You are forced to jump off a cliff. You have a 1 in 1000 chance of dying if you choose Cliff #1. You have a 0.1% chance of dying if you choose Cliff #2. Which cliff do you choose?
Now you’ve probably figured out that your death chances are identical in both cases, yet if you are like most people, the instant reaction is to pick Cliff #2. Certain cognitive biases affect the way information is perceived, making presentation ever important.
On the divisive topic of the Affordable Care Act (ACA), or Obamacare, it’s not surprising to see readers guided to different conclusions, through strategic presentation, based on the political leanings of a publication.
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Last week, information was released about the insurance premiums for the 5.4 million people who purchased insurance through Healthcare.gov, the federal government-run health insurance exchange. Eighty-seven percent, or 4.7 million, received a subsidy. This subsidy averaged $264 per month. For those 4.7 million people, their average monthly premium was $82. Extrapolate these figures for all enrollees via exchanges (add the other 2.6 million who purchased insurance through state exchanges), and that would result in a 2014 federal government subsidy expense of around $22 billion.
To support Obamacare, focus on the low amount people are actually paying. To rally against Obamacare, focus on the government expense and rising premiums. But both sides miss a point that makes this story less significant – the Congressional Budget Office (CBO) rather accurately predicted in February that 2014 expenditures on “exchange subsidies and related spending” would be $20 billion.
In relation to a $15 trillion GDP, $20 billion doesn’t sound so big. In relation to a $346 average monthly premium, a $264 subsidy sounds very big. It’s all in the presentation.
As for the premiums themselves, those are expected to rise again in 2015. This is a continuation of a long-term trend of increasing health insurance premiums. The difference, though, is that those receiving a subsidy will not have to bear any of this cost.
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Subsidies are based on designated maximum percentages of one’s income that can be spent on health insurance premiums. As an example, if you make $34,470, 300% of the Federal Poverty Line, you do not have to spend more than $3,274.65, 9.5% of your income, on health insurance premiums per year. The difference between $3,274.65, or $273 per month, and the real total annual cost of the health insurance premiums, assuming a bronze or silver plan is chosen, is paid for by the government. Your monthly cost of $273 remains the same regardless of how much premiums grow as long as your income stays the same. In 2015, the CBO expects $47 billion in “exchange subsidies and related spending.”
Humans aren’t always very good at predictions, so figures will constantly change. And as more is learned, opinions should evolve too, but let them because of legitimate shifts, not because the same cliff is described in a different light.
