Does Obamacare Work? It Did for Me

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This post comes from Mitchell D. Weiss at partner site Credit.com.

Five years ago, I retired from the company I had owned and run since the mid-1990s. My wife and I were in our 50s back then — healthy and thinking little about the 14-karat-gold health plan we had at the time. It cost a little more than $200 per pay period (approximately $5,000 annually), the deductible was very low, and co-pays virtually nonexistent.

When I left my firm, I took advantage of COBRA continuation health coverage to which departing employees (voluntary or otherwise) are entitled under federal law, and maintained our insurance through my former company’s group policy.

But COBRA prices often aren’t the same as employee prices. That’s because companies typically subsidize their employees’ health care premiums — a benefit that evaporates along with your paycheck. In my case, a roughly $400 monthly payment more than doubled to more than $900. Still, I didn’t have an issue with that, because the plan was terrific and I was fortunate enough to be able to afford the post-paycheck cost.

All that changed as I drew close to the 18-month mark (the end of the COBRA plan).

I hired an insurance consultant to help us replicate what we had in place. The news was shocking. My wife had a pre-existing condition at the time and the only coverage that was available for her involved our state’s high-risk pool — at more than $3,000 per month! Thankfully, my own health was good, so my share of the policy would run only $1,600, for a total of nearly $5,000 per month, roughly the same amount I had been paying for a year’s worth of coverage.

That, by itself, was eye-opening. I knew that privately purchased health care insurance was more expensive but I hadn’t realized how obscenely unaffordable it had become.

In an effort to bring down our cost to a more rational level, my adviser suggested that I apply for coverage through the limited liability corporation I formed for my consulting and publishing work, and to consider a high-deductible health plan supported by a health savings account. Of course, that meant we would be insuring against catastrophic illness rather than for routine doctor visits that had previously been covered, but we were interested to see how the dollars and cents added up.

My first disappointment was in the apparent lack of competition. Only two insurance carriers responded to our request for proposals and one’s premiums were significantly higher than the other’s. We ended up choosing a plan that had a $5,000 deductible for each of us ($12,000 maximum out-of-pocket). Initially, the premiums ran about $1,200 per month, but that increased to $1,600 after I turned 60.

Hence, you can imagine my keen interest in seeing what the Affordable Care Act had in store via the exchanges that opened for business on Oct. 1.

The health insurance exchange

Early that morning, I went online — and guess what? I found virtually the same policy from the same insurance carrier. This time, however, the coverage cost $600 less per month — even without government subsidies — and $100 or so lower than when I first signed up for my current plan. What’s more, I had 15 other plans to choose from as well.

As questionable as the pricing tactics of the insurance carriers may have been in the run-up to the ACA’s implementation, the level of misinformation pertaining to this legislation — that it’s a government takeover, that it will cost consumers more, and so forth — deserves equally harsh criticism, if not calls for accountability. Perhaps some of the loudest voices on this issue are as out of touch as I once was. I say that because many of my corporate friends and colleagues were shocked to hear of the pricing and coverage disparities my wife and I encountered. Fear mongering and demagoguery, however, should not be tolerated.

The issue of employee coverage

We’ve also heard news reports about companies announcing plans to downgrade or discontinue employee health care coverage, supposedly in response to the ACA.

Let’s think about that for a moment.

Companies that subsidize a portion of their employees’ health care premium costs are, in effect, providing additional compensation — just in a different form. For example, since my former company’s policy was to offset the cost of its employees’ coverage by roughly half, it could just as easily have paid the same amount in salary and sent folks off to fend for themselves. We elected not to do that because prior to the implementation of the ACA, group health care coverage was almost always less expensive than individually purchased policies.

Today, however, that may be changing, so past practices are legitimately worth revisiting. For example, I recently heard about the owner of a large trucking company who, after realizing his employees would be better served through his state’s health care exchange, decided to discontinue coverage — but only after increasing their salaries to compensate for the value of the subsidy his company once paid.

That is precisely the point.

