Unexpectedly Intriguing!
November 1, 2013

Let's suppose for a moment that you actually could buy health insurance through Obamacare's state and federal government-run exchanges. How high would your health care expenses have to be to really justify buying that kind of insurance?

Healthcare.gov site down - Source: http://issa.house.gov/district-blog/2013/10/8-cats-who-called-1-800-obamacare-but-still-couldnt-get-healthcare-3/

Previously, when we asked if you even need health insurance, we identified a number of situations where having health insurance would be most beneficial to you (Sean Parnell adds to that discussion here). All the scenarios came down to one basic reality: buying health insurance is most worth doing when you can reasonably expect to have high health care expenses in the next year.

So today, we're going to identify the level of health expenses you would have to have before you could obtain the maximum benefit of having health insurance - when you reach your annual limit for out-of-pocket expenses! This is the level at which all your major health care expenses beyond that point would be paid for through your insurance coverage.

Just enter or select the appropriate data in our tool below, and we'll give you better information than you could ever hope to get from the dysfunctional Healthcare.gov web site! Also, before you go any further, if you're reading this article on a site that republishes our RSS news feed, please click here to access a working version of this tool!

Health Insurance Coverage Data
Input Data Values
Which "metal" plan for health insurance coverage are you considering buying?
What is the annual deductible for that plan?
What is your annual out-of-pocket limit?
[Individual = $6350, Family = $12700, See Note Below Tool]
How high do you expect your health care expenses to be next year?

When Will You Get the Maximum Benefit for Having Health Insurance?
Calculated Results Values
Amount at Which 100% Coverage of Health Care Expenses Begins
How Much of Your Health Care Expenses Will You Pay?
Your Total Out-of-Pocket Cost for Health Care Expenses
Insured Portion of Costs for Health Care Expenses
Percentage of Health Care Expenses For Which You Are Responsible for Paying

Note: Per President Obama's choice to deny consumers the protection of an out-of-pocket limit for insured health care expenses in 2014, you may want to enter a very large number like $1 million for this figure. The other figures may apply in 2015, unless President Obama once again chooses to favor the interests of his crony insurance corporations over consumers.

Also, this particular tool is focused on what you actually pay for your consumption of health care services, but it doesn't consider what you pay in health insurance premiums. You'll want to add your annual out-of-pocket expenses for these to the total above to get a good sense of what you're really going to be paying out in the name of health care.

Finally, if you know you're going to have the expenses, you may find it more beneficial to opt for a higher level plan. We tried it using data for a 27-year old non-smoker in Chicago for Humana's Connect Bronze (Deductible $6,300, Out-of-Pocket Limit $6,300, Monthly Premium $190.49), Connect Silver (Deductible $4,600, Out-of-Pocket Limit $6,300, Monthly Premium $216.03) and Connect Gold (Deductible $2,500, Out-of-Pocket Limit $5,000, Monthly Premium $248.74) plans.

Nerdwallet: Obamacare Death Spiral

Here, using the same $7,500 in expected health care expenses, the Bronze plan required our hypothetical 27 year-old pay for 84% ($6,300) of those costs out of pocket, the Silver plan required they pay for 72.9% ($5,470), while the Gold plan held the out-of-pocket cost down to 46.7% ($3,500). These figures all assume that the annual out-of-pocket limit specified for each plan would apply and not be overruled by President Obama's waiver of those limits for health insurance providers.

Adding in the annual costs of each metal plan's unsubsidized premiums, the Bronze plan imposed the highest cost of $8,585.88, the Silver plan was the next highest at $8,062.36 and the Gold plan was the least costly at $6,484.88. What this result suggests is that people who expect to incur large health care costs in the next year will very likely opt for more generous levels of coverage when they do buy health insurance on the Obamacare exchanges.

Meanwhile, for people who don't expect to consume much health care, they would benefit by paying much less for a plan that provides less generous coverage, even though they might face a huge cost gap before they would have any real benefit in having health insurance. Assuming they don't choose to save even more money by not buying any health insurance at all and are willing to take a pass on the very small savings associated with Obamacare's health insurance subsidy tax credit.

That's really a recipe for sticking insurers with higher costs imposed by the most ravenous health care consumers without any offsetting revenue to cover those costs from insuring healthier individuals. They will have to respond by increasing their premiums or increasing the deductibles and restrictions on their policies to compensate, making them even less desirable to buy, except only for those who expect to have high health care expenses.

And that's the death spiral that awaits health insurance consumers and insurers in 2015 and beyond - even if consumers actually could buy health insurance through Obamacare's state and federal government-run exchanges today.

Image Credit: Nerdwallet, where Amelia Granger did a fine job in describing the Obamacare death spiral almost exactly one year before it began!

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