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America's Middle Class is no Longer the World's Richest
The recent book 'Capitalism in the 21st century' by Thomas Piketty that is currently sending social progressives into orgasms and financial conservatives into spasms takes the reasons for growing disparity in developed nations head on.
I have not read this book but found one point quoted from that book interesting. The rate of return on capital in this economy is greater than the growth rate of the economy. That is an astounding statement if true for its implications.
I have commented on the increasingly favored treatment of capital over labor several times in thus forum that is at the root cause of this problem for the people without capital.
My approach has been a pragmatic one, to change my life choices and structure finances to divest from depending on labor for building wealth to primarily leveraging capital. A very early retirement from wage economy being a good side effect of this made possible by a healthy attitude to saving and building capital in my early years of good wages.
Filing the tax this year reinforced again how bad this disparity in capital vs labor treatment is in policy as I have been in both camps over time. While I am certainly not at Mitt Romney's level in magnitude of income, I can certainly identify with his tax treatment over the average working stiff.
I do empathize with the angst/fear of this generation as discussed by @dex in another thread. Except for a tiny percentage in well compensated wage professions, people that have to depend on labor alone for their income are really screwed at the moment, for any real chance at a financially secure life. That covers most of the poor and middle class.
Are the inflation statistics used to adjust the figures used in these studies sufficiently accurate for us to draw any valid conclusions from them? And I didn't ask if they're honest, I asked if the historical inflation figures from all of these countries are accurate, or even if it's theoretically possible for them to be accurate? To put it another way, how accurate are 'hedonic adjustments' and the like supposed to be?
The guys who gave us Facebook are multi-billionaires, which hasn't done much for income equality. Now I personally couldn't care less about Facebook, but obviously many millions of people do. If we had prevented Facebook from ever coming into existence it would have left incomes more equal, but who exactly would have been better off?
On the other hand, we do have central banks which create and direct money to the owners of capital, and do so (among other means) by denying those who work any significant return on their savings. This certainly increases income inequality at the expense of those workers. (I might also say that they have the impudence to brag about saving us from the depression that they themselves did most to cause, but that would be another subject.)
We do have a country which, uniquely in the world, accepts millions of uneducated (illegal) immigrants annually who drive down the wages of low income workers and simultaneously drive down the prices that the wealthy need pay to have various services performed. This certainly increases income inequality at the expense of those low wage workers.
We have government energy policies which subsidize (for the owners of capital) methods of production (solar, wind power and the like) which increase prices of energy for consumers (most seriously for those with low incomes to pay the increased prices) while discouraging those methods (fracking) which decrease such prices.
Oh yes, and we implement a health care system which seems specifically designed to crush the middle class (not those like me, and perhaps cman is in similar shape, who can almost completely control their taxable income and therefore can make sure that they can grab up the subsidies paid for by those poor workers).
I might also question why it's income rather than wealth that's considered an injustice by the authors of such papers, but this is more than enough. Generally I'd say that income inequality which results from someone solving some problem is good; income inequality which results from someone creating some problem is bad.
What importance does a one dimensional comparative reference based solely on financial wealth provide us?
I believe Lower, Middle or Upper Class shouldn't be thought of as a destination we arrive at or even a label we're assigned. I have never aspired to be Middle class or Upper class. I do enjoy the freedom to follow my dreams and my personal aspiration for happiness. Most of us were not born with a silver spoon so, generally speaking, it's critical to have a set of skills that help us build capital and accumulate wealth.
My personal interest in building capital started very young with my desire to frequent the neighborhood corner market. I would regularly build and destroy capital on Bazooka bubble gum, baseball cards, and Mad magazines. Later in my youth it would be on wine, women and song. The best consumers in the world are boys and girls under age 30.
Back then I derived capital from a paper route, a lawn / snow service, or a concession stand. Not much different than today where I buy tag sale items and sell them on EBay or fix up an old car or piece of furniture (for resell or personal pleasure) or, most recently, renovate a foreclosed property I call home for six month of the year.
Each of these enterprises required a variety of skills, some I learned on the fly, others I developed formally. The point of all this focused energy (work and acquired skills) is to basically follow my dreams. Whether it's lower, middle or upper class I have no clue, but I do know that I created this lifestyle by piecing together a thousand little actions (good and bad).
I still believe opportunities exist for enterprising and hard working American to follow their dreams, at least I hope so.
I might also question why it's income rather than wealth that's considered an injustice by the authors of such papers, but this is more than enough. Generally I'd say that income inequality which results from someone solving some problem is good; income inequality which results from someone creating some problem is bad.
From an economics perspective, income is more critical for economic activity than wealth as it participates in money velocity more broadly than wealth does. However, wealth can generate income.
Income is a measure of how the benefits of the economic growth is flowing into the society. If these benefits get too lopsided then it has side effects.
One problem is in how you treat income generated from wealth vs income generated from labor and what opportunities exist for both. If you favor the former too much, it leads to compounding income inequality as well as extreme wealth concentration.
