal ACA/Medicare system we currently are trying to make work.

[prof61820]

My understanding is that individuals - especially those that won't get a subsidy -  can enroll in individual policies outside of the exchanges at any time.  These "outside" policies also cannot discriminate against those with pre-existing conditions.

My understanding is that, either legally or practically, they can't. By "practically" I mean that even if the ACA doesn't require insurers to only permit new enrollment at certain times of year, insurers will do that themselves precisely because they aren't allowed to exclude preexisting conditions anymore, and they don't want to get suddenly hit with massive expenses from people who go uninsured until they get a bad diagnosis.

I haven't heard that insurers will refuse individuals after the March 31st exchange enrollment deadline.  I've been told that it may be like the wild, wild, west in trying to get insurance but you should be able to buy an individual policy.  That said, if you have a link that supports your point, I would love to see it because I think your notion of "open" and closed" enrollment periods makes much more sense from a policy perspective and will put a damper on those seeking to game the system.

[prof61820]

If I haven't been misinformed, the ACA limits deductibles to $6350.

One more nuanced, but important point: Obamcare caps out of pocket costs at $6350 annually.  This cap is reached by paying the percentage of your deductible (bronze 60%, silver 70%, gold 80%, platinum 90%) associated with your plan until you hit you your cap (which is $6350 or less, depending on your plan). 

These insurance options - that will help pay to cover folks with pre-existing conditions and eliminate lifetime caps - don't seem like a bad deal to me but again it depends on the premium and, again, I am not a healthy single, 29 year old with no assets and $80K in student loan debt...

[prof61820]

OK, so I move to Illinois and lie about my age - problem solved!  Except that then I'd have to live in Illinois :-(

You better not be from Indiana...go Bears!

[Daleth]

It's also a fact that while the OP may be under 30, many of us - myself included - are not, yet we're in good health, but still will be required to pay higher rates, and for coverage we've no chance of needing.

[MOD EDIT: Removed Personal Attack #1.]

See, living in a society means we all make some sacrifices and we all reap some benefits (for instance, if your house catches fire, your neighbors all subsidized the cost of sending a fire truck over to rescue you even though they personally will probably never need a fire truck themselves). This is what's called "civilization." And while your insurance premiums are helping pay for my childbirth, which is something you'll never need yourself, mine are helping pay for your prostate exams or prostate cancer treatment, which I'll never need. That's just how insurance works.

[MOD EDIT: Removed Personal Attack #2.]

MOD NOTE: Please refer to the first rule of these forums Daleth.

[MelodysMustache]

The idea of "self-insuring" when don't actually have the money to self insure is laughable.  What you really mean is that you will roll the dice and if you lose you will stick it to the rest of the America with unpaid medical bills.  You claim to support the ACA, but then you turn around and try to game the system.  That says as much about ethics and integrity as it does about financial acumen.

Also, are you thinking that the penalty is $95?  Actually it is not.  It is $95 or 1% of your income, whichever is HIGHER.  So the penalty for you will be 1% of 85k or $850.  Therefore you will be paying about 25% of the premium and getting zero benefit.

[Emilyngh]

One more nuanced, but important point: Obamcare caps out of pocket costs at $6350 annually.  This cap is reached by paying the percentage of your deductible (bronze 60%, silver 70%, gold 80%, platinum 90%) associated with your plan until you hit you your cap (which is $6350 or less, depending on your plan). 

Just as an fyi, those percentages you list are not a "percentage of your deductible," but rather, they are average percentage of the costs for all participants the plan covers.    These percentages aren't limits for an individual, but guidelines for the plans for the average of what percent they pay for all their participants together.    The participants pay whatever their deductibles are, and then the terms of their plans kick in (copays, etc).    Once the total they've paid out of pocket (including deductibles plus copays, but not including premiums) reaches the oop max, the insurance will pickup 100% (no more copays or other costs for the participant).    And yes, Aca limits this oop max to $6350 (although some plans could be lower).


It just sounded like you were confused about the percentages associated with each plan (which are not deductibles, nor do they even apply for any individual in any set way) and the difference between a deductible and an out of pocket max.

[prof61820]

One more nuanced, but important point: Obamcare caps out of pocket costs at $6350 annually.  This cap is reached by paying the percentage of your deductible (bronze 60%, silver 70%, gold 80%, platinum 90%) associated with your plan until you hit you your cap (which is $6350 or less, depending on your plan). 

Just as an fyi, those percentages you list are not a "percentage of your deductible," but rather, they are average percentage of the costs for all participants the plan covers.    These percentages aren't limits for an individual, but guidelines for the plans for the average of what percent they pay for all their participants together.    The participants pay whatever their deductibles are, and then the terms of their plans kick in (copays, etc).    Once the total they've paid out of pocket (including deductibles plus copays, but not including premiums) reaches the oop max, the insurance will pickup 100% (no more copays or other costs for the participant).    And yes, Aca limits this oop max to $6350 (although some plans could be lower).