If the full cost of company-sponsored health care coverage were simply passed through to its employees, little would be gained from terminating this highly valued benefit. However, companies that had been subsidizing these costs and are now pointing to the ACA as the reason for curtailing or eliminating that support, without making their employees whole in the process, are just taking advantage of a still-weak economic recovery — where too many applicants are chasing too few jobs — in order to boost the bottom line.

Those business owners and managers might want to keep in mind an old saying: “All that goes around comes around.” At some point, the economy will strengthen and the talent they’ve spent time and money hiring, training and cultivating — but failed to treat fairly — will take all that education, skill and experience to an employer who will.

This story is an op-ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • Robert

    I work in economics. The intermediate and long range prospects for the micro/firm’s economics will prove to be more profitable due to the ACA. On a social context we will become a stronger, healthier nation through ACA as a single payer healthcare system evolves. On a personal context. As a rule we are generally mis-informed. The internet has compounded that.

  • James

    Some of the most egregious misinformation is coming from the minority group of ultra conservatives who have taken hostage not only the Republican party but also the nation. The ACA is not even fully implemented yet and they are making statements that it is not working to back up their effort to reverse the progress that has been so hard fought. A number of them come from states and districts where they have no fear of electoral retribution. We indeed have a dysfunctional Congress but we also have a dysfunctional electorate.

  • JCarol

    My experience closely mirrors yours, Mitchell.

  • lonleylibertarian

    I am surprised that your think it is OK to spend $1000 a month to get the kind of coverage you describe. If I understand you correctly you will be out ~ $22,000 before you get any payment from you insurer each and every year. That money could be saved- invested to provide you significant resources to deal with any future health care expense. In five years you would have well in excess of $100,000 set aside. Taking a portion of your funds and purchasing a life insurance policy for each of you with catastrophic care riders would add a layer of protection should you need more resources sooner. In addition you would be a cash buyer which gets you discounts from providers often over 50%. Self insurance is a valid option for many and can be done at a much lower net cost to people like you [and I]

    • Jake

      I agree with the libertarian. That insurance price under the exchange seems extremely high. My employer-sponsored plan is a high-deductible (which I LOVE) and costs about $500/month for my family. I pay for everything with cash (HSA), and get unbelievable discounts. Some times they are as much as 90%.

  • A. Lincoln

    How did it work for you, Mitchell, exactly? You didn’t get any health *care*–you only got a slight discount on your insurance. Six hundred dollars sounds like a lot at first glance, but based on what you were paying–you don’t make it perfectly clear–that seems to be only about a ten percent discount for you.

    Congratulations on being able to afford $5,000 per year for health insurance, and for having a paid financial advisor and a limited liability company through which to run your expenses. You never knew (or have forgotten) what it’s like to live hand to mouth. For the average family without insurance, Obamacare represents a huge financial burden. Even fifty dollars a month would be too much, and Obamacare will cost hundreds per month, on average. These numbers may seem trivial to you, but I assure you they are not.

    Health care in this country is a luxury-price service, like first-class travel. If you cut the price of a first-class plane ticket in half via subsidies, from $3,000 to $1,500, it’s still not affordable to the lower classes. That’s what Obamacare attempts to do. Of course, when you buy a plane ticket, you’ve paid for the whole seat. With Obamacare, you have paid for only 60% of the seat in advance; when you actually board the plane, you have to pay much more. Two of the most common surgeries in the USA are c-sections and hysterectomies, which each cost (median estimate) $15,000. If you have to get one, and you’re part of Obamacare, you’ll pay $6,000. A lower-class family will need many years to pay that–and that’s before the interest they’ll be charged.

    Anyone who conflates support for Obamacare with *caring* is making a mistake; don’t assume the law’s supporters have more empathy than its opponents. I think Obamacare will only benefit the wealthy: doctors and the owners of healthcare-related businesses, and will chop the lower classes off at the knees. I empathize with those people–perhaps because I’m one of them.

    P.S. It’s sad that you call for “accountability” for people who express opinions that differ from yours. What’s more important to you: free discourse or your agenda?

