Under the PPACA, beginning in 2014 many Americans will have their premiums and out of pocket costs subsidized by the federal government when they receive health care through an exchange. Generally speaking, these folks will have an income no more than 400% of the poverty level for a family of four. Today that is $88,000 per year. That subsidy is to make health care “affordable”.
Tax credits will limit the amount an individual must pay for health insurance premiums
for essential health benefits from 2% of income up to 133% of the federally defined poverty level to 9.5% at 400% of poverty. The credits are based on the second-lowest-cost plan in the individual market where the person resides. Cost sharing is also reduced by credits, limiting the amount a person pays out of pocket based on a sliding scale of income and phasing out at 400% of poverty.
Here is what the law says:
SEC. 1402. REDUCED COST-SHARING FOR INDIVIDUALS ENROLLING IN QUALIFIED HEALTH PLANS.
(a) IN GENERAL.—In the case of an eligible insured enrolled in a qualified health plan—
(1) the Secretary shall notify the issuer of the plan of such eligibility; and
(2) the issuer shall reduce the cost-sharing under the plan at the level and in the manner specified in subsection (c).
(b) ELIGIBLE INSURED.—In this section, the term ‘‘eligible insured’’ means an individual—
(1) who enrolls in a qualified health plan in the silver level of coverage in the individual market offered through an Exchange; and
(2) whose household income exceeds 100 percent but does not exceed 400 percent of the poverty line for a family of the size involved. In the case of an individual described in section 36B(c)(1)(B) of the Internal Revenue Code of 1986, the individual shall be treated as having household income equal to 100 percent for purposes of applying this section.
(c) DETERMINATION OF REDUCTION IN COST-SHARING.—(1) REDUCTION IN OUT-OF-POCKET LIMIT.—
(A) IN GENERAL.—The reduction in cost-sharing under this subsection shall first be achieved by reducing the applicable out-of pocket limit under section 1302(c)(1) in the case of—
(i) an eligible insured whose household income is more than 100 percent but not more than 200 percent of the poverty line for a family of the size involved, by two-thirds;
(ii) an eligible insured whose household income is more than 200 percent but not more than 300 percent of the poverty line for a family of the size involved, by one-half; and
(iii) an eligible insured whose household income is more than 300 percent but not more than 400 percent of the poverty line for a family of the size involved, by one-third.
You would think that if health care were made truly affordable, no subsidy would be necessary, but as we know we did not go down that road and rather we reformed health “insurance.” Of course, both Medicare and Medicaid are highly subsidized as well, but with one difference. The federal government also determines what it will pay health care providers and while it may not be able to control the volume of claims, it can control the fees per service rendered (albeit resulting in cost shifting to the private sector).
In the case of health insurance provided through the exchanges, not only can the government not control the cost of services (yet), the PPACA contains numerous provisions that will increase premiums, but nothing to manage the rate of increase.
Here is the scenario of concern. By 2014, premiums have risen significantly and continue to do so (likely in the range of 7% or more annually). The subsidy levels set in 2010 to make health care (appear) affordable are increased to maintain that goal thereby creating an open-ended entitlement added to Medicare, Medicaid and Social Security. In other words, to achieve short-term goals (expanding coverage) we have created another fiscal monster.
There is at least one other scenario. Within a few years of 2014 the payment system is drastically changed (upsetting the AMA), coverage is changed 
(upsetting patients) and some form of (dare I say it) rationing is required (upsetting everyone) – as I have said before that is not necessarily a bad thing, there is too much unnecessary and ineffective care provided now.
Of course, with the above, I am assuming that there are no politicians running for re-election and all politicians focus on just doing the right thing for the Country. Sure, that can happen, read this.
QUINNSCOMMENTARY 