It just sounded like you were confused about the percentages associated with each plan (which are not deductibles, nor do they even apply for any individual in any set way) and the difference between a deductible and an out of pocket max.

I was trying to say what you said...you just said it better.

[prof61820]

The idea of "self-insuring" when don't actually have the money to self insure is laughable. 

This seems a little holier than thou (especially to a guy toughened up by Chicago)...if I wanted to live in a moral nation, I'd move to Canada... instead I choose to live in the land of the free (which allows me the freedom to make business and economic choices that may result in a bankruptcy - and there's nothing immoral about seeking a fresh start)...which leads me to the question of what do we do with folks that don't qualify for subsidies but yet can't afford to self-insure or insure because of student debt?

Here's the hypothetical again.  Can we leave moral judgments out of it for a moment?  I'd rather just crack this nut from a financial perspective...and I do think I'm almost there...

For purposes of discussion, let's assume the millennial will pay a $300 per month premium and an annual deductible of $5,000.

Should a single, healthy millennial with no personal assets, $80,000 in student debt and job that pays $85,000 per year (a) purchase health insurance or (b) should they pay the penalty, self insure and take the cash saved on premiums to pay down their student loan debt?

Since the same millennial can now get insurance coverage a month or two after they get ill, it seems to me that strategy "B" is the smarter use of a millennial's money.  Is this correct?

By the way, I truly would love to be proven wrong here - but from a financial perspective...

[beltim]

which leads me to the question of what do we do with folks that don't qualify for subsidies but yet can't afford to self-insure or insure because of student debt?

This might also be "holier than thou," but your hypothetical can easily afford the hypothetical insurance.  There may be examples of folks who don't qualify for subsidies who can't afford insurance, but your hypothetical quite easily can.

[prof61820]

which leads me to the question of what do we do with folks that don't qualify for subsidies but yet can't afford to self-insure or insure because of student debt?

This might also be "holier than thou," but your hypothetical can easily afford the hypothetical insurance.  There may be examples of folks who don't qualify for subsidies who can't afford insurance, but your hypothetical quite easily can.

Okay - can you explain how they can afford to buy insurance, pay off their student loan debt and save for retirement from a financial perspective?  Do they need to move back home?   Maybe get a roommate?  Maybe I'm changing the hypothetical a bit but I still have doubts that it makes financial sense for a healthy, single, 29 year old with no assets and $80K in student loan debt to buy insurance before maximizing debt repayment and retirement savings because both are protected in the event of a BK.

That said, you are probably right about $85K annual income - with penalties, tax deductions and other side benefits (as pointed out by other posts) it does make sense (to me) for this person to purchase insurance.

However, at what income level (between $85K and $46K) does it start to not make sense?

[beltim]

which leads me to the question of what do we do with folks that don't qualify for subsidies but yet can't afford to self-insure or insure because of student debt?

This might also be "holier than thou," but your hypothetical can easily afford the hypothetical insurance.  There may be examples of folks who don't qualify for subsidies who can't afford insurance, but your hypothetical quite easily can.

Okay - can you explain how they can afford to buy insurance, pay off their student loan debt and save for retirement from a financial perspective?  Do they need to move back home?   Maybe get a roommate?  Maybe I'm changing the hypothetical a bit but I still have doubts that it makes financial sense for a healthy, single, 29 year old with no assets and $80K in student loan debt to buy insurance before maximizing debt repayment and retirement savings because both are protected in the event of a BK.

That said, you are probably right about $85K annual income - with penalties, tax deductions and other side benefits (as pointed out by other posts) it does make sense (to me) for this person to purchase insurance.

However, at what income level (between $85K and $46K) does it start to not make sense?

You've changed the question from whether it makes financial sense to go without health insurance to whether health insurance is affordable.  I think in every circumstance someone earning 46K per year can afford $300/month in health insurance.

[MelodysMustache]

This seems a little holier than thou (especially to a guy toughened up by Chicago)...if I wanted to live in a moral nation, I'd move to Canada...

In the U.S. we have decided to require hospital emergency rooms to treat the sick and injured regardless of their insurance status or ability to pay.  This was a moral and ethical choice made decades ago. I was a child when this law was made, and I remember that it was because there was a public outcry about people being left to die because they could not pay.  (Yes, that actually happened.) Those who have the ability to pay for insurance yet choose not to and do not have the ability to pay for major medical out of pocket are taking advantage of this morality to their own benefit. 

If you want to make a case that health insurance has no value you certainly can.  Insurance in general has no value unless you need it.  If you don't want to buy insurance, then don't.  Just recognize that your are gambling with your life, health, and financial well being, and putting yourself in a position to be dependent on the generosity of others. 

[Jamesqf]

If I haven't been misinformed, the ACA limits deductibles to $6350.

One more nuanced, but important point: Obamcare caps out of pocket costs at $6350 annually.  This cap is reached by paying the percentage of your deductible (bronze 60%, silver 70%, gold 80%, platinum 90%) associated with your plan until you hit you your cap (which is $6350 or less, depending on your plan).

