Obamacare Cliffs - earn $1 more, lose $9,355 in subsidies

[cpwill]

We see this all the time with other welfare social programs as well. When an additional dollar of income results in more than a dollars worth of lost benefits, the net income for the individual goes down, and so the incentive is not to increase productivity, never climbing lifes' ladder. This is one of the ways in which we keep the poor, poor. We make it too expensive for them to try to get not-poor.

Treating the Subsidy as a Cap on Premiums paid by the individual:

...For households with income between 100 percent and 133 percent of the poverty level, for example, insurance premiums are capped at 2 percent of household income. From there, the cap gradually rises until it tops out at 9.5 percent of income for households making between 300 percent and 400 percent of the poverty level.

For households with incomes over 400 percent of FPL—even just $1 over, according to the IRS—there is no cap on the percentage of their income they can be made to pay for their Obamacare-mandated health-insurance premiums.
“ACA will provide premium credit support scaled to individual and family income relative to poverty such that eligible families and individuals’ premium contributions will be limited from 2.0 percent to 9.5 percent of income,” explained the Congressional Research Service. “Individuals and families with income at or above 400 percent of poverty will be ineligible for premium credits.”..

CNSNews.com put a hypothetical family of five through the Kaiser Family Foundation subsidy calculator. In this family, there were three children and a mom and a dad who were both 56 years old--and who did not smoke.
This hypothetical family started out with an annual income of $110,280—exactly 400 percent of the Federal Poverty Level. According to the Kaiser Family Foundation subsidy calculator, their total annual premiums for an Obamacare-approved “Silver” health-insurance plan were $19,832. Under the Obamacare subsidy regulation, this family would be required to pay $10,477 of that premium—which equals 9.5 percent of their household income, the Obamacare cap on premiums for people earning between 300 percent and 400 percent of the Federal Poverty Level.
The rest of this family’s annual premium--$9,355—would be covered by the federal government in the form of subsidy payments that the Treasury would send directly to the family’s insurance company.
But, continuing our hypothetical example, this mom and dad each get a 50-cent raise in their annual salaries. As a result of those 50-cent raises, their household income climbs an entire dollar to $110,281—putting their household income exactly $1 over 400 percent of the Federal Poverty Level.
When this $1 increase in household income is plugged into the Kaiser Family Foundation subsidy calculator, the calculator accurately notes that the family no longer qualifies for Obamacare’s 9.5-percent-of-household income cap on their health-insurance premiums.
According to the calculator, the family’s total annual premium for their Silver health-insurance plan remains $19,832. Now, however, because they earn too much money to qualify for the federal subsidy, they must pay every penny of that $19,832 premium. As a result, the cash they must pay out of pocket for their health insurance plan goes from $10,477 per year to $19,832 per year, an increase of $9,355...

Obamacare has a massive marriage penalty, too, which will help contribute to the massive number of children raised in single-parent homes. Children raised such are at significantly higher risk for every possible form of social malady, and statistically suffer the consequences their entire lives.

So, just to reiterate: it's going to keep people from increasing their productivity (or cause them to decrease productivity in order to find ways to hide income, or receive it in tax-free manners), and it's going to screw over the next generation of poor kids, more of whom will be raised in single-family homes than otherwise would be.



Say it with me: Train. Wreck.

 

[ttwtt78640]

We see this all the time with other welfare social programs as well. When an additional dollar of income results in more than a dollars worth of lost benefits, the net income for the individual goes down, and so the incentive is not to increase productivity, never climbing lifes' ladder. This is one of the ways in which we keep the poor, poor. We make it too expensive for them to try to get not-poor.

Treating the Subsidy as a Cap on Premiums paid by the individual:

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Obamacare has a massive marriage penalty, too, which will help contribute to the massive number of children raised in single-parent homes. Children raised such are at significantly higher risk for every possible form of social malady, and statistically suffer the consequences their entire lives.

So, just to reiterate: it's going to keep people from increasing their productivity (or cause them to decrease productivity in order to find ways to hide income, or receive it in tax-free manners), and it's going to screw over the next generation of poor kids, more of whom will be raised in single-family homes than otherwise would be.



