For the sake of argument, let’s say that eventually, the technological glitches plaguing President Obama’s health care program get resolved.
Over the long term, one of the key issues facing the law will be whether enough young and healthy people sign up for insurance to offset the cost of insuring older and sicker Americans.
One of the most heated arguments among health care policy writers has revolved around the issue of “rate shock,” which is a term for the premium increases that many Americans, especially younger and healthier ones, will experience once the law kicks in.
Though the specifics have varied, broadly speaking, the debate over premiums has followed a familiar pattern. When a state or the federal government has released data on premiums under Obamacare, conservatives have noted how much more expensive the plans are than what’s available in the existing market.
Supporters of Obamacare then counter that it isn’t a fair comparison because Obamacare plans cap deductibles and out-of-pocket costs and provide subsidies for lower-income individuals to purchase insurance.
With this in mind, I set out to find a plan in the existing market and find as close a match as possible on a government-run exchange to see how the price varied, taking into account subsidies available under Obamacare at various income levels.
I chose to look at insurance costs in Connecticut because it’s one of the few exchange websites that I’ve been able to search reliably.
To create a benchmark for comparison, I searched eHealthInsurance.com Monday morning and found that a 30-year old living in Hartford, Conn., can currently purchase a plan from insurer ConnectiCare for $109.59 per month that has a $5,000 deductible and caps out-of-pocket costs at $6,000.
I found a roughly similar plan on Connecticut's state health insurance exchange -- a ConnectiCare policy that has a $5,000 deductible and a $6,250 cap in out-of-pocket costs.
The base price of the plan on the exchange was $221.48, or slightly more than double the pre-Obamacare cost of the similar plan.
I then adjusted the income level of the theoretical Hartford 30-year old and created the graph that accompanies this post, which looks at the cost of the plan after subsidies at various income levels.
As the graph shows, at $17,500 in income, federal subsides would be significant enough to allow individuals to enroll in the plan at no cost to themselves.
At $27,500 of earnings, the cost of the plan would be $105.57, nearly the same as the pre-Obamacare cost. But after that point, the Obamacare cost starts exceeding the pre-Obamacare status quo.
And by $37,500 in income, 30-year old individuals from Hartford earn too much money to qualify for any subsidies, meaning the cost of purchasing the same insurance policy is slightly more than double than what it was this year, before the effects of Obamacare.
This, of course, is only one aspect of the debate. Remember, for Obamacare to succeed, about 40 percent of enrollees have to be from the young and healthy demographic.
Subsidies are one way in which the administration hopes to entice young people to sign up. But if that doesn’t work, they hope the threat of a financial penalty will be enough to compel them to purchase insurance.
However, in 2014, the mandate penalty is $95 or 1 percent of taxable income, so it isn’t a very powerful stick. For the plan referenced above, the cost of premiums would be higher than the cost of the mandate, even for somebody earning $20,000.
For somebody earning $35,000, premiums on the ConnectiCare plan would be nearly $2,500 annually, while the mandate penalty would only be about $250.
Thus, even if administration officials can fix Obamacare’s technical problems, they may have a hard time convincing young and healthy Americans to purchase insurance.