Health Care Reform, Because Why Shouldn't I Comment Too?

[whirlwindmonk]

Yeah, everybody wants to have a say. Fortunately, this is America, so we get one, whether anyone listens or not. But anyway, I'm not going to try to analyze that 1000 page monstrosity of legal mumbo-jumbo or anything insane like that. Really, what spawned this is I was reading stuff on the reform and found an editorial on cnn.com. Health bill

Comments

[engelhardtlm1]

A few points

[whirlwindmonk]

"'You must buy this' is law for auto insurance in many states. Of course, that is conditional on having a driver's license or car. So, it's not quite the same."

It's also different in that it's a State law, rather than a Federal one. Is it still ok? I dunno. I do feel like given the way the Constitution grants power between the Federal and the State governments, it'd be difficult to use a state power to argue precedent for a federal power

[engelhardtlm1]

Agreed. Assuming that federalism means anything, it would mean that state law shouldn't provide a precedent for federal law

[whirlwindmonk]

So, in other words, it's probably actually cheaper for Joe Average to just eat the fines, and then get insurance if something happens. Is there a single stated goal of this plan that will actually work?

[engelhardtlm1]

It depends how we define "work", no? From what I've read, people won't be denied health insurance based on preexisting conditions (doing so is illegal), and people won't be dropped from insurance when they get ill. Of course, that doesn't mean that insurance will be cheap enough for people to afford it...

[whirlwindmonk]

Yeah. I mean, I can very easily imagine the cost of health insurance growing so that the cost to the average, reasonably healthy, person, will be nearly what rather sick people pay now. They come out even or lose just a bit from the sick people, and then make up for it from the healthy. Unless, you know, people see that they can save money by eating the fines, in which case, it'll have to go even higher, making the difference between insurance and the fines even more obvious, making more people drop insurance, etc, etc, etc.

This sounds like it'll be a great time.

[engelhardtlm1]

Wait... I just thought through things a bit more.

It actually makes sense to buy a high deductible health insurance plan rather than pay the fine. Here's why:

Fine = $750
Premium = $864

BUT, buying a high deductible health plan makes you eligible to contribute pre-tax dollars to a health savings account. So, if you're in the 25% bracket (like most American households), then putting just $1000 in your HSA will save you $250 in taxes. Families are allowed to contribute a bit over $6000 to an HSA each year, so you can save a bit over $1500 in taxes, making high deductible insurance better than "free". Makes you wonder why there are people that have no health insurance...

[whirlwindmonk]

So, you need to deposit roughly $3,600 each year to save enough on taxes to pay for your health insurance. However, this money must be spent on medical stuff. Spend it on anything else and you pay income tax + 10%. Ouch. So, really, you've lost a very significant chunk of money unless you happen to need to spend a very large portion of it on medical care. I don't know exact numbers, but somehow I doubt the average American spends over three grand a year on medical care. The best number I can find is from back in 2005 which gives a number at about $2,500 per 2.5 person household. Given those numbers, that's not enough spending to come out even, and in fact, loses them another $100 if they try to use the money they deposited for something else. And if you don't use it all, it carries over, so you build up more and more money that you can't access without eating a 10% fine. So, if you take those averages and assume they don't let that money build up, insurance ends up costing them ($1100 * .1) + ($864 - ($2500 * .25)) = $349. So, still

[engelhardtlm1]

Doing more research...

An individual can get high deductible plan for $450 a year. So, you only have to save a bit under $2000 in an HSA to get tax savings to pay for the plan, and individuals are allowed to put in $3000ish.

Also, the HSA doesn't have a penalty if you keep the money in until you're 65. (Actually, that's a reason the left doesn't like it. They suggest that it's just another way for the rich to save for retirement tax-free.)

Anyway, the $750 looks to be per person, up to $2250 max per family (basically). So, even without the tax benefits of an HSA, once the fine is in place, it makes more sense to have a high-deductible insurance plan than to take the fine.