Say it with me: Train. Wreck.

That was the intent of PPACA from the beginning - create a bigger "problem" that will then require the gov't to fix it.

 

[Arbo]

We see this all the time with other welfare social programs as well. When an additional dollar of income results in more than a dollars worth of lost benefits, the net income for the individual goes down, and so the incentive is not to increase productivity, never climbing lifes' ladder. This is one of the ways in which we keep the poor, poor. We make it too expensive for them to try to get not-poor.

But the goal is to get the masses to not care about those that make over 400%... because... THEY... ARE ... RICH.... and don't deserve that money. Yeah, that's the party line.

 

[sangha]

We see this all the time with other welfare social programs as well. When an additional dollar of income results in more than a dollars worth of lost benefits, the net income for the individual goes down, and so the incentive is not to increase productivity, never climbing lifes' ladder. This is one of the ways in which we keep the poor, poor. We make it too expensive for them to try to get not-poor.

Treating the Subsidy as a Cap on Premiums paid by the individual:

[/FONT][/COLOR][/FONT][/COLOR]


Obamacare has a massive marriage penalty, too, which will help contribute to the massive number of children raised in single-parent homes. Children raised such are at significantly higher risk for every possible form of social malady, and statistically suffer the consequences their entire lives.

So, just to reiterate: it's going to keep people from increasing their productivity (or cause them to decrease productivity in order to find ways to hide income, or receive it in tax-free manners), and it's going to screw over the next generation of poor kids, more of whom will be raised in single-family homes than otherwise would be.



Say it with me: Train. Wreck.

I am certain that you are extremely upset that a family making more than 100k/yr is not getting a govt entitlement

Because right wingers hate it when people do not get entitlements. They're all about giving entitlements to more and more people :roll:

 

[Neomalthusian]

I am certain that you are extremely upset that a family making more than 100k/yr is not getting a govt entitlement

Because right wingers hate it when people do not get entitlements. They're all about giving entitlements to more and more people :roll:

What, do you not understand the perverse incentives created by a subsidy cliff? Have you not thought this through, or are you simply so auto-defensive of the legislation for some reason that you simply don't care about any of its defects?

The point is that a poorly-devised subsidy program is a work disincentive.

Cliffs like this create "dead spots" of earnings potential where there is no rational reason for the family to earn more, unless they earn at least (x amount) more. If earning an extra dollar means, say, $5,000 less in a subsidy, then it is irrational to earn that extra dollar. But not just the extra dollar, and not even the extra $5,000, but significantly more than that. Because it's a tax credit, it would be more like $8,000 just for the family's bottom line to break even. And then you have to think about how much extra work beyond THAT you would have to make the amount of money that would sufficiently compensate for the financial setback from having gone over the cliff. Why would you work several months out of the year only to be left with an extra few hundred dollars relative to what you would have had not working at all? If you work an extra 4 months to have an extra few hundred dollars than you would have not working at all, it's like working for pennies per hour during those months.

You'd need to work a lot more to compensate for the financial setback the subsidy cliff creates for you. And many families this scenario applies to will simply choose not to. Middle class folks will voluntarily undermine their own professional success, e.g., cut back on their hours, be willing to let their salary stagnate, or have one parent continue to stay home when going back to work would otherwise be an option. It's not about getting entitlements, or pitying anybody. It's about the ****ty effects of ****ty policy.

 

[sangha]

What, do you not understand the perverse incentives created by a subsidy cliff?

I'm not so foolish as to believe that someone will give up more than 100K in income in order gain 9K in subsidies.

You'd need to work a lot more to compensate for the financial setback the subsidy cliff creates for you.

So it's an incentive to work harder?

Why, that's so evil!! :lamo

And many families this scenario applies to will simply choose not to. They'll cut back on their hours, be willing to let their salary stagnate, or have one parent continue to stay home when going back to work would otherwise be an option.

So they'll risk losing their 100K+ job in order to save 9K?

I don't think so

 

[Neomalthusian]

I'm not so foolish as to believe that someone will give up more than 100K in income in order gain 9K in subsidies.