OK, it's apparently even worse than I thought :-)

But consider an analogy: what would auto maintenance & repair costs be like if everything had to be done through an insurance company?  You need an oil change or a simple brake job: instead of doing it yourself or taking it to a mechanic & paying cash (or credit card), every little repair had to be covered by insurance, so the transaction costs of doing that paperwork get added to the actual cost of the work.  I don't know if it was here or somewhere else, but one person mentioned being quoted something like $750 for a windshield replacement.  When he balked at the cost, the shop asked "but isn't it covered by your insurance?"  He said no, it'd be out of pocket.  "Ok, in that case we can do it for $200."

Now obviously not everyone can afford to pay out of pocket up to some reasonably large amount, but for those of us who can, why shouldn't we be able to?

These insurance options - that will help pay to cover folks with pre-existing conditions and eliminate lifetime caps...

And of course there's the answer right there.  Obamacare is NOT insurance, it's a tax.

And while your insurance premiums are helping pay for my childbirth, which is something you'll never need yourself, mine are helping pay for your prostate exams or prostate cancer treatment, which I'll never need. That's just how insurance works.

Err...  No, because insurance is supposed to insure against the unforeseeable.  At the present time in this country (and despite the efforts of the religious right), childbirth is a choice, and quite honestly I have problems seeing why normal childbirth* should be covered by insurance at all.  OTOH, while you may not need prostate exams or have a chance of getting prostate cancer, I will not need mammograms, and have zero chance of getting ovarian cancer, and a vanishingly small chance of getting breast cancer (males can get it).

(*Even if you consider that pregnancy usually requires two partners, the sad - to me, anyway - reality is that at this point in my life, I'm highly unlikely to be getting anyone pregnant.  I suppose that it's theoretically possible that some nubile young woman might fall head over heels for me, but realistically the odds of that are about the same as of winning one of those $100 million lottery jackpots.  Indeed, winning the lottery might be a prerequisite :-))

Then there are the other things required under Obamacare which I have absolutely zero chance of needing, such as substance abuse treatment.  Even if you accept that such treatment actually works, there is no way that I would start in the first place.

[Jamesqf]

...if I wanted to live in a moral nation, I'd move to Canada...

Canada, moral?  Tar sands.

[rocketman48097]

First I would ask:  If your job pays that much, doesn't your employer provide coverage?  If not, I assume you must be a contractor.

Anyway, a better option would be to buy a short term health insurance policy with very comprehensive coverage with a high deductible and pay the penalty.  The best thing about these is you can renew them, they are dirt cheap, they cover everything you need, and they are much cheaper than Obamacare.  Problem solved.  This is especially true in the first year when the penalty is only 1%, and that is after a big deduction. 

Don't subsidize others, buy a qualified short term plan with the highest deductible you can find (I would suggest United Health).  Should you develop a chronic disease during this time, about a 1 in 1,000,000 chance for a healthy lifestyle, simply sign up during open enrollment for Obamacare, which is much pricier and has the same high deductibles anyway. 

[randymarsh]

Don't subsidize others, buy a qualified short term plan with the highest deductible you can find (I would suggest United Health).

You do realize that insurance companies take your premium and use it to pay for other people's healthcare right? That's entire point insurance. By definition you subsidize others. And they subsidize you.

Should you develop a chronic disease during this time, about a 1 in 1,000,000 chance for a healthy lifestyle, simply sign up during open enrollment for Obamacare, which is much pricier and has the same high deductibles anyway.

It's only because of Obamacare that this person would even be able to do that after they developed a chronic condition.

[mpbaker22]

i'd look for a cheaper plan. surly $300/month is not the best you can do for a very healthy, young individual? id pick something with lower premiums and a higher deductible.

Except that under Obamacare, you are not allowed to purchase a high deductible policy.

You also have the fact that healthy people, particularly healthy younger people, have to pay quite a bit more than what would be a fair price, given their actuarial risk, in order to subsidize the unhealthy who now can't be denied "insurance".  (In quotes because it's hardly insurance if you're expecting it to pay for something that's already happened.)  The price also has to cover those extra services that many of us have absolutely zero chance of ever needing.

Presumably the OP is under 30?  I can't register for an exact price in the 61820 zip code, but the 'see plans now' option shows estimates between $120 and $160.  That's still a lot more than the $70 premiums pre-Obamacare, but a lot less than the $300 stated.

Assuming you are under 30, and you're a professor at U of I?  ... You should be able to get that $120-$160 plan with a $6,350 deductible.

The hypothetical millennial did not have a zip code.  The level of the plan was not designated but it's probably more of a "Silver" rather than a "Bronze."  Other posts have pointed out that some bronze plans (with a $6,350 deductible/pays 60% of costs) in certain States/Counties/Zip Codes are cheaper than the $300 monthly premium but other posts have pointed out that $300 is an accurate number in other states.

