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Health Exchange Shoppers Can Expect $2,700 in Tax Credits

Health Exchange Shoppers Can Expect $2,700 in Obama Tax Credits
U.S. President Barack Obama's administration has said it wants to see about 7 million people enroll in plans through the exchanges next year, including at least 2.7 million who are young and healthy. Photographer: Patrick T. Fallon/Bloomberg

Aug. 14 (Bloomberg) -- Tax credits to buy medical coverage next year will average $2,672 per family under President Barack Obama’s health-care system overhaul, a benefit that will make the plans more affordable than some critics have predicted.

The subsidy should reduce the cost of the premiums by about 32 percent on average for people buying the second-lowest priced plans through state-by-state insurance exchanges set to open Oct. 1, the Kaiser Family Foundation said in a report today.

Republican politicians in states including Indiana, Ohio, Georgia and Florida have tried to discourage participation in the exchanges, warning consumers that premiums will rise as a result of the law’s requirement that insurers cover sick people. Those warnings focus on “sticker prices” and ignore tax credits available to people earning less than four times the poverty level, about $94,200 for a family of four, Kaiser said.

“Tax subsidies are an essential part of the equation for many people who buy insurance through the new marketplaces,” Drew Altman, chief executive officer of Menlo Park, California-based Kaiser, said in a statement. “They will help make coverage more affordable for low- and middle-income people.”

About 48 percent of people who currently buy insurance for themselves, instead of getting it through work, will be eligible for subsidies to reduce their premiums next year, Kaiser said. Those tax credits will average $5,548 per family for that pool of people. When all consumers are taken into account, whether eligible for credits or not, the average subsidy works out to $2,672 each, according to the study.

Healthy Youth

U.S. Health and Human Services Secretary Kathleen Sebelius criticized Republican state leaders warning of big premium increases due to the Affordable Care Act, saying last week that their numbers are “just factually incorrect.”

Republican officials in Georgia, Indiana and Ohio have predicted premium increases of as much as 200 percent. Leaders in Democratic-led states including New York and California have said smaller increases or savings will occur when subsidies accompanying the law are included.

The Obama administration has said it wants to see about 7 million people enroll in plans through the exchanges next year, including at least 2.7 million who are young and healthy. That’s necessary to balance the cost of covering sick people.

Better Deal

Sebelius also said her department wasn’t worrying about a “pretty dismal” effort by politically conservative groups to discourage young people from signing up. Two months before enrollment begins for the online exchanges, the project is on schedule, she told reporters on an Aug. 5 conference call.

“We are on target and ready to flip the switch on Oct. 1,” Sebelius said. The markets “are already increasing competition and giving consumers a better deal.”

As of June, proposed monthly premiums in nine states for the benchmark level of medical coverage were less than congressional estimates, according to a study at the time from Avalere Health, a Washington-based consulting company.

The reported premiums and subsidies are what customers can expect for plans that go on sale Oct. 1 and take effect Jan. 1, 2014. About 24 million people are expected to get their coverage from exchange plans by 2023, according to the Congressional Budget Office.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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