Senate Health Care Bill Would Force Some Middle Class Families to Pay $15,200 Yearly Insurance Fee, According to CBO Analysis
The fee would result from the facts that the bill requires individuals—but not employers—to purchase health insurance plans and that families that earn up to 400 percent of the federal poverty level would be given government subsidies to purchase insurance in government-regulated insurance exchanges while families earning more than 400 percent of the federal poverty level would be denied government subsidies.
A family of four—two parents and two children—earning $88,200 would be at 400 percent of the poverty level this year, according to the U.S. Department of Health and Human Services. A family of four earning $88,201, therefore, would not be eligible for a federal subsidy to buy insurance under the Senate health-care bill. If the mother and father in such a family could not get employer-based health insurance—because their employers decided not to buy their workers insurance—the family would be required by law to purchase a policy with its own money that would cost an estimated $15,200 per year, according to the CBO.
The basic facts demonstrating that this would be the case if the Senate health care bill were to become law were presented in letters that the CBO sent to Sen. Harry Reid (D.-Nev.) on November 18 and to Sen. Evan Bayh (D.-Ind.) on November 30. The letters are available on the CBO Web site.
Here are the facts about what the Reid health care bill would mean for the finances of families that earn more than 400 percent of the poverty level and the CBO sources for those facts:
Fact 1: The bill requires all legal U.S. residents to buy health insurance beginning in 2014.
Fact 2: The bill provides subsidies to people making up to 400 percent of the poverty level to buy health insurance if their employer does not buy them insurance and as long as they agree to purchase a government-regulated insurance plan in the government-regulated insurance exchange.
Source: Page 4 of a Nov. 18 CBO letter to Sen. Reid states: “The legislation would take several steps designed to increase the number of legal U.S. residents who have health insurance. Starting in 2014, the legislation would establish a requirement for such residents to obtain insurance and would in many cases impose a financial penalty on people who did not do so. The bill also would establish new insurance exchanges and would subsidize the purchase of health insurance through those exchanges for individuals and families with income between 133 percent and 400 percent of the federal poverty level (FPL).”
Fact 3: The bill does not require employers to buy health insurance for their workers, and makes employers with 50 workers or more pay a fee of only $750 for each fulltime worker they do not insure if any of their workers get an insurance plan on the exchange using a federal subsidy.
Fact 4: Individuals who are offered insurance by their employer cannot buy insurance with a federal subsidy in the exchange.
Source: Page 7 of the Nov. 18 CBO letter to Sen. Reid says: “The legislation contains a number of other key provisions related to insurance coverage. Firms with more than 50 workers that did not offer coverage would have to pay a penalty of $750 for each full-time worker if any of their workers obtained subsidized coverage through the insurance exchanges; that dollar amount would be indexed. As a rule, fulltime workers who were offered coverage from their employer would not be eligible to obtain subsidies via the exchanges.”
Fact 5: By 2016, when the new health-care system created by the bill is fully operational, the average family insurance policy sold to people buying insurance individually, rather than through an employer, will cost $15,200 per year.
Source: Page 6 of a Nov. 30 CBO letter to Sen. Evan Bayh (D.-Ind.) says: “Average premiums per policy in the nongroup market in 2016 would be roughly $5,800 for single policies and $15,200 for family policies under the proposal.”
Fact 6: According to the analysis of the CBO and Joint Tax Committee, 32 million people will buy their insurance on their own rather than through an employer in 2016 under the Senate bill, and only 18 million of those people will get federal subsidies to buy their insurance, meaning 14 million will be required by the law to buy their own health insurance and will not be given any federal subsidy to do so.
Source: Page 24 of the Nov. 30 CBO letter to Sen. Bayh says: “Therefore, of the 32 million people who would have nongroup coverage in 2016 under the proposal (including those purchased inside and outside the exchanges), about 18 million, or 57 percent, would receive exchange subsidies.”
Common sense analysis: The CBO may be underestimating the number of Americans that would be forced under the Senate health care bill to buy health insurance plans without any help from an employer or the government—a group that will include middle-class families who are forced by the government to pay $15,200 for a health insurance plan out of their own pockets.
Why? The bill imposes a maximum fine of only $750 per worker on employers with more than 50 workers who do not buy insurance for their workers. Thus employers will face a choice: Pay the employer’s share of the insurance plans for their workers--including the employer's share for the typical $15,200 family insurance plan--or drop insurance for all their employees and pay a maximum fee of only a $750 per employee.
Under the bill, the financially rational decision for employers will be to drop their health insurance plans and pay the $750 fine. This decision will be reinforced by the fact that their employees making less than 400 percent of the poverty level will only qualify for a federal insurance subsidy if the employer does not offer the worker an insurance plan.
Left out in the cold will be workers who earn more than 400 percent of the poverty level and whose employers make the financially rational decision to drop their health insurance coverage. These workers will be required by federal law to buy health insurance, but will get no subsidy to do so. According to the estimate of the CBO, they will have to pay $15,200 for a family policy in 2016.
In effect, the Senate health care bill will impose a new $15,200 annual tax on all American families that make over 400 percent of the poverty level and whose employers decide not to purchase health insurance for their workers after the bill takes effect.