That said $120-160 per month for a 29 year old does seem like a lot more reasonable expenditure to avoid catostrophic medical Bills...however I suspect that also depends on your income level and other debt.

Also, a word of caution on using the Healthcare.gov estimator: http://money.cnn.com/2013/11/07/news/economy/obamacare-prices/index.html

From the article: "The plan browser on healthcare.gov was added a few weeks after the launch of the federal exchange, and was meant to help Americans shop after technical problems made it tough to log in. But the feature that allows visitors to see insurance plans without creating an account provides only limited information, and may lead users to think they will pay less than they actually will... If a visitor is looking for coverage for himself, the browser feature only asks if he is younger than 50 or age 50 and older. For younger folks, it spits back prices for a 27-year-old. For older people, it provides premiums for someone age 50.
Unless you happen to be one of those ages, you're likely getting a lowball estimate of the actual rates, said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities."

I know JamesQF also responded to my post.  I made a few assumptions in my comment.  The OPs handle is Prof61820 and his location is Champaign, IL.  As an alumnus of the University of Illinois, I happen to know the zip code there is 61820.  I used the zip code 61820 to find rates for this poster who said he (if he/she ever declared a sex) was a millennial.  Being a millennial I assumed he was probably under 30, and thus qualifies for catastrophic coverage.  While a stretch here and there, I don't think my assumptions were unreasonable.

Given those assumptions, he should be able to find rates for ~$150

[rocketman48097]

...
And in exchange for paying off your student loan a few months sooner, you're taking a (relatively unlikely) risk of having to quit your job for 6 months so you can declare ch 7 bankruptcy for medical expenses? How is that even remotely rational?
...

(Emphasis mine.)

I do not know the number, but if you look at the "free market" prices of health insurance before the ACA goes into effect, it's obvious there is very little risk.  I saw on CNBC a former CEO of a health insurer say that his actuaries told him that a male only sees a doctor 6x between the ages of 18-35, on average.  Lifestyle is a big factor in my opinion, no smoking, lose the weight, and avoid most alcohol. 

It would be rational based on how unlikely that risk is.  If it's a 1 in 999,999,999,999,999 chance, it's worth paying off the debt a few months early.  If it's a 1 in 9 chance, it is not.  The truth lies somewhere in the middle, but it could clearly be the rational decision to pay off the student loan debt, even if it only shaves a few months off of the payoff time.

I'm not saying it is (or isn't), but it seems pretty obvious that it could be the rational choice, and it all comes down to the likelihood of a catastrophic medical issue.

Thanks for keeping me honest :). Yes, I realize it could be rational, and was really arguing that it was unlikely to be rational.

Ah, a much more interesting claim.

I'm curious if anyone can find the percent of young people that get quite sick, so we can work some very rough odds and put some numbers to it.

[rocketman48097]

Don't subsidize others, buy a qualified short term plan with the highest deductible you can find (I would suggest United Health).

You do realize that insurance companies take your premium and use it to pay for other people's healthcare right? That's entire point insurance. By definition you subsidize others. And they subsidize you.

Should you develop a chronic disease during this time, about a 1 in 1,000,000 chance for a healthy lifestyle, simply sign up during open enrollment for Obamacare, which is much pricier and has the same high deductibles anyway.

It's only because of Obamacare that this person would even be able to do that after they developed a chronic condition.

Wrong, it's only because of Obamacare that this person has to pay twice as much when he's healthy vs. pre Obamacare policies, like the one MMM has, which are adjusted for health, and they do pay out quite often when you get sick.  So no, I would say, subsidize the actual health care you need, not the junkies, the abortions, the  child births (pointless for a male, anyone who's been fixed or old, female or male) pediatric dental and vision care, unlimited mental health (open for fraud), etc. etc. 

Obamacare isn't insurance, it's a tax on the healthy, once you realize this, look elsewhere. 

[mpbaker22]

Don't subsidize others, buy a qualified short term plan with the highest deductible you can find (I would suggest United Health).

You do realize that insurance companies take your premium and use it to pay for other people's healthcare right? That's entire point insurance. By definition you subsidize others. And they subsidize you.

Should you develop a chronic disease during this time, about a 1 in 1,000,000 chance for a healthy lifestyle, simply sign up during open enrollment for Obamacare, which is much pricier and has the same high deductibles anyway.

It's only because of Obamacare that this person would even be able to do that after they developed a chronic condition.

Wrong, it's only because of Obamacare that this person has to pay twice as much when he's healthy vs. pre Obamacare policies, like the one MMM has, which are adjusted for health, and they do pay out quite often when you get sick.  So no, I would say, subsidize the actual health care you need, not the junkies, the abortions, the  child births (pointless for a male, anyone who's been fixed or old, female or male) pediatric dental and vision care, unlimited mental health (open for fraud), etc. etc. 

Obamacare isn't insurance, it's a tax on the healthy, once you realize this, look elsewhere.

