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ACA Fail Fractal
Dispatch From the Obamacare Frontline
A Via Meadia reader writes in about his experience with the Affordable Care Act. This reader lives in the Midwest and is in the midst of purchasing a family health insurance plan on the ACA exchange through an insurance broker: 
When I first reported my income level to my insurance broker it excluded a three thousand dollar raise my boss is giving me. Today I called in and gave the updated salary that included the raise, and the broker re-ran the numbers. With the old quote at the lower salary level, my plan would include a $389 premium,a $1k family deductible, and a $2.5k family max out of pocket. At the new quote those numbers become a $424 premium, a $4k family deductible, and a $9k family max out of pocket. So by increasing my income by three grand, my costs would increase by ~$7k when you factor in premium increase + the new out of pocket max. Big picture, then, it’s in my interest to avoid increasing my salary above that threshold until I can increase it well over that threshold. But that isn’t really how pay raises work at most companies, so we have a law that—in certain cases at least— incentivizes keeping wages down.
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  • Andrew Allison

    As regular readers know, I’m no fan of ACA, but I believe that ACA plans are all high-deductible, which the one described is not. A high deductible plan would both reduce the premium and allow one spouse to set up a HSA and sock away $4,300 of pre-tax income per year to pay medical bills (a single HSA can be used to pay an entire family’s medical expenses). However, depending on family circumstances, two HSAs might make more sense (HSA funds roll-over and can be used for any purpose once the owner reaches 65, i.e., are a replacement for, or addition to IRA contributions). Incidentally, health insurance company HSAs are a rip-off. A little research will find no-fee HSAs that pay 5-10 times as much interest as the banksters with whom the insurance companies (who are no better) partner.

    • Boritz

      “. A high deductible plan would both reduce the premium and allow one spouse to set up a HSA and sock away $4,300 of pre-tax income per year to pay medical bills… ”

      So forget actually enjoying a raise and doing something with it that makes you happy or is a little bit fun like our grandparents might have done.  And under the circumstances I can’t argue with you.

      • Andrew Allison

        I was pointing out that there are, in fact, ways in which the writer can enjoy more of his raise (via reduced premium payments, reduced taxable income, and payment of the deductible with pre-tax dollars). Health insurance is a quagmire, but there are some things the consumer can do to lessen the burden.

  • Corlyss

    a short and quick education in what “transfer of wealth” means in real terms.

  • ljgude

    Any bracketed system can have these kind of gotchas. I have seen it often with women who finally got a decent job only to be worse off because they lost their government paid child support. I think Andrew Allison makes and excellent point about HSAs and I would add that when people are spending their own money they would become much more price sensitive and therefore introduce some downward pressure into a market that little or none. In nothing else questions would be asked about price far more frequently which should encourage price transparency.

  • Boritz

    When you go to buy a car, a house, a can of green beans, whatever, you are not required to disclose your income to the seller. Anywhere this requirement exists, except for welfare seekers, you are being had.

    • FriendlyGoat

      The majority of people buying houses and cars actually do disclose their income to a lender.

  • vepxistqaosani

    We looked at ACA coverage when I lost my job (long story short: we went with COBRA).

    But in modeling my family on the site, I discovered that we could save thousands — if I just divorced my wife. I could even let her continue to live in my house and charge her rent. Then she’d get government rent subsidies, as well as food stamps. We’d actually end up with much more disposable income.

    Alas, we’ve been conditioned by traditional bourgeois morality. So we’re still married …

  • small mkt insurance guy

    Known as the subsidy cliff. I have helped dozens of families in this situation. Earn more but keep less. It is perverse.

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