Opinion, Berkeley Blogs

Now it's time to learn what the Affordable Care Act really does

By Rosemary Joyce

The verdict is in (although not yet posted in full). The Affordable Care Act is constitutional: "the mandate can be regarded as establishing a condition -- not owning health insurance -- that triggers a tax -- the required payment to IRS."  This, the court found, is a legal use of existing congressional power.

So now would be a good time to shake off the fog of propaganda and hysteria and become familiar with what the ACA does and does not do.

As Washington Post analyst Ezra Klein wrote, "polling shows the law remains unpopular even as its component parts — with the notable exception of the individual mandate — are very popular". Klein provides a list of 11 facts about the ACA.

Top of the list: ten years from now, 33 million people currently uninsured will have medical insurance.

33 million. Not only is guaranteeing health care for the people an ethical imperative: it is a financial necessity. As many analysts have noted, uninsured people do get health care-- through emergency rooms, which everyone else pays for through higher costs for health care.

All of us, uninsured today or not, will benefit from a provision sharply limiting the circumstances that insurance companies can use to enforce higher rates, banning discrimination based on pre-existing medical conditions.

What ACA does is draw everyone into a single system of financing health care, with a variety of provisions that link how much you can be asked to pay to your household income. Today, what you pay for health insurance depends first on if you are employed, and if your employer provides health plans (drawing on the power of group purchasing). If not, your possibility of getting health insurance-- and thus health care-- will vary, as will the cost, based on a variety of factors including your previous health record. Essentially, the more you need insurance, the more likely you will not be able to afford it.

As Klein notes, the mandate to buy health insurance is the most unpopular part of the ACA. The Supreme Court actually ruled in favor of the mandate because of the way that the requirement will be enforced. Unlike the misleading discussion during arguments before the court, this isn't like being forced to buy broccoli. People who fail to buy insurance will be subject to a penalty, which the court found a legal exercise of federal authority to impose a tax.

The ACA places a cap on the maximum that a person can be asked to pay for health insurance. Klein gives the example of a family of four earning four times the poverty line-- a calculator from the Kaiser Family Foundation says that would be $93,700 annual income-- where the cap on health insurance costs would be 9.5% of income annually: $8,901.

The unsubsidized cost of that insurance would be $19,750. Under the law, this model family will receive a tax credit covering 55% of the actual cost, equal to $10,849. So, this family of four will receive a higher level of federal benefits for health care than they will be required to spend.

And the penalty if that family chooses not to pay for the mandated insurance? Just $2342-- 2.5% of the annual income. So, if you want the freedom not to buy broccoli, you can save yourself $6558-- and forego that $10,849 tax credit. You will still have to pay for your own health care, of course, so this is less about freedom than gambling. As was noted during the debates, health care is not like vegetables: you can go all your life without eating broccoli, but sooner or later, you will need health care.

My assumption is that most people can do the math, and will realize that this is a good deal for them.

And unambiguously, it is a good deal for those millions of people without health insurance who will now be able to get the care they need. It is a good deal for people with pre-existing conditions, who today are offered ruinously expensive policies, if they can find them at all.

And it is a good deal for us as consumers: the law requires insurers to use 80-85% of premiums for actual costs of health care. That provision, already in force, has resulted in one year in rebates of $1.1 billion-- $1.1 billion-- to policy holders.