Technically I think you were both right.  I think most policies would pay for actual illnesses in the past.  Except, when the year ended and you had to renew, the price of the policy jumped ten-fold.  Agreed that the routine cares should not be rolled into insurance, and certainly not be forced that way.  As a male, why do I have to pay for birth control?  Even more compelling, why do women who choose to be open to a child have to pay for other people's birth control? 

In terms of medical cost though, I think other example need to be used because people hear birth control and think, war on women, war on women, war on women.  Really, you could say, why do I need to pay for someone to take cholesterol medicine for the next 40 years?  I don't think statins are actually covered by the law, but that would be the idea.

[Jamesqf]

You do realize that insurance companies take your premium and use it to pay for other people's healthcare right? That's entire point insurance. By definition you subsidize others. And they subsidize you.

Wrong.  Look up the definition of the word "subsidy" sometime.  Ordinary insurance has a risk pool: the price you're charged for any kind of insurance, be it auto, home, business, health, or whatever, depends on the insurance company's computation of your risk (plus their costs & profit, of course).  So let's say that afer evaluating risk factors, a company is willing to insure Amy for $50/month, but charges Bob $150/month.  That's a fair market price, which Amy & Bob are free to accept or reject.  No subsidies involved, even if Amy does happen to get hit by a car next week, so Bob's monthly payment goes to pay her bill.

Now subsidies come in, first because some people think that it's unfair that Bob should have to pay $150, despite his real higher risk.  So we force the company to only charge Bob $100/month, and make up the difference by charging Amy $100, too.  So now Amy is subsidizing Bob.

Then Amy & Bob both think they're still being charged too much, so the government adds a $25/month subsidy for them.  But since the money doesn't come from nowhere, they now have to raise Amy & Bob's taxes by $25/month (or increase the debt limit, etc.)

And of course all the additional paperwork raises costs for everyone, so almost everybody winds up losing, even if the losses aren't obvious at first glance.

[randymarsh]

Technically I think you were both right.  I think most policies would pay for actual illnesses in the past.  Except, when the year ended and you had to renew, the price of the policy jumped ten-fold.  Agreed that the routine cares should not be rolled into insurance, and certainly not be forced that way.  As a male, why do I have to pay for birth control?  Even more compelling, why do women who choose to be open to a child have to pay for other people's birth control? 

In terms of medical cost though, I think other example need to be used because people hear birth control and think, war on women, war on women, war on women.  Really, you could say, why do I need to pay for someone to take cholesterol medicine for the next 40 years?  I don't think statins are actually covered by the law, but that would be the idea.

It's interesting that the "why do I have to pay for X" has gotten so much traction. If you're on an employer plan, are you able to make the same decisions you can in the individual market? My parents said their plan has options for themselves, themselves + spouse, and family. There are different plans but the difference is in how much insurance pays, not what's covered. For example, all plans include maternity care. So most Americans were already paying for that.

My car has those latch things for car seats. I have no children. Yet you can't sell a car in the US without those. Why should the cost of my car be driven up just because you spread your legs? Etc.

As for birth control, I do find it highly amusing that the same people who scream about welfare queens and food stamps and WIC and Head Start hate birth control. That's not directed at anyone here, just something I've noticed. Those programs are used almost exclusively by people with kids. What stops kids? BIRTH CONTROL.

[rocketman48097]

You should not have to pay for latch controls.  I have two kids and don't agree with this, this should be optional to the car manufacturer's and not imposed on you, couldn't agree more and unsure of your point given that you just made mine that government over regulation increases price above consumer's ability to afford things. 

Statins-  drugs for people who don't watch what they eat.  Obama treats a 500 pound person the same as one at a healthy 170 pounds.  Why would the regular weight want to pay for the expense of this person who obviously should be charged more?  Answer, they won't, and that is why we have SO FEW people signing up for this mandate. 

I'll pay the tax if it comes to it, short term plans here I come.  They will cover me until open enrollment, if necessary.  In fact, I predict a huge surge in these policies among the healthy, of which 50% of the insured make up only 3% of all health insurance claims.  If you are young, you are especially bad at math to sign up for Obamacare-nosurance. 

[Heart of Tin]

In response to the questions about medical costs I ran some numbers using some CMS and HHS data on health costs as well as the age- and gender-based risk factors from a paper sponsored by the Society of Actuaries. According to this survey of the uninsured by HHS: http://aspe.hhs.gov/health/reports/2011/ValueofInsurance/rb.shtml, about $1,460 per uninsured person in the U.S. went unpaid because of lack of insurance. This accounted for 95% of the total amount billed to the uninsured in 2008 which means that about $1,536.84 was billed to the uninsured in 2008. According to this study funded by the Society of Actuaries: http://www.healthcostinstitute.org/files/Age-Curve-Study_0.pdf, the age-gender factor for a 25-30-year-old male in the U.S. in 2006 and in 2010 was about .65 (I used the male factor to filter out pregnancy related costs which would have caused our millennial to get insurance). I’ll extrapolate that the factor was the same in 2008. So, making some wild and crazy assumptions that are probably unjustified but nonetheless necessary for this evaluation, 25-30-year-old uninsured males were billed around $998.95 in 2008. However, we are assuming a much higher premium than average for insured individuals, so we must account for that in an area factor. If we take the Kaiser estimate of $2,101 per year as an average for the country, then we get about a 1.71347 area factor that must also be included. That comes to expenditures of about $1,711.67 per uninsured 25-30-year-old male per year.

