Tick-tock, tick-tock, tick-tock… just six-and-half more months until the Patient Protection and Affordable Care Act, also known as Obamacare, goes into full effect.
Over the past year we at The Motley Fool have examined the ins-and-outs of this bill from multiple angles, including how a cap on the medical loss ratio at 80% will ensure patients who need medical care are getting it, and that no patient can be turned away for preexisting conditions. However, we’ve also looked at the other side of the coin, which demonstrates there’s a strong possibility that health insurers will maintain much of their pricing leverage that would most likely lead to continued premium hikes.
As I’ve said before, one of the few certainties about the PPACA is that uncertainties reign! Questions abound as to how it will affect the quality and price of care received, as well as impact the individual pocketbooks of consumers around the U.S. Perhaps no issue, though, is more pressing than how the bill will affect the middle-class American consumer.
Some will like this bill
This isn’t to say that lower-income individuals are going to unanimously be in favor of Obamacare, but the fact of the matter is that the PPACA will almost certainly provide them with better quality care. The Medicaid expansion will bring approximately 16 million currently uninsured people into the government-run program, and beefed up minimum health plan requirements will ensure a steady level of care even for our nation’s lower income individuals.
This is one of the primary reasons we witnessed WellPoint, Inc. (NYSE:WLP) and CIGNA Corporation (NYSE:CI) jockeying for position in the Medicaid arena by purchasing AMERIGROUP and HealthSpring, respectively, in 2012 and 2011. Government-run health care may not provide the beefiest margins, but it’s more than made up for with the sheer volume of new Medicaid patients expected to enter the system next year.
The viewpoint of upper-income earners with regard to the rollout of Obamacare isn’t likely to be as enthusiastic. Just as upper-income earners pay the majority of taxes in this country, they’ll be responsible for 40% of all new tax revenue from Obamacare, according to estimates by the Christian Science Monitor. A 0.9% tax surcharge on income up to $200,000 ($250,000 for a family of four) and a 3.8% tax on unearned income of more than $250,000 (e.g., dividends and capital gains) will certainly go a long way to helping pay for this Medicaid expansion. Despite an unpopular viewpoint among the rich, this tax isn’t likely to be a backbreaker for this income group.
And others will be crushed whether they like it or not!
The real concern I have stems for the middle class, which could see a conglomeration of problems derived from the implementation of Obamacare.
The bill itself has failsafes in place to ensure that it isn’t a burden to the middle-class consumer. Specifically, subsidies up to 400% of the federal poverty level — which equates to roughly $46,000 for an individual or $94,200 for a family of four — are in place to help curb rate shock for middle-class individuals who fall under the $46,000 range. But what happens to those individuals who are considered middle class and make $46,000 to, say, $70,000 a year? I’d propose that there’s a potential they’re going to get crushed!