Well you clearly haven't even grasped what we're talking about here. No one is suggesting that's how this works.

So it's an incentive to work harder?

No, it's an incentive for certain people (at certain middle class salary levels with certain insurance options) to intentionally work less.

So they'll risk losing their 100K+ job in order to save 9K?

Dude, no, just read up on it for Christ's sake so that you can figure out what we're talking about.

Start here if you need to.

 

[sangha]

Well you clearly haven't even grasped what we're talking about here. No one is suggesting that's how this works.



No, it's an incentive for certain people (at certain salary levels with certain insurance options) to intentionally work less.



Dude, no, just read up on it for Christ's sake so that you can figure out what we're talking about.

Start here if you need to.

No, it's because you're posting nonsense

People who work for a salary generally don't have a choice to work fewer hours, and even if they do, they get paid a salary. Either they will get fired and lose all their income, or they'll keep their job and lose none.

The self-employed will not jeopardize their businesses by working fewer hours or else the competition will take their business.

Your argument may sound sensible in the bizarro right wing fantasy land, but it bears no relation to reality

 

[Neomalthusian]

No, it's because you're posting nonsense

People who work for a salary generally don't have a choice to work fewer hours, and even if they do, they get paid a salary. Either they will get fired and lose all their income, or they'll keep their job and lose none.

The self-employed will not jeopardize their businesses by working fewer hours or else the competition will take their business.

Your argument may sound sensible in the bizarro right wing fantasy land, but it bears no relation to reality

You're refusing to read about this and understand its effects. People can easily negotiate pay cuts to their own salaries if it will leave their family with a better bottom line. One parent can continue to stay home and not work if their family is earning close to one of those cliffs. There are plenty of ways to voluntarily work (or earn) less to not have to get hit with the financial setback this policy creates for some families.

Here's another: for those who are not too close to the cliff, and who have insurance options at 9.5% of their income, and others that cost even more (and, say, offer more coverage), what do you think they will choose? The cheaper policy? Nope. They'll choose the more expensive policy because it doesn't cost them any more (it's subsidized beyond 9.5%). So there's another perverse incentive: some families will voluntarily choose the more expensive policy, and the insurance company is rewarded by this because more customers are choosing their more expensive offerings thanks to the subsidy.

 

[sangha]

You're refusing to read about this and understand its effects. People can easily negotiate pay cuts to their own salaries if it will leave their family with a better bottom line.

Good! They'll be making the economy more efficient

This is bad...how?

One parent can continue to stay home and not work if their family is earning close to one of those cliffs.

And someone else will work the job, reducing unemployment.

This is bad....how?

There are plenty of ways to voluntarily work (or earn) less to not have to get hit with the financial setback this policy creates for some families.

And anything a family can do to better their financial situation is bad.....how?

Here's another: for those who are not too close to the cliff, and who have insurance options at 9.5% of their income, and others that cost even more (and, say, offer more coverage), what do you think they will choose? The cheaper policy? Nope. They'll choose the more expensive policy because it doesn't cost them any more money (it's subsidized). So there's another perverse incentive: some families will voluntarily choose the more expensive policy, and the insurance company is rewarded by this because more customers are choosing their more expensive offerings thanks to the subsidy.

And they will get better coverage in return.

This is bad....how?

 

[Neomalthusian]

Good! They'll be making the economy more efficient

This is bad...how?

Middle class people voluntarily undermining their own earning potential thanks to an arbitrary and ****ty policy? I dunno, you tell me.

And someone else will work the job, reducing unemployment.

This is bad....how?

Further impeding women's incentive to return to work after having a child? I didn't realize you were such a social conservative.

And they will get better coverage in return.

This is bad....how?

It rewards higher insurance prices (2nd time I've had to point it out now).

I've given you all the info you should need to be able to comprehend the inherent problems in this, and you're just intentionally playing dumb to it.

 

[sangha]

Middle class people voluntarily undermining their own earning potential thanks to an arbitrary and ****ty policy? I dunno, you tell me.

No, you tell me.

Further impeding women's incentive to return to work after having a child? I didn't realize you were such a social conservative.

So you assume it will be the woman who stays at home?

