“Opt Out of Obamacare” Campaign Has Some Major Flaws

Remember this advertisement? The image of an individual clothed in a red, white, and blue suit wearing an over-sized clownish mask in the form of Uncle Sam in the midst of giving a woman a pelvic exam is very disturbing for most people. That emotion is what a recent advertisement financed by Generation Opportunity was counting on its viewers feeling.

To be precise, the one-minute long video employed that shocking example to show why it will be problematic to “let the government play doctor,” which is what the organization has argued the Affordable Care Act will accomplish. The argument is not that the health care reform, known popularly as Obamacare, will not work from a financial standpoint — but that the law will allow the government to intervene in the personal lives of Americans to an unbearable extent, meaning it is better off to go without coverage.

However, the claim that the tax penalty, which anyone who does not buy insurance coverage that does not meet the Affordable Care Act’s regulations will incur, is a “better deal” for young people cannot be backed up by hard data. The organization’s communications director David Pasch told the Atlantic Wire that the organization was “we’re working on” accumulating the necessary supporting facts, and that the situation depicted in the ad was “generally, anecdotally, what we’ve seen.”

During the phone interview, Pasch said that he could not confirm whether purchasing insurance on the individual market would be cheaper than buying a policy via the Affordable Care Act’s individual exchanges. Yet, the expressed message of the Opt Out campaign is: “SAVE MONEY and PROTECT YOUR PRIVACY by opting out and buying insurance outside of the Obamacare exchanges,” a relatively simple statement.

“We’re a small non-profit” without the funds to do research about all plans offered on every state’s exchange, Pasch told the Wire when explaining why he could not confirm the affordability of plans offered on the Affordable Care Act’s marketplaces. Generation Opportunity may be a small non-profit, but the group has been given more than $5 million from a fund controlled by conservative donors Charles and David Koch, and more than $750,000 will be spent on the campaign, according to Yahoo News.

The group maintains that young people will find a better deal opting out of Obamacare, paying the “relatively” small penalty, and buying insurance on the private market. The petition, which enjoins young people to sign as evidence of their commitment to opting out:

Obamacare will triple costs for young Americans, a scheme that benefits older Americans while lining the pockets of politically-connected companies. But the good news is, you are not required to purchase health insurance through an Obamacare exchange. There are cheaper, better options for young people.

For an example, the “Opt Out of Obamacare FAQ Sheet” states that “in Virginia right now there are 87 health care plans sold on the individual market — the cheapest one being $40.84 per month.” But the assertion that young people have “cheaper, better options” has no math to support it. “I don’t have the calculations in front of me,” Pasch told the Wire. “Every state is different, and every individual is different.” Still, the organization plans to continue campaigning in favor of “opt out.”

Here is what a simple calculation does show. First, the penalty for not complying with the individual mandate in 2014 will be $95, or 1 percent of income, which ever is greater. The only exception to the individual insurance mandate are those people for whom the cost of insurance premiums exceeds 8 percent of income, if income falls below the threshold for filing taxes, of if the individual has a certified financial hardship or would have qualified for Medicaid but lives in a state that did not expand the program. This means that no one who makes less than $10,000 annually will be fined. Furthermore, anyone making less than $15,800 per year is eligible or free or low-cost Medicaid in states that have consented to expand the program.

If an individual chooses to purchases an insurance policy on the private market for an annual premium of $490, based on plan the FAQ sheet used as an example, the total insurance bill would amount to $585 per year, including the tax. Of course, by 2016, the penalty will increase to $695, or 2.5 percent of income, meaning an individual’s total insurance would increase to $1,185, at the minimum. If that plan did fit the requirements of the individual mandate, the tax would not be included, but at such a low premium, it may not include the 10 specific benefits the health care reform requires policies to include.

The other problem with the plan Generation Opportunity highlighted is that while the premium may low, additional health costs are very expensive; it offers catastrophic coverage, with a deductible of $10,000. That type of plan is beneficial in that it prevents individuals from racking up a great deal of debt in the event of a serious accident, such as a car crash, or an illness. However, if an individual requires more regular health care — prescriptions filed or lab tests — that type of plan may not be the best option because out-of-pocket expenses will be high. For context, the average person paid about $854 annually on health expenses, a figure cited by Supreme Court Justice Samuel Alito during oral arguments over the constitutionality of the Affordable Care Act. That figure was filed in an amicus curiae brief and calculated from compiling health care spending by 21- to 35-year-olds with serious conditions like diabetes or cancer in 2008. Adding the cost of inflation through 2016, health care spending per person could hit $1,262. Figuring in the catastrophic care premium, average annual health spending, and the tax for opting out brings total health care costs to $2,377.

When considering such calculations there are several other important to remember: that the second cheapest-plan listed on ehealthinsurance.com for Virginia is significantly more expensive, 59 percent more expensive to be exact, and the rates listed on sites like ehealthinsurance.com are what are known as “starting rates,” meaning the actual premium costs will very based on factors like age, gender, or medical history. Plans offered on the Obamacare exchanges limit or outright ban insurers from basing costs on those factors.

For a young person — say a 26-year-old male who earns $25,000 annually — a bronze plan can offer further benefits. However, to keep premiums low, deductibles will be high. While that level of coverage will come with relatively high cost-sharing, 60 percent of medical expenses, and therefore still have high out-of-pocket expenses, the Affordable Care Act does mandate that annual out-of-pocket expenses be capped at $6,350. According to the state of Virginia’s federally-facilitated exchange, a person fitting that profile, a bronze-level, the lowest grade, would come with a premium as low as $80 per month, including a tax credit, or $960 per year, which is less than $1,185 cost of the annual premium of a plan purchased on the private market plus the full 2016 penalty. Currently, the exact price of plans is a little hard to determine because the health plans to which subsidies can be applied are not yet available. This person could also do apply for catastrophic plans, which are limited those individuals under 30 or suffering financial hardship, but no subsidies are available.

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