    • Nancy

      Thank you for your perspective. It is my understanding that Obamacare enables states to expand their medicaid programs for the lower classes. Is that not so? Also, some states have refused to take advantage of the opportunity. What are the reasons for that?

      • Diane

        Obamacare makes states cover more people under Medicaid by upping the income level for people to qualify for the Medicaid program (many more people will qualify for Medicaid). And during the first several years, the Feds reimburse the states for the large majority of the costs. But that reimbursement gets less and less over time and in a few years, states are left to foot most of the bill. States can’t print money like the federal government, many of the states are already running in the red or barely treading water. So, they opt out of expanding their Medicaid rolls. It is called being fiscally responsible, something the federal government and many states know nothing about.

        • Nancy

          Thanks.

  • Paul Cenac

    As a licensed insurance agent in 2 states, one with a state run exchange and another without, I am absolutely amazed at your extremely partisan and verifiably false claims in your post!

    Repeating the Obama White House talking points and deliberately omitting your ‘ must pay in full first’ $5,500 Deductible for each of you in addition to your $13,000 annual premiums before your 20% co-pay becomes available for the Silver Plan, is making a false claim by omission!

    Since only a handful of people nationwide claim to have actually paid for and obtained coverage, versus the millions who were duped into trying to log-on, and when questioned further most have admitted they ‘found’ a plan they liked but did not buy anything…similar to your story. That is why No One wants to claim how many people have actually bought a policy versus just creating an account this past week!

    Compare this absolute failure to Apple documenting $9 million in sales in 3 days!

    Obama admitted today the Obamacare website was supposed to only cost $95 Million but has now cost $695 Million and it still doesn’t work! Apples website cost a lot less!

    No sane person below 50 years old is going to pay nearly $10,000 for INSURANCE they will likely not use instead of a $95 fine!

    Remember that the IRS will be targeting political opponents through your financial information you are forced to reveal.

    An identity theft and financial fraud expert claims the Obamacare website is a hackers wet dream!

    An Obamacare Navigator has already been caught forwarding 2,400 to a personal email account!

    Obama said Obamacare would cost $900 Billion but has revised that to $2.4 Trillion before they have paid a penny toward an aspirin!

    That is $2,400,000 MILLIONS !

    Added to $17,000,000 Millions of DEBT!

    Socialist attempts to run Healthcare has failed in every country it has been tried because it bankrupts the country!

    Bottom Line is STAY AWAY until Obamacare implodes or is repealed!

  • G Muelheims

    I understand your point. You did however retire in your 50’s
    Did you prepare for retirement or expect others to pay your bill? Don’t expect other citizens to pay for your lack of preparation.

  • Sydney

    As a 24 year old whose job doesn’t provide health insurance, the only reason I am insured is because Obamacare allows me to stay on my mom’s insurance for another 1.5 years. My husband also would’ve been without health insurance for the past three years if it wasn’t for the Affordable Care Act.

    When we reach 26 years, which my husband will do next October, we’ll have to shop for our own health insurance. I am so relieved to have something like Obamacare to ensure that I will have access to affordable health care. It’s definitely not perfect, and I would really like to have the ACA cover MORE, but it’s better than what we had previously, which is pretty much a poke in the eye. This is a big step in the right direction.

  • Dan

    I am glad to hear that you premiums went down. My family is on the other side of the coin; we received a letter from Blue Cross that my wife will be losing her coverage at the end of the year because it was not obama approved. Her plan currently runs $330/month with no deductible and 70/30 coverage with a max out of pocket of 2500. After 6 hours of trying I made it into the exchange. She can not pick from Blue Cross and one other option that was priced much higher then Blue Cross. The most comparable policy is the gold plan at $990 per month. It will now have a $150 deductible, 80/20 coverage with a max out of pocket of $4950. Going uninsured and pocketing the premiums would make since in my situation but she is pregnant and due in March, so not an option currently. Can someone please explain to me the new definition of affordable?

    In summary
    Premium – Tripled
    Max out of pocket – Doubled
    Co insurance percentage– Slightly better
    Keep your coverage if you like it – False
    It will create competition in the marketplace – False