It rewards higher insurance prices (2nd time I've had to point it out now).

I've given you all the info you should need to be able to comprehend the inherent problems in this, and you're just intentionally playing dumb to it.

It also rewards better insurance coverage. That's a good thing

 

[Neomalthusian]

No, you tell me.

If you think it's a good thing that middle class people undercut themselves professionally to avoid federally imposed financial setbacks at certain specific earning levels, then I'll let you own that one.

So you assume it will be the woman who stays at home?

More often than not.

It also rewards better insurance coverage. That's a good thing

No, it encourages more expensive insurance. If coverage is marginally better but significantly more expensive, people wouldn't buy it if they were the ones paying for it. With the subsidy, they'll accept marginally better coverage at virtually any price because it's not costing them any more.

 

[sangha]

If you think it's a good thing that middle class people undercut themselves professionally to avoid federally imposed financial setbacks at certain specific earning levels, then I'll let you own that one.

You haven't shown that middle class people will undercut themselves professionally.

More often than not.

more often not because you haven't shown that it would happen

No, it encourages more expensive insurance. If coverage is marginally better but significantly more expensive, people wouldn't buy it if they were the ones paying for it. With the subsidy, they'll accept marginally better coverage at virtually any price because it's not costing them any more.

You are now reduced to making up nonsense about how the better insurance will be significantly more expensive but only marginally better.

Your arguments may sound good in right wing fantasy land, but they have no relation to reality

 

[CanadaJohn]

This is similar to welfare recipients or unemployment insurance recipients who will not take on part-time work because they receive the same or greater benefit simply by staying home. Such programs should encourage people to gradually remove themselves from these social safety nets by allowing them to keep all or most of the benefit while gaining additional income through part-time work that could and often does lead to full-time work and reintegration of people into the contributing classes of society.

 

[Neomalthusian]

You haven't shown that middle class people will undercut themselves professionally.

It has been explained in detail, with links to these comprehensive explanations, that certain families would be financially rational to do so (i.e. it would be better for their bottom line). If you're counting on the guess that these families will not act rationally, that's your prerogative.

You are now reduced to making up nonsense about how the better insurance will be significantly more expensive but only marginally better.

Your arguments may sound good in right wing fantasy land, but they have no relation to reality

From the get-go you have been reduced to feigning ignorance to everything being discussed in this thread. You started off asking why someone would forego $100,000 to save $9 grand in subsidies, which displays profound ignorance to this topic. Since then you've just been calling bull**** because you refuse to think.

If you sold a product and could increase its quality marginally while increasing its price substantially, without affecting your consumers' demand for it despite its higher price (thanks to the subsidy), would you go that route? Or would you just be charitable about it? Are you betting on the charitability of the health insurance industry?

 

[specklebang]

This is just a contribution of one of my unloved anecdotes but here it is, no sides taken.

My ex-wife lives on her SS check. She also sucks my blood like a vampire but that's besides the point. She was getting about $900 a month and thus received Medicaid. Las year, they raised her SS check by about $20 and that was just enough to kick her out of Medicaid.

Needless to say, this had quite an impact or her cost of medical (she is 70, diabetic and genuinely unable to work) and if it weren't for me, and my stupid generosity, she would be totally screwed. Getting that "raise" was automatic and for her extra $20-something, I've paid out nearly $1000 this year to her heart doctor and hospital.

So, yeah, some people might deliberately keep their incomes low to gain these important benefits. Doesn't mean they won't make money "off the books" though. They probably should have a more gradual strategy than "cliffs".

 

[sangha]

It has been explained in detail, with links to these comprehensive explanations, that certain families would be financially rational to do so (i.e. it would be better for their bottom line). If you're counting on the guess that these families will not act rationally, that's your prerogative.

Speculating about what people might do is not the same thing as proving that they will do that.

And you have not shown how such decisions would be rational

From the get-go you have been reduced to feigning ignorance to everything being discussed in this thread. You started off asking why someone would forego $100,000 to save $9 grand in subsidies, which displays profound ignorance to this topic. Since then you've just been calling bull**** because you refuse to think.

