Much of the debate surrounding health care reform has centered on affordability. Some policymakers believe that if a person is required to buy health insurance, the cost should not be burdensome. The three main Congressional committee bills being debated all recognize the need to provide some level of assistance for individuals and families to buy health coverage. Our research, though, suggests that any health reform package should include larger subsidies and at higher income levels than are currently being considered.
The latest version of the Senate Finance Committee proposal, released September 22, would limit the amount an individual or family would be required to pay toward a health care premium. The limit would range from 2 percent to 12 percent of income; those with lower incomes would pay a smaller share of the cost. The remainder of the health care premium would be paid by public subsidies.
How would this work? Let’s take a single adult with earnings at 200 percent of the poverty line, or $21,660. Already, this individual earns less than the annual $24,760 that the CBP estimates a single adult would need to earn in order meet basic expenses, including rent, food, and transportation. This does not include the cost of health care.
Under the Senate Finance Committee proposal, though, this individual would be required to spend 7 percent of his or her income on health insurance premiums, or $1,516 per year, for a modest health coverage plan. This does not include copayments and other out-of-pocket costs. If those costs add up to the typical $750 per year on medical care, total health-related costs would be $2,266 annually. That’s 10.5 percent of this individual’s annual income, in addition to basic needs. In short, to pay rent, eat, get to work, and meet the requirements of the Senate Finance Committee proposal, this individual would need to earn $5,366 more than he or she actually does, equivalent to a 24.8 percent raise.
As lawmakers continue to debate and improve upon the health reform proposals, they should continue to keep affordability in mind, but within the context of the budget realities of the individuals they are trying to help.
Note: The Kaiser Family Foundation has posted a Health Reform Subsidy Calculator to help determine how much consumers would pay under various proposals.
— Hanh Quach