Anthem Blue Cross reports that currently the average employee cost of health insurance on a monthly basis in California is $150. Under ACA it is estimated that the cost will increase to $300 – $500 for the individual employee coverage. So how will employers deal with the increased costs? How will individuals deal with increased costs? Many will simply opt out of the insurance. If you are an employer of less than 50 employees you will simply not provide insurance, as you are not subject to any of the penalties.
If you are an individual and can’t afford the cost of health insurance the penalties are not onerous enough to cause you to buy insurance. For example in 2014 if you are a family of four and your health insurance costs went from $900 to $1,800 and you can no longer afford insurance the penalty is $95 per adult and $47.50 per child (up to $285 per family) or 1.0% of family income whichever is greater. That compared to $21,600 per year in the cost of the new health insurance. You do the math.
In 2015 that increases to $325 per adult and $162.50 per child (up to $975 per family) or 2.0% of family income, whichever is greater. For 2016 and beyond the penalty is $695 per adult and $347.50 per child (up to $2,085 per family) or 2.5% of family income, whichever is greater. Still looks like not having insurance is a lot less than what you have to pay in the penalty.
How is this sustainable? It isn’t. As we discussed earlier the increased cost of health care have to be born by someone. It will be the policyholder. The government does not have unlimited resources and neither does the private sector. It is unreasonable to expect that either should be able to sustain the ever-increasing cost of health care. Look at the numbers we discussed earlier. We spend 18% of GDP or $8,402 per person in America. We spend 48% more on healthcare than Switzerland and according to the Organization for Economic Co-operation and Development we spend 81% more than Denmark.
What about nearly 50% of healthcare costs are spent on 5% of the population. I am sorry but there is not enough reform for those numbers. So offering new coverage to the 30 million that are uninsured and increasing costs in general not including the abuse and waste we are going to raise taxes to fix this. The Federal Government cannot print enough money or raise taxes enough to fix the problem.
With the mandate, rising premiums costs, and issues of access being a problem, we are in for a world of hurt.