Obamacare Out-of-Pocket Costs Much Higher Than Expected

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Monday, 21 Oct 2013 11:40 AM

By Sandy Fitzgerald

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Even with the federal tax breaks and subsidies promised through Obamacare, many consumers will likely find their out-of-pocket costs will be much higher than expected, according to an analysis of the healthcare law's problems.

Consumers can benefit from two different subsidies, writes Forbes contributor and physician Scott Gottlieb, who also serves as a Republican appointee on a federal health policy committee. Premium tax credits, based on family income, are designed to offset the overall costs of health insurance plans, while cost-sharing subsidies help pay for out-of-pocket expenses and to help lower costs when catastrophic limits kick in.

But so far, technical glitches on the website have caused miscalculations of cost estimates for uninsured individuals and families trying to sign up, leading to confusion and fears that the costs may end up not being as affordable as promised, Gottlieb noted.

Part of the problem, Gottlieb wrote, stems from the fact that the Healthcare.gov website cannot communicate correctly with other federal and state agencies to share the data needed to help calculate costs. Data sharing with other agencies has proven too much for the website to handle, leading to errors in cost calculations on enrollment applications that have gone through. In many cases, the system simply crashed on some applicants as they tried to calculate costs.

Gottlieb also notes that the subsidy to cover out-of-pocket costs are exempt from sequester cuts and could reduce the amount of money available to help offset co-pays or other medical costs not covered. For many, that could mean that a subsidy they were hoping to use to pay a medical bill may not be there when the time comes.

The Obama administration calculates that subsidies over the next 10 years could cost about $149 billion. But if the subsidies are cut, under the law insurance plans could be forced to absorb the shortfalls.

Not a good idea, said Gottlieb, given the fact that many insurance companies have already been burned by the bungled rollout of the federal healthcare program.

"Given the failed launch of Obamacare, many insurers will be looking at far lower enrollment numbers, and losses on their new exchange health plans," said Gottlieb. "Want proof? Expect Wall Street analysts to cut their earnings projections on the major health plans in the coming weeks."

If that happens, he added, many health plans will likely be pulled from the marketplace, and Obamacare could fail fast unless the administration lobbies Congress to stop sequester cuts from hitting cost-sharing subsidies.

"For all of these reasons, the Obama administration should approach its failed rollout with much more humility and candor," Gottlieb said. "These website woes aren’t merely 'glitches.'"

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