It's a question you have not been able to answer reasonably

If you sold a product and could increase its quality marginally while increasing its price substantially, without affecting your consumers' demand for it despite its higher price (thanks to the subsidy), would you go that route? Or would you just be charitable about it? Are you betting on the charitability of the health insurance industry?

What makes you think they can increase it quality marginally while increasing its price substantially?

And even if they do, so what if those people see an increase in their health related costs? It's their choice.

It won't make my health insurance more expensive. Might make it less expensive.

 

[sangha]

I've paid out nearly $1000 this year to her heart doctor and hospital.

I like you. I really do, but....

You've earned a very large picture of a very small violin

 

[Neomalthusian]

Speculating about what people might do is not the same thing as proving that they will do that.

And you have not shown how such decisions would be rational

Not only did I, but so did the OP. You just refused to read it, or else failed to understand it.

 

[specklebang]

I like you. I really do, but....

You've earned a very large picture of a very small violin

If you like me so much, why don't you tell me what your issue is with my post? I warned you it was anecdotal and I think it illustrated the ":cliff" issue rather well. So, why the violin?

 

[sangha]

If you like me so much, why don't you tell me what your issue is with my post? I warned you it was anecdotal and I think it illustrated the ":cliff" issue rather well. So, why the violin?

Fair enough.

Given your financial position, I'm not sympathetic that you have spent $1000 over the last year.

I think there's a world of difference between your wife, who is married to someone who has made it clear that he is far from poor, and someone who is genuinely poor. I also think it's not realistic to compare someone on public welfare (with it's extremely low income thresholds) and a family with more than 100K in income.

The welfare recipient is facing a decision about money in a situation where every dollar counts. A couple with a 100k+ income is not in a similar situation.

 

[specklebang]

Ah, I got it now. She is my ex-wife and I have not been married to her since 1982. My point wasn't that I spent $1000 on hr medical expenses. I have $1000 and for some reason am willing to spend it on her despite the many years we have been apart.

The point I was trying to make was how screwed she would be if she didn't have such a nice ex-husband and how abruptly she arrived at the cut-off point. Now I hope it will make more sense. Most people with a $900 monthly income would suffer from that $20 raise if they didn't have an "angel" to save them. We're discussing a $10,000 a year income in her case, not $100,000 a year income.

Fair enough.

Given your financial position, I'm not sympathetic that you have spent $1000 over the last year.

I think there's a world of difference between your wife, who is married to someone who has made it clear that he is far from poor, and someone who is genuinely poor. I also think it's not realistic to compare someone on public welfare (with it's extremely low income thresholds) and a family with more than 100K in income.

The welfare recipient is facing a decision about money in a situation where every dollar counts. A couple with a 100k+ income is not in a similar situation.

 

[sangha]

Ah, I got it now. She is my ex-wife and I have not been married to her since 1982. My point wasn't that I spent $1000 on hr medical expenses. I have $1000 and for some reason am willing to spend it on her despite the many years we have been apart.

The point I was trying to make was how screwed she would be if she didn't have such a nice ex-husband and how abruptly she arrived at the cut-off point. Now I hope it will make more sense. Most people with a $900 monthly income would suffer from that $20 raise if they didn't have an "angel" to save them. We're discussing a $10,000 a year income in her case, not $100,000 a year income.

Fair enough.

I'll just say that I have far more sympathy for those like your wife who don't have someone like you in their lives than the couple who are making 100k+ per year.

And I believe that many of the people complaining about this issue (you excepted) don't give a damn about the hardships the poor face due to this cliff and that their preferred solution is to eliminate the welfare in order to eliminate the cliff.

 

[specklebang]

Fair enough.

I'll just say that I have far more sympathy for those like your wife who don't have someone like you in their lives than the couple who are making 100k+ per year.

And I believe that many of the people complaining about this issue (you excepted) don't give a damn about the hardships the poor face due to this cliff and that their preferred solution is to eliminate the welfare in order to eliminate the cliff.

I thought the topic was cliffs and I illustrated that. I didn't bring up the sorrows of $100K a year, more like the sorrows of $10K a year and the abruptness of the cut-offs.