Let’s compare an insured 25-30-year-old male. According to this projection from CMS: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf, the per capita total health expenditures in 2008 were $2,252.8. Considering the age-gender factor above, .65, and our area factor of 1.71347, we have a total expenditure of $2,509.07 for an insured 25-30-year-old male in 2008. However a bronze plan covers, on average, 60% of these costs leaving the out-of-pocket costs at about $1,003.63.

But even this doesn’t tell the whole story. Our insured 25-30-year-old was able to exclude $3,600 in premiums from his W-2 wages, probably in the 25% tax bracket, giving him about $900 more in after tax income. We will subtract $900 from his out-of-pocket costs so that we are left with $103.63 in out-of-pocket “real” costs for our insured 25-30-year-old male.

As for our uninsured male, his fee structure for foregoing insurance is $285 in year one, $975 in year two, and $1,540 in year three. (BTW, there seems to be some confusion about these fees. The fee structure is thus: in 2014 you pay the greater of $95 or 1% of income capped at three times $95; in 2015, $325 or 2%, capped at three times $325; in 2016, $695 or 2.5%, capped at three times $695.Source: http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21157.pdf, see section 1.5000A-4. It is also worth noting that “income” here means AGI plus or minus a few deductions and income sources).

This individual should be able to pay off his loans in three year if he has relatively low expenses ($15,000 - $20,000 per year). Over those three years he will pay about  $3,703.63 per year for insurance or an average of about $2,645 per year without insurance.

So for about $1,100 per year this individual could risk catastrophic medical expenses over a three year period. What does that mean in real terms? We can estimate his risk by looking again at the HHS data which summarizes total hospital costs for the uninsured by the amount billed for inpatient care. Keep in mind that not only do these amounts exclude physicians’ fees, ambulance fees, prescriptions fees, etc. they also do not reflect the billed amount, but rather the cost to the hospital. HHS organized the data in this way, because most often the hospital is merely trying to break even with their own costs when hospitalizing the uninsured. Approximately 0.7691% of the uninsured population had hospital costs greater than $25,000. Approximately 0.082% of the uninsured had hospital costs greater than $100,000. It is worth noting that 18-to-35-year-olds make up about 41% of the uninsured population. The elderly make up very little of the uninsured population, so please don’t write off catastrophic hospitalization as completely improbable. If we assume that hospitalization rates are independent from year to year (which certainly isn’t the case, but nonetheless), then we get a 2.325% chance of hospitalization costing over $25,000; a 0.246% chance of hospitalization costing over $100,000. Please note that I did not apply the 1.71 area factor to these numbers even though I probably should have.

tldr; our $85,000/year millennial could save about $1,100 per year in risk-adjusted dollars by going uninsured while paying off his student loans, but he would be taking about a 0.246% chance of having over $100,000 in medical expenses during that three year period.

[randymarsh]

I brought up the latch example to show that the government is already regulating things and no one is screaming about freedom and liberty being taken away over their car being compatible with car seats. My point is that I don't think it's over regulation. I just don't think forcing people to have health insurance is that big of deal. It's similar to the system used in a few other developed countries.

You seem to live in this world where all health problems are caused by people's own neglect and people aren't affected by others. That is not true. You can have high cholesterol even if you eat right. Uninsured people can hit your car. Even if you are being forced to pay for unhealthy people's statins, wouldn't that be cheaper than paying for their heart attacks and strokes when they receive uncompensated care? Although I'm guessing you probably think statins are a scam by big pharma just like mental illness.

Few people have signed up for it because the website has been shit and people naturally wait until the last minute.

[Jamesqf]

As for birth control, I do find it highly amusing that the same people who scream about welfare queens and food stamps and WIC and Head Start hate birth control.

False generalization.  Some do object to birth control, for basically religious reasons.  (And a certain number of those have no objection to those other programs, at least when they're the ones getting benefits.)  Others of us really like the idea, and might even wish there was some practical way it could be added to urban water supplies or something.

So leave the birth control thing out of it, and try explaining why we should have to pay for some of that other stuff, like the substance abuse "treatment", which - all else aside - doesn't really work.  It's as if you were required to pay for child seat latches in your car, even though the government-mandated design didn't actually latch.

(I also think it's a rather strange sort of logic that tries to justify one piece of bad legislation by pointing out that other bad legislation exists, and people manage to cope with it.)

You seem to live in this world where all health problems are caused by people's own neglect and people aren't affected by others.

