How Obamacare will Hurt the Middle Class

Barack Obama

Photo credit — The Washington Post

Most of the provisions of the Affordable Care Act, better known as Obamacare, will go into effect at the beginning of 2014. While it is being hailed as a step toward providing all Americans with affordable health care, that was never actually the goal of the individual mandate. The goal was to get all Americans insured. I remember noticing how health insurance stocks shot up the day the bill passed and thinking something must be wrong.

Here’s how the system will work. Unless you receive health insurance through your employer, starting in 2014 you will be required to purchase health insurance or else pay a tax penalty of one percent of your annual income for 2014, two percent in 2015, and 2.5% in 2016 and beyond. That is strong motivation to purchase insurance!

Poverty Definitions don’t pay Medical Bills

Medicaid subsidies are available to help supplement the cost of insurance for poorer families. For those earning below 1.5 of the federal poverty line (around $30,000 for a two-income household), their insurance will be free. Above that the subsidies are tiered. The more money you make, the higher your insurance premium will be.

The actual cost will vary by state. Insurance companies in a few states (California, Oregon and New York) have already come out with group coverage plans. While it will still take some time for the market to settle on costs, the plans appear to make the insurance highly affordable for lower income families, but much of the cost will be picked up by the higher premiums paid by the middle class.

To use an example of a two-income, two child family in New York state, the subsidies are set to fall off at an income of $94,000. The estimated cost of a mid-range family coverage plan would be $17,760

Considering additional costs of deductibles and co-pays, the tax penalty no longer looks so bad.

No Good Choice for Middle-Class Families

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Photo credit — Provident Trust

Now whatever the official poverty line is, the cost to raise a family of in any major urban area of the United States is far different. $94,000 in income for such a family would hardly make them well-off. The pending cost of insurance would be a substantial hit to their bottom line and standard of living. That added amount will make a big difference for families just struggling to survive.

The cost to ensure a self-employed individual or family before Obamacare was not much different. Those not covered by an employer’s health plan were always in a tough spot. The difference now is that the insurance will be required.

Free or pay-as-you-go clinics and other health services, especially for children have always served a certain segment of the market. Poor and middle-class families who are self-employed, or work for employers on a “contract” basis will now have a decision to make: pay the tax penalty and continue to use such services, or buy health insurance.

Only a Small Step Toward Health-Care Affordability

Despite its flaws, I still believe that overall, the Affordable Care Act was necessary and can work. A medical practitioner friend of mine compared this law to the first small step of veering a ship out of the path of an iceberg. It’s still barreling in the direction of catastrophe, but we’re starting to try to change course. The provisions regarding pre-existing conditions and preventative care alone were dramatic “wins” for the social good against insurance industry interests.

But if no adjustments are made, this law will not make things any easier for the self-employed middle-class. For those in this category who have made the decision not to buy health insurance in the past, the individual mandate will make it more difficult to make ends meet.

Now that the law is about to be implemented, liberals are slapping each others backs, feeling satisfied that they have “fixed” health care. Conservatives fight to undermine the bill without offering any viable alternatives. Socially conscious individuals in both parties need to face the fact that a good deal of work remains to be done.

Obamacare should not have been called the Affordable Care Act. It should have been called the Affordable Insurance Act. The only way to truly make health care affordable for all Americans is to actually decouple the health care industry from insurance company hegemony. That would be a huge step toward social justice! Unfortunately, the insurance lobby has such deep control of both political parties that it is difficult to see this happening without full structural changes… else the health care ship will drive into a financial iceberg and sink!

About Gregory Phillips

Gregory Phillips, author of "Reclaimed: This Catholic Faith is Mine," is a trusted resource on the topics of Catholicism and social justice. He shares 10 plus years experience in the finance industry and his views on theology, philosophy, life, and politics on his blog gregoryerichphillips.com. Follow him on Twitter @by_gep.

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