One of my TAB Board meetings has an insurance broker who followed the reform debate closely. The discussion was illuminating.
It is one of many that I’ve had in the last three months, and it’s all beginning to come together. I will discuss this in short posts over the next few days.
Health insurance age related risk premium differential is limited to 3:1 in the reform bill. That means that if you currently pay $125 for a young healthy male employee, you won’t pay any more than $375 for an old guy who is overweight and smokes.
In reality, the premiums for those old guys right now would be more like $550 – $600 today. So the insurer has two choices. he can drop the old guy’s premium to $375, or raise the young guy to $200. Let’s say he compromises. $175 and $525,
The problem is, the young guy is the one making $10 an hour. His employer is paying the legally mandated minimum 60% of premium to avoid penalties. So the $175 premium means $35 more every two weeks out of the young guy’s paycheck. About 2 cases of beer from each paycheck. Does the young guy (who right now declines coverage entirely) pay the premium, or does he opt out of he company plan into the government exchange with a full subsidy for anyone making less than $22,000 a year? No brainer. Most employers reading this know exactly what the answer would be.
The people who wanted a public option didn’t get it in the bill, but they got something pretty close. This is just one of a number of things that are happening very quickly on a number of fronts that will change the complexion of our economy for a long time to come. More later.