The reality is that no one knows exactly how much insurance plans on the exchanges will cost.
Q: Did the IRS say that the cheapest health insurance plan under the federal health care law would cost $20,000 per family?
A: No. The IRS used $20,000 in a hypothetical example to illustrate how it will calculate the tax penalty for a family that fails to obtain health coverage as required by law. Treasury says the figure “is not an estimate of premiums.”
The Internal Revenue Service issued a report in which it estimated that under Obamacare, the least expensive health insurance plan available to a family in 2016 would cost $20,000 annually, according to CNSNews.com.
Is this a true report?
This question — and several more from readers — was prompted by an article published by the Cybercast News Service (an “alternative” news site run by the conservative Media Research Center) with the headline: “IRS: Cheapest Obamacare Plan Will Be $20,000 Per Family.” But the IRS made no such declaration about the future cost of health insurance plans.
In January, the Treasury Department and IRS issued proposed regulations for the individual shared responsibility provision of the health care law. That provision, otherwise known as the “individual mandate,” requires nonexempt persons to obtain minimum essential health insurance for themselves and their nonexempt family members, or pay a penalty when filing their income taxes. The proposed regulations include several examples of how the “shared responsibility payment,” as it was called, would be calculated for single persons and families of various sizes and incomes.
One of the examples from the proposed regulations, and the basis for this claim, is below:
IRS REG-148500-12: Example 3. Family without minimum essential coverage. (i) In 2016, Taxpayers H and J are married and file a joint return. H and J have three children: K, age 21, L, age 15, and M, age 10. No member of the family has minimum essential coverage for any month in 2016. H and J’s household income is $120,000. H and J’s applicable filing threshold is $24,000. The annual national average bronze plan premium for a family of 5 (2 adults, 3 children) is $20,000.
Beginning in 2014, individuals and families purchasing health insurance on their own will be able to shop for insurance in new state- or federal-run health care exchanges. Qualified health plans offered through the exchanges will provide four basic levels of coverage (bronze, silver, gold and platinum), with the bronze-level plan being the lowest tier of acceptable coverage.
But the headline of the Cybercast News Service report simply jumps to the conclusion that the IRS said that the “Cheapest Obamacare Plan Will Be $20,000 Per Family,” when there was no indication that that was the case. An opinion piece published on LifeNews.com made the same leap, claiming that “the IRS … has finally released a cost analysis based on ObamaCare regulations showing that the cheapest healthcare plan in 2016 will cost average American families of four or five members $20,000 per year for the so-called ‘bronze plan.’ ”
For one thing, the example in the proposed regulations uses the word “average,” which means that the “cheapest” plan could, in fact, be lower than $20,000. But more important, the regulations weren’t a “cost analysis” at all. A spokesperson for the Treasury Department confirmed to FactCheck.org in an email that the IRS wasn’t making any declarations or projections about what prices will be.
“[Twenty thousand dollars] is a round number used by IRS for a hypothetical example,” the official wrote. “It is not an estimate of premiums for a bronze plan for a family of five in 2016.”
So far, no one knows exactly how much insurance plans on the exchanges will cost. The health care law only mentions “actuarial values” for the four tiers of coverage — in other words, how much of an insured person’s health care costs a plan is expected to cover. Bronze plans are to cover at least 60 percent of costs; silver plans will cover 70 percent. Gold plans will cover 80 percent, and platinum plans will cover 90 percent of the costs. In each case, the remaining percentage is left to the insured to pay through deductibles, copayments and coinsurance.
In January 2010, before the Affordable Care Act became law, the Congressional Budget Office projected that, in 2016, premiums for bronze plans would, on average, cost “between $12,000 and $12,500 for family policies.” That estimate has not been updated since.
About how much are families paying now?
Most recently, the average annual premium for employer-sponsored coverage for a family of four reached $15,745 in 2012 — up 4 percent from 2011 — according to a survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust. On average, workers paid $4,316 toward the cost of their coverage, while employers covered the remainder.
There is less information available about what individuals and families pay in the non-group market. But a 2010 survey, also conducted by the Kaiser Family Foundation, found that, on average, people paid a premium of $7,102. That was for families of two or more, however, so premiums could vary widely depending on the number of insured. And while their premiums are typically lower, those purchasing insurance on their own tend to pay higher out-of-pocket costs, according to KFF.
It is also worth noting that under the federal health care law, individuals and families for whom purchasing insurance is deemed unaffordable will be exempt from having to pay the tax penalty. Those with incomes below 138 percent of the federal poverty level will be eligible for Medicaid. And people with incomes up to 400 percent of the poverty level ($92,200 for a family of four and $44,680 for a single person in 2012) — who are not also eligible for public coverage such as Medicaid and Medicare — will receive federal subsidies to help cover the cost of acquiring health insurance. In its most recent report, the CBO projected that, in 2023, about 80 percent of the 25 million people purchasing insurance through the exchanges would receive subsidies from the government.
The Kaiser Family Foundation has developed a “Health Reform Subsidy Calculator,” which allows people to get a sense of who might be eligible for premium support from the government, and how much the subsidy might be. (It is just an illustration, though, and not meant to suggest that this is exactly what people will pay or receive in subsidies.) Assuming a medium-range regional cost factor, the premium for a 50-year-old policyholder — in a family of four, with a household income of $92,200 — could be $16,858, according to the subsidy calculator. But that family might also qualify for an $8,099 subsidy, leaving them to pay $8,759. That estimate is close to the average subsidy of $8,290 that CBO projects exchange participants would receive in 2023.
Department of the Treasury. IRS REG-148500-12. 30 Jan 2013.
Cover, Matt. “IRS: Cheapest Obamacare Plan Will Be $20,000 Per Family.” CNSNews.com. 31 Jan 2013.
Staver, Matthew. “IRS Admits Obamacare’s Cost is $20,000 Per Family.” LifeNews.com. 3 Feb 2013.
National Conference of State Legislatures. American Health Benefit Exchanges. 5 Feb 2013, accessed 27 Feb 2013.
Kaiser Family Foundation. Patient Cost-Sharing Under the Affordable Care Act. Apr 2012.
Congressional Budget Office. Letter to Honorable Olympia Snowe. 11 Jan 2010.
Kaiser Family Foundation, Health Research and Educational Trust, and Health Affairs. Family Health Premiums Rise 4 Percent to Average $15,745 in 2012, National Benchmark Employer Survey Finds. News release. 11 Sep 2012.
Kaiser Family Foundation. Survey of People Who Purchase Their Own Insurance. June 2010.
Congressional Budget Office. CBO’s February 2013 Estimate of the Effects of the Affordable Care Act on Health Insurance Coverage. 5 Feb 2013.
Kaiser Family Foundation. Health Reform Subsidy Calculator. Accessed 28 Feb 2013.
FactCheck.org is a nonpartisan, nonprofit “consumer advocate” for voters that aims to reduce the level of deception and confusion in U.S. politics.
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