The Big Winners
According to the Congressional Budget Office (CBO), ObamaCare’s effects on the cost of premiums will differ across insurance markets (see table below). The greatest savings will be seen in the nongroup market. The effects on premiums will be much smaller or even costly, however, for the small group and large group markets.
Effect of ObamaCare on Average Insurance Premiums in 2016
Percentage, by Market
|Nongroup (a)||Small Group (b)||Large Group (c)
|Distribution of Nonelderly population insured in these markets||17%||13%||70%
|Total difference before accounting for subsidies||+10% to +13% ||+1% to |
|Effect of subsidies in Nongroup and Small Group Markets||
|Share of people receiving subsidies (d)||57%||12%||n.a.
|Difference in average premiums paid after accounting for subsidies, for people receiving subsidies||–56% to |
|–8% to |
|Effect of Excise Tax on High-Premium Plans sponsored by employers||
|Share of people who would have High-Premium Plans||n.a.||19%
|Difference in average premiums paid, for people who would have High-Premium Plans (e)||n.a.||–9% to
|Number of people covered under ObamaCare (millions)||32||25||134
If you have a low income under ObamaCare, you will be able to either enroll in Medicaid or qualify for a subsidized insurance plan through your state’s healthcare exchange. Don’t panic yet if your state doesn’t run a health exchange; the federal government will be setting up health exchanges of their own that you may be able to use.
If you have a high income you will also be able to buy a plan through an exchange and its price will still most likely be lower than if you had purchased on the private insurance market pre-ObamaCare. The reason for the lower cost is that under the Patient Protection and Affordable Care Act (PPACA/ObamaCare), you’re not an isolated buyer. Rather, you’ll be a member of a very large group made up of everyone who is purchasing through the exchange.
Check back soon for an article on what it will mean to have “low” income or “high” income under ObamaCare. We’ll also go into much greater detail about how your financial situation will determine ObamaCare’s impacts on your life healthcare exchanges and any other new topics that come up and require further examination.
Which Market are you in?
This group is overwhelmingly the biggest winner under ObamaCare. 32 million Americans who buy or will buy their insurance this way will see premiums go down 56% – 59% after accounting for subsidies. Premiums actually go up 10% – 13% before accounting for subsidies but at the end of the day, the final cost is all that matters and your final cost will probably be trimmed by almost two thirds! The caveat of course is that only 57% of Americans will receive subsidies.
Stay tuned for an upcoming article on subsidies and how to know if you’ll qualify. The 43% who don’t qualify for subsidies may actually see premiums increase by 10% – 13%.
Things are a little bit more complicated for Small and Large Group markets. If you fall into this category and you don’t qualify for subsidies, you can expect to see premiums change very slightly, probably somewhere between a 2% decrease and a 1% increase. Of the 25 million Small Group Americans, only 12% qualify for subsidies. If you’re one of these roughly three million people, you can expect to see premiums drop by 8% – 11%.
This group makes up 70% of the population and is not subject to subsidies. If you’re in this group, you can expect to save at most 3% on your premiums. The likely worst case scenario leaves you where costs are before ObamaCare.
This group includes the 19% of the population who receive high-premium plans through their employers and includes both Small and Large Group markets. This group can expect to save between 9% and 12% on their premiums under the Affordable Care Act.
What’s it all mean?
In short, those who qualify for subsidies will be the biggest winners across all markets, especially if you’re a Nongroup buyer. Interestingly, the worst off will be the inverse, Nongroup buyers who won’t qualify for a subsidy. This unfortunate group will see premiums rise by as much as 13%.
If you’re not in one of those groups then you’ll fall somewhere in the middle. Take a look below and you’ll see how your circumstances will likely develop by the time ObamaCare rolls out fully.
% of Nonelderly Population
# of People Covered (millions)
Change without subsidy
% of Group Receiving Subsidies
Change with subsidy
|Nongroup Market||17%||32||+10% to +13%||57%||56% to 59%
|Small Group Market||13%||25||+1% to 2%||12%||8% to 11%
|Large Group Market||70%||134||0% to 3%||n.a.||n.a.
|High-Premium/Cadillac Plans||19% of Small Group and Large Group Market||30 million of 149 million Small and Large Group Members||9% to 12%||n.a.||n.a.
Now that we know how important qualifying for subsidies can be, we’ll have to explore them in the near future. Stay posted here, on Facebook or Twitter. As ObamaCare Pros and Cons continues, we’ll be addressing topics as they arise. If there’s anything you’d like to learn about, please comment below, find me on social media, or email me directly.
Thanks for reading.
(a) The nongroup market includes people purchasing coverage individually either in the proposed insurance exchanges or in the individual insurance market outside the insurance exchanges.
(b) The small group market includes people covered in plans sponsored by firms with 50 or fewer employees.
(c) The large group market includes people covered in plans sponsored by firms with more than 50 employees.
(d) Premium subsidies in the nongroup market are those available through the exchanges. Premium subsidies in the small group market are those stemming from the small business tax credit
(e) The effect of the tax includes both the increase in premiums for policies with premiums remaining above the excise tax threshold and the reduction in premiums for those choosing plans with lower premiums.