Wrong again.  I live in a world - and you do, too - where people's risks of health problems are strongly affected by their lifestyle choices.  So why is it unfair to charge people a price for insurance that's based on actuarial risk?  This seems perfectly acceptible for other sorts of insurance: my auto insurance rate depends on the number of violations I have, what kind of car I drive, and so on.  My homeowner's insurance rate depends on my home construction, distance from a fire station, etc.

I'll also remind you all of something you seem to be missing: this was supposed to be the Affordable Care Act, was it not?  So how is it affordable for most people when we find rates are now several times what they used to be?

[Lackland]

Hi, stepping into the fray!

False generalization.  Some do object to birth control, for basically religious reasons.  (And a certain number of those have no objection to those other programs, at least when they're the ones getting benefits.)  Others of us really like the idea, and might even wish there was some practical way it could be added to urban water supplies or something.

So leave the birth control thing out of it, and try explaining why we should have to pay for some of that other stuff, like the substance abuse "treatment", which - all else aside - doesn't really work.  It's as if you were required to pay for child seat latches in your car, even though the government-mandated design didn't actually latch.

Hear hear on birth control, but why only "urban" water supplies? Something about the high-paid hipsters of NYC and SF overprocreating? It'd be more useful in the Republican-voting, God-fearing meth-producing land of my upbringing, but there are just too many private wells.

Wrong again.  I live in a world - and you do, too - where people's risks of health problems are strongly affected by their lifestyle choices.  So why is it unfair to charge people a price for insurance that's based on actuarial risk?  This seems perfectly acceptible for other sorts of insurance: my auto insurance rate depends on the number of violations I have, what kind of car I drive, and so on.  My homeowner's insurance rate depends on my home construction, distance from a fire station, etc.

I've been thinking hard about this one. Why is it not fair for someone who has made poor lifestyle choices to not pay more for insurance based on actuarial risk, just like the values calculated for cars and houses? Well, I've come up with:

• The GATTACA problem: If insurance companies get to adjust policies based on knowledge of poor lifestyle choices, why can't they just take a DNA sample and charge everyone based on their genetic risks? I'm sure that the genetically un-risky would save a bundle if we charged higher rates to those with "unstable" genes.
• The false analogy: In order to reduce my insurance rates, I can easily give up the Subaru WRX of my youth with the minivan of middle age. It is a decision over which I have control; personal responsibility now gives me a discount despite past mistakes. But I can't trade my body. I can eat well and exercise, but the actuarial tables are linked more strongly to age and past hospital visits and costs, not current health.
• The bad assumption: Is predictable disease brought about by "lifestyle choices" more costly to the individual than unpredictable disease brought about by genetics and freak accidents? Not if we think about markets and capitalism. Type I diabetes is somewhat common, type II diabetes is now way too common. It's treated with insulin. Demand for insulin is high and there is a now robust market for the drug. The market has worked its magic and there are now competing manufacturers offering multiple brands with multiple mechanisms of delivery (pumps, shots, pens, pills) so that afflicted individuals can shop and adjust their spending on this good depending on their own particular needs, even within the constraints of medical insurance. See, chronic diabetes, or chronic depression, or chronic arteriosclerosis or all of the "lifestyle" diseases are costly to society, but are miraculously cheap to the individual consumer, precisely because they are so common. That's not going to be true with a rare form of cancer, a disease from a genetic anomaly, or anything that is treated with a new or experimental drug or technology. It's ironic: a dumbass who ate McDonald's every day for forty years is way cheaper to treat than a child with a rare form of lymphoma.

I'll also remind you all of something you seem to be missing: this was supposed to be the Affordable Care Act, was it not?  So how is it affordable for most people when we find rates are now several times what they used to be?

Most people? What, the 51% of the population of the United States? Or people in the individual marketplace who were buying cut-rate plans?

[prof61820]

In response to the questions about medical costs I ran some numbers using some CMS and HHS data on health costs as well as the age- and gender-based risk factors from a paper sponsored by the Society of Actuaries. According to this survey of the uninsured by HHS: http://aspe.hhs.gov/health/reports/2011/ValueofInsurance/rb.shtml, about $1,460 per uninsured person in the U.S. went unpaid because of lack of insurance. This accounted for 95% of the total amount billed to the uninsured in 2008 which means that about $1,536.84 was billed to the uninsured in 2008. According to this study funded by the Society of Actuaries: http://www.healthcostinstitute.org/files/Age-Curve-Study_0.pdf, the age-gender factor for a 25-30-year-old male in the U.S. in 2006 and in 2010 was about .65 (I used the male factor to filter out pregnancy related costs which would have caused our millennial to get insurance). I’ll extrapolate that the factor was the same in 2008. So, making some wild and crazy assumptions that are probably unjustified but nonetheless necessary for this evaluation, 25-30-year-old uninsured males were billed around $998.95 in 2008. However, we are assuming a much higher premium than average for insured individuals, so we must account for that in an area factor. If we take the Kaiser estimate of $2,101 per year as an average for the country, then we get about a 1.71347 area factor that must also be included. That comes to expenditures of about $1,711.67 per uninsured 25-30-year-old male per year.

