How is the Affordable Health Care Act going to save you money?

Will the Affordable Care Act Make Health Care More Affordable.  By the RAND Corporation 2013

Healthcare cost has posed a substantial burden for Americans.  Between 2001 and 2010 the share of working age adults with medical expenses totaling 10 percent or more of income increased from 21 percent to 32 percent.

Rand has completed the following study:

RAND has a Comprehensive Assessment of Reform Efforts (COMPARE) model, RAND researchers estimated how changes in coverage under the ACA will affect consumers’ spending on health care and their risk of catastrophically high health care costs. Specifically, the analysis examined two kinds of consumer spending  out of pocket spending,  which includes deductibles, copayments, and coinsurance (the fraction of expenses paid by the insured person), and total spending which includes out of pocket spending plus the net cost of premiums (total premiums minus subsidies). Because the ACA offers different coverage options based on income, the research team assessed how the effects on consumer spending will vary across three income groups those with incomes below 138% FPL and 400% FPL. (RAND 2013)

According to the Health and Human Services the FPL for a family of 4 is $23,555. The Federal Poverty Level (FPL) is the minimum amount of gross income that a family needs for food, clothing, transportation, shelter and other necessities. This level is determined by the Department of Health and Human Services (DHHS). FPL varies according to family size. Public assistance programs, such as Medicaid in the U.S., define eligibility income limits as some percentage of FPL. (Investopedia 2014)

Consumers with incomes below 138% of FPL (In the family of four this is $32,499. In a family of four the FPL at 400% is $94,200) Consumers in this group will see an estimated decrease in out-of-pocket spending under the ACA, but effects on total spending will vary. (RAND 2013)

According to the Kaiser Family Fund calculator with a Silver plan for a two income home with 4 persons at $81,000 (the 2012 Texas Median income is $80,092 for respective situation Census 2014)  annual income the premium would be $9148, (Kaiser 2014) this would place the family between the FPL of 138% and 400% at 344%. According to the RAND Corporation this group transitioning from the pre-ACA individual market to the ACA-regulated individual market will see a decrease in both out-of-pocket spending (from $1,191 to $686) and total spending (from $4,417 to $3,523). (RAND 2013) There is also an opportunity to receive a government tax credit subsidy of up to $1723 per year. (Kaiser 2014) Additionally the out of pocket maximum can be no more than $12,700.

A two person income home earning $21,000 (135% FPL) annually will only receive a tax credit up to $4,465 for a silver plan. However if they opt to enroll in the bronze plane it may not cost anything for the premium and receive up to $3505 in subsidies.  The group enrolled in the bronze plan will pay less in premiums but have higher out of pocket expenses. (Kaiser 2014)

I think the premise of the Affordable Care Act RAND Corporation study is to show how the ACA will help catastrophic medical expenses. After either purchasing health insurance there will be in most instances a reduction in out of pocket expenses. Some of the premiums can approach as much as 10% of a group’s income. The tradeoff between paying high premiums and minimum co-insurance payments in some scenarios may prove more beneficial if you are consistently spending more than the premiums minus the tax credits. If you are consistently spending less on healthcare then the premiums may not be most beneficial. This perhaps can enhance the insurance companies to find more efficient healthcare facilities. Insurers may work in similar fashion to the Health Maintenance Organizations where at times it would be a challenge to receive care.

Census (2014) State Median Income, Income Data, U.S. Census Bureau website last accessed 4/13/2014

Retrieved from: http://www.census.gov/hhes/www/income/data/statemedian/

Federal Poverty Level (2014) Definition Investopedia  Website Last Accessed 4/13/2014 Retrieved from:

http://www.investopedia.com/terms/f/fpl.asp

RAND Corporation (2013) Willl the Affordable Care Act Make Health Care More Affordable? RAND

Corporation Brief Retrieved from: http://www.rand.org/content/dam/rand/pubs/research_briefs/RB9700/RB9734/RAND_RB9734.pdf

Kaiser Family Foundation Subsidy Calculator (2014) KFF.org Website Last Accessed 4/13/2014 Retrieved

from http://kff.org/interactive/subsidy-calculator