The ongoing coverage of the Affordable Care Act’s rollout has become a pain train for the Obama administration. The horror stories about the ongoing problems with the web site–even now, after it has supposedly been “fixed”–have only been outshined by the slow national realization that healthcare costs are actually going up for the majority of people. This has resulted in major complaints, policy cancellations, rate hikes, and, ultimatlely, disappointment among the many Americans who have become notified of their healthcare changes.

Despite all this, some Obamacare advocates have tried to paint a counter-narrative of lowering healthcare costs and hope. One such story is the tale told by this graduate student, who wrote at the DailyKos that he was eligible for an insurance plan with a “3 Cent premium.”

Yes, you read that correctly: $0.03. And a mere $500 annual deductible, to boot.

How, you ask, would someone get so fortunate? MikeTX, the screenname of the “broke grad student” in question, shares with us his story: before Obamacare, he was enrolled in what he described as a “junk” catastrophic coverage insurance plan. Because of his low income, and because he was too old to qualify for the “stay on your parents’ plan until you turn 26” option, MikeTX waited through the worst of the Healthcare.gov glitches until he could finally enroll.

After successfully undergoing a credit check, he was able to assess his options:

As expected, I am eligible to purchase insurance through the exchanges. I qualify for a premium subsidy of a bit under $200 a month, which comes out to a bit more than $2000 a year. I still have to send proof of my 2014 income by Feb 28, which I can do by sending in W-2s.
 
In addition, because I am a starving grad student, I qualify for a plan with “lower copayments, coinsurance, and deductibles.” What that means is that I am eligible for “Cost-sharing reduction plans”, which are a special type of silver plan. A standard silver plan covers 70% of the average costs of healthcare, but because I am a starving grad student, my “Cost-sharing reduction” silver plans cover 94% of the average costs of healthcare. This essentially converts a silver plan to the equivalent of a platinum plan.

What is this cost-sharing subsidy, you ask? Basically, when an individual or family sees their income falls within a certain percentage of the poverty line as calculated by the Federal Poverty Guidelines, that person or family gets discounts on their monthly premiums, reduced annual deductibles, and caps on total out-of-pocket expenses. These measures were one of the reasons that liberal proponents of Obamacare found the bill so appealing: they radically changed the way that lower-income individuals and families would purchase health insurance.

That was when MikeTX made his big discovery:

I knew enough to know that I was going to have lower premiums. And I knew that the premiums for some of the high-deductible bronze or catastrophic plans (similar to my current plan) would be essentially completely covered by the premium subsidies (what happens in that case is you pay a nominal premium of $.01 or $.03). And I knew that the combination of premium subsidies and Cost-sharing reduction plans would make a silver plan affordable for me. But you can’t see the effects of the Cost-sharing reduction plans outside of the actual healthcare.gov website, before you enter in all your info. And so while I was expecting to see options that I could afford, I was not quite expecting to see a Silver plan with a $.03 monthly premium, a $500 deductible, and a $750 out-of-pocket maximum!!!

While MikeTX ended up taking a slightly more expensive plan (a $20/month premium with a $600 deductible) that offered a better network of providers, he was still very pleased with his results. He seems to have concluded, in part based on these experiences, that Obamacare will end up being good for everyone.

MikeTX has assumed the perspective of the lowest-income American, and speaks from that perspective for the majority of his piece. This is the perspective of the group that most stands to benefit from Obamacare; thus, MikeTX genuinely believes that “everyone” will be better off.

I share several things in common with MikeTX. I, too, am a “broke grad student,” and I also have what MikeTX would likely think of as a “junk” insurance plan with a higher annual deductible because (for a range of financial reasons which I cannot disclose here) it is also not possible for me to stay on my parents’ health insurance plan.

Unfortunately, despite these similarities, I still find MikeTX’s assessment of Obamacare lacking in depth and context. Primarily, he seems to make the fallacious assumption that, since his experience went well, everyone’s experiences will eventually go well also. While he makes a very brief attempt at addressing the concerns of the most committed “Tea Party Randian totally devoid of simple human compassion for the sick and injured,” he has seemed to ignore the mountains of statistical data and negative anecdotal evidence that suggest that other people around the country simply aren’t getting a good deal like him.

Let’s be really, really generous to MikeTX’s argument about cost-sharing subsidies for a moment. According to Kaiser Health News, families with incomes of up to 250% of the Federal Poverty Level may still qualify for some small level of a subsidy. There is a point to be made that, for some people, this could help defray costs. MikeTX, whose income is so low that he benefits from the largest of the subsidies, is the “ideal” case.

However, Mike’s case is the exception to the rule. First, most individuals and families are going to make far above the income level required to get the biggest subsidies (MikeTX, after all, is the “ideal” case). Second, and even more important than the first, we have yet to consider how big of a premium increase an individual or family will experience before any subsidies or benefits apply. Whether you agree with the widely-disseminated data compiled by the Heritage Foundation, or the slightly more forgiving data published by Forbes shown below, the net premium increases nationwide are terrifying.

Rate Map

Consider MikeTX’s case. Not only does MikeTX benefit from the biggest cost-sharing subsidies, he also benefits from being in Texas, which Forbes cites as having an across-the-board average premium increase of only 26%. I, by contrast, currently live in North Carolina, where the average premium increase is a whopping 136%. Even if I were to move back to my home state of Illinois, I would still be facing a bigger increase than MikeTX (46%) through the Illinois exchanges.

Any benefits that MikeTX gets from subsidies are magnified even more by the fact that his state’s rate increases are among some of the lower increases in the country. Any subsidies I might get, by contrast, would be mitigated severely by my state’s comparatively massive rate increases. The bulk of the people who would benefit from a subsidy, therefore, are going to see rapidly diminishing returns based solely on their geographic distribution. A 25% subsidy applied against a $100 premium is great, but 25% against $200? $500? $1000? For many whose incomes are higher up on the scale, those massive rate hikes will still cause them to pay more for insurance even after any subsidies are factored in.

In other words, for the maybe 3 in 10 Americans who could actually benefit from cost-sharing subsidies under Obamacare, the other 7 in 10 will still have to foot higher bills even with their subsidies factored in. And this analysis doesn’t even address the other problems being faced by those who are already losing their private plans and are being forced to enroll in the exchanges: the losses of preferred doctors to new network restrictions, lost coverage for catastrophic conditions that had previously been treated, mandatory services that one does not need or will never use (like maternity care for men), and a smorgasbord of other situations.

Will this truly make Obamacare better for everyone, as MikeTX surmised it will be? Clearly, the answer is no.

I get where MikeTX is coming from. He and people like him will be genuinely better off because of Obamacare, and you know what? I’m happy for them. But in the meantime, I hope that MikeTX remembers that his experiences are the exception to the rule. Even those who do benefit from subsidies will not be getting discounts as big as him, and not everyone who gets a subsidy will come out ahead on costs after the dust settles.

The overwhelming majority of Americans are currently getting a raw deal, and will ultimately be the ones paying for the benefits that he is currently receiving. Once MikeTX graduates and his income increases, he may learn this lesson the hard way.

David Giffin

David Giffin | Wake Forest University School of Law | @D_Giffin