Let’s compare an insured 25-30-year-old male. According to this projection from CMS: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf, the per capita total health expenditures in 2008 were $2,252.8. Considering the age-gender factor above, .65, and our area factor of 1.71347, we have a total expenditure of $2,509.07 for an insured 25-30-year-old male in 2008. However a bronze plan covers, on average, 60% of these costs leaving the out-of-pocket costs at about $1,003.63.

But even this doesn’t tell the whole story. Our insured 25-30-year-old was able to exclude $3,600 in premiums from his W-2 wages, probably in the 25% tax bracket, giving him about $900 more in after tax income. We will subtract $900 from his out-of-pocket costs so that we are left with $103.63 in out-of-pocket “real” costs for our insured 25-30-year-old male.

As for our uninsured male, his fee structure for foregoing insurance is $285 in year one, $975 in year two, and $1,540 in year three. (BTW, there seems to be some confusion about these fees. The fee structure is thus: in 2014 you pay the greater of $95 or 1% of income capped at three times $95; in 2015, $325 or 2%, capped at three times $325; in 2016, $695 or 2.5%, capped at three times $695.Source: http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21157.pdf, see section 1.5000A-4. It is also worth noting that “income” here means AGI plus or minus a few deductions and income sources).

This individual should be able to pay off his loans in three year if he has relatively low expenses ($15,000 - $20,000 per year). Over those three years he will pay about  $3,703.63 per year for insurance or an average of about $2,645 per year without insurance.

So for about $1,100 per year this individual could risk catastrophic medical expenses over a three year period. What does that mean in real terms? We can estimate his risk by looking again at the HHS data which summarizes total hospital costs for the uninsured by the amount billed for inpatient care. Keep in mind that not only do these amounts exclude physicians’ fees, ambulance fees, prescriptions fees, etc. they also do not reflect the billed amount, but rather the cost to the hospital. HHS organized the data in this way, because most often the hospital is merely trying to break even with their own costs when hospitalizing the uninsured. Approximately 0.7691% of the uninsured population had hospital costs greater than $25,000. Approximately 0.082% of the uninsured had hospital costs greater than $100,000. It is worth noting that 18-to-35-year-olds make up about 41% of the uninsured population. The elderly make up very little of the uninsured population, so please don’t write off catastrophic hospitalization as completely improbable. If we assume that hospitalization rates are independent from year to year (which certainly isn’t the case, but nonetheless), then we get a 2.325% chance of hospitalization costing over $25,000; a 0.246% chance of hospitalization costing over $100,000. Please note that I did not apply the 1.71 area factor to these numbers even though I probably should have.

tldr; our $85,000/year millennial could save about $1,100 per year in risk-adjusted dollars by going uninsured while paying off his student loans, but he would be taking about a 0.246% chance of having over $100,000 in medical expenses during that three year period.

Heat of Tin - thank you for taking the time to do this analysis.  No one is arguing with your numbers so I do think that it is safe to say that it is rational for my hypothetical millennial to buy insurance and, with some sacrifice, pay off their student loans.  Obamacare is complicated and confusing (proven by the fact that it's even hard for the very smart and financially savvy folks on MMM) but a step in the right direction, IMHO.  We need more folks explaining the numbers in a cold, calculating way (like what motivates smart young capitalists), rather than lecturing them on morality or spreading falsehoods in a bombastic fashion so individuals can make calm and rational decisions on what is best for them and we can fix any structural problems we identify (like the subsidies may be too low or we do a more sophisticated subsidy analysis that takes into account net worth) to make this system work.  My hat is, as they say, off to you!

[mpbaker22]

Technically I think you were both right.  I think most policies would pay for actual illnesses in the past.  Except, when the year ended and you had to renew, the price of the policy jumped ten-fold.  Agreed that the routine cares should not be rolled into insurance, and certainly not be forced that way.  As a male, why do I have to pay for birth control?  Even more compelling, why do women who choose to be open to a child have to pay for other people's birth control? 

In terms of medical cost though, I think other example need to be used because people hear birth control and think, war on women, war on women, war on women.  Really, you could say, why do I need to pay for someone to take cholesterol medicine for the next 40 years?  I don't think statins are actually covered by the law, but that would be the idea.

It's interesting that the "why do I have to pay for X" has gotten so much traction. If you're on an employer plan, are you able to make the same decisions you can in the individual market? My parents said their plan has options for themselves, themselves + spouse, and family. There are different plans but the difference is in how much insurance pays, not what's covered. For example, all plans include maternity care. So most Americans were already paying for that.

But that's a false comparison.  You're taking compensation for a job completed in the form of insurance and comparing it to a government mandate.  One is done by employers and varies from employer to employer.  Who is the largest employer in the US (oh isn't that walmart?  I bet they don't offer insurance)?  Probably at most 1 million people are affected by any individual employer rule.  The PPACA sets the requirement for every insurance plan in the US, without choice.