About that misleading 85% factoid about Obamacare subsidies
posted at 3:01 pm on November 1, 2016 by John Sexton
The lead story at CNN, as I write this, is a piece about the premium hikes under Obamacare. Here’s what it looks like on the front page:
Note that subhead which promises, “Most won’t experience the full price hike or anything near it.” As soon as I saw this I had a good idea where this was coming from. And sure enough the story itself opens with the price hikes and then turns on the same 85% factoid the law’s supporters routinely trot out:
For some consumers, Obamacare’s skyrocketing insurance premiums will soon morph from a political mess to a pocketbook crisis.
As enrollment begins Tuesday, the impact of an average 22% rise in benchmark plan prices will vary wildly depending on where you live. While Obamacare plans on some state exchanges will have modest price increases, others will have staggering hikes…
Yet most Obamacare participants won’t feel the full price hike or anything near it. Nationally, 85% of those enrolled receive a tax credit, which is based on the price of the second-lowest cost silver plan and an enrollee’s income. These subsidies put a limit on how much you have to pay.
I’ve written about this before but this oft-repeated factoid is both true and very misleading. It’s true that roughly 85% of those who purchased Obamacare plans on the exchanges are getting subsidies. However, millions of people are not buying plans on the exchanges, which means they are not eligible for subsidies. When you break it down, far more than 15% of people buying Obamacare compliant plans are paying the full cost of those plans. The Washington Post’s Glenn Kessler pointed this out just last week:
Most people on the exchange get tax credits that mitigate the cost of premiums, which has resulted in a substantial decrease in the number of Americans without health insurance. Those people are mainly the winners in Obamacare.
But about half of the people in the individual market are not getting such tax credits — and their premiums are increasing because of mandates in the law, a sicker-than-expected pool of applicants and decreasing competition because insurance companies have found it too difficult to make money. These people are the losers, at least so far.
The Associated Press addressed this in its story about the price hikes last month:
An estimated 5 million to 7 million people are either not eligible for the income-based assistance, or they buy individual policies outside of the health law’s markets, where the subsidies are not available.
It would be one thing if people using the 85% factoid were careful to note that this only applies to a subset of people buying Obamacare compliant plans, i.e. those buying them on the exchanges. But, as with this CNN story, people using this factoid often fail to point this out. That makes it seem like the bad news isn’t really impacting very many people. The truth is that the price hikes are a problem for millions of people.