So how much are premiums anyway? It's Complicated.

Not long ago, I realized that it’s very hard to do a cross-comparison of how much you’d pay in premiums if you were in a different type of insurance plan in the US. So, I tried to create a graph to explain just how much you would pay by your income. This is the fruits of my googling.

This graph compares several things. First, your base Medicare Part B premiums (Medical Insurance) and Part D premiums combined. That can be found here. Second, the Employer minimum standard assuming the Employer Firewall ends up being set up to match the ARPA rate (not a given, sadly). Third, the typical employer plan based on CBPP analysis. Fourth, The benchmark cost of a silver plan based on American Rescue Plan Act (ARPA) enhancements to the Affordable Care Act (ACA) premiums for people that have an age band modifier of 1 (young), 2 (around 53 years old), and 3 (64 years old). Only individuals are compared because Medicare doesn’t do family plans. Individuals only.

As you can see, the chart isn’t pretty. Well, it gets even more complicated. Just because the benchmark plan is the second cheapest silver plan doesn’t mean people buy it. Many people buy other silver plans. Many people just want the cheapest plan possible and go for bronze plans. People have a lot of choices to make, let alone off-exchange insurance plans. For Medicare, you could qualify for help paying your premiums if you are low enough income and have few enough assets. You could even be dually eligible in full and be covered by both Medicare and Medicaid. Here lies a problem though. This is all functions of state Medicaid programs, so it varies wildly by state. The Kaiser Family Foundation wrote more in depth about this. Because of these problems, I didn’t attempt to account for dual eligibles or these extra programs. And with the asset test, I’m not sure if I should. And remember, if you make less than 138% of poverty in an expansion state, you qualify for Medicaid. If you are in an expansion state, it varies and you only qualify for ACA subsidies at the poverty line or above. And the poverty line varies by household size.

And you may ask yourself, “that’s great to have this graph, but what does the typical American household look like? How many people make $20K and how many make $120K?”. Well, look no further. The median household in America made $68,703 in 2019. About 30% made less than $40,000, about 13% made less than $20,000, and roughly one-fifth or one-fourth of households made over $120K.

What really struck me is this. Without Medicaid or help from extra programs, Medicare Part B and Part D premiums are more expensive than ACA/Obamacare benchmark silver premiums until about $40,000 (not to mention bronze premiums could approach zero for some time after you start paying premiums at all). And once you make $120,000, Medicare and ACA silver premiums for the young are roughly the same. Not to mention that the typical employer plan is often cheaper than what you would find on Medicare or the ACA.

Simply saying that you’ll solve everything by giving everyone Medicare isn’t a guaranteed win, You will raise people’s premiums. Simply getting the cheapest plan on the ACA might not be good either. The lower premiums come with skimpier coverage. And let’s not forget that employer plan premiums vary quite a lot. And remember that saying you will substitute premiums for taxes aren’t a clear victory either. For the ACA, we subsidize expensive plans. For employers, it’s technically cheaper to offer slightly better coverage than an equivalent raise. For Medicare, it’ll get paid for via taxes anyway (admittedly, this is the smallest problem of the bunch administratively).

I think the lesson here is this. Our system is complicated, fractured, and it’s hard to explain it simply. Even when you try, you spend most of an article trying to explain how you compiled the work rather than what it all means. And none of this even accounts for differences in cost sharing, headline prices, networks, or more. And it doesn’t account for the subsidization of it all via tax free employer benefits or ACA subsidies. Nor does it consider that ACA subsides are unavailable to people below the poverty line, pricing 2.2 million people out of the market completely.

“Who knew health care could be so complicated.” am I right?