I agree with you on differentiating how income is generated. But income inequality creates social problems when taken to extremes regardless of how it came about.
Ideally, you want to create opportunities for good income generation (win-win outcomes) and prevent bad income generation (win-lose outcomes). Income primarily from asset inflation is more of the latter in the long run.
Oh yes, and we implement a health care system which seems specifically designed to crush the middle class (not those like me, and perhaps cman is in similar shape, who can almost completely control their taxable income and therefore can make sure that they can grab up the subsidies paid for by those poor workers).
Is this meant as a serious statement, or as some type of chum for the leftists on the board?
I still believe opportunities exist for enterprising and hard working American to follow their dreams, at least I hope so.
@bee, I believe that too but the opportunities seem to have become compressed into a few professions and vocations to benefit from hard work and create "upward mobility". But everyone cannot fit into those narrow segments logistically.
This might be leading to the loss of hope in this generation while the hope still exists within our generation simply because it worked for us more broadly/diversely.
to PRESSmUP- Well, I've often been accused of being a "leftist" (or worse) but I have to tell you that I couldn't make much sense out of that either, from any perspective.
If he's referring to so-called "Obamacare", I'm just watching to see if in fact it is an improvement- I think the jury's still out on that, as it should be- but whatever it is, it doesn't seem to be designed to "crush" anyone, but rather to promote some sanity between healthcare costs and results.
Will it actually work? If so, will it be any sort of an improvement? I have no idea at this point, but almost anything was worth a try considering the absurdities of the non-system we've had up to this point.
Joe...medical expenses are the #1 cause of bankruptcies, so it will be interesting to see how this statistic is impacted.
Frankly, the ACA will allow me to retire early (hopefully later this year at 59 1/2) since I will be able to buy some insurance which is reasonable... I am currently pretty much uninsurable without the ACA.
Oh yes, and we implement a health care system which seems specifically designed to crush the middle class (not those like me, and perhaps cman is in similar shape, who can almost completely control their taxable income and therefore can make sure that they can grab up the subsidies paid for by those poor workers).
Is this meant as a serious statement, or as some type of chum for the leftists on the board?
You bet it's a serious statement. I guess you'll be discovering the premiums plus the deductibles (plus the co-pays) on the various Bronze, Silver and Gold plans (Platinum too if I recall correctly). They begin rising sharply at incomes of $16,500 for a single person (that's for this year). Below $11,500 and they ship you to Medicaid. I can tell you that with a $5,000 deductible and paying $235/month premiums (my old private insurance) that I would have approximately broken even with Obamacare any year that I went through the entire $5000 deductible if I couldn't arrange it to qualify for the subsidies. FYI, this is for a 59 year old male in Northeast Ohio. With the subsidies, I'm at $182/month premium with only a $500 deductible (you have to take a Silver Plan if you get a subsidy). And the old $10 million lifetime limit is eliminated. So as you see, I'm one of the very few who are making out like a bandit on this.
I should say that I'm probably somewhere around the 10th percentile in wealth while managing to keep myself on the edge of poverty by way of income. I know I'm eligible for food stamps thanks to recent changes in that program (don't take them) and God knows what else. Good luck, PRESSmUP, you should tell us how this works out for you.
But let me repeat, if you can't control your income as I can, and not many in the middle class can, then you're adding the costs of all those subsidies onto your own healthcare bills. I was forced out of my, I believe it's often described as a "crappy health plan", so that's the way it is. Good luck to one and all.
Well Vert...I'm about the same age as you, and plan to continue my coverage at the Cleveland Clinic under the Affordable Care Act when I retire. Frankly, if I can buy a plan at around $500/month, I will be happy as a clam. I've not explored the details, and what the parameters are around a subsidy as I don't require or need one. I'm not really clear what constitutes "income" for that calculation, but it seems like I might be significantly above the thresholds you mentioned.
By the way...you didn't mention how the ACA was going to crush the middle class. $186 a month in your example is about the same as the average cell phone or cable bill.
Howdy, You noted to Vert: "I'm about the same age as you, and plan to continue my coverage at the Cleveland Clinic under the Affordable Care Act when I retire."
You're stating that your current health care plan at Cleveland Clinic will remain in place after your retirement and that the plan will be blended with/into ACA guidelines, yes?
Well Vert...I'm about the same age as you, and plan to continue my coverage at the Cleveland Clinic under the Affordable Care Act when I retire. Frankly, if I can buy a plan at around $500/month, I will be happy as a clam. I've not explored the details, and what the parameters are around a subsidy as I don't require or need one. I'm not really clear what constitutes "income" for that calculation, but it seems like I might be significantly above the thresholds you mentioned.
By the way...you didn't mention how the ACA was going to crush the middle class. $186 a month in your example is about the same as the average cell phone or cable bill.
Press
It appears that I'm miserable at communication. However, I live to serve so I did some quick checking for you:
If you want to use the Cleveland Clinic, only one company's plan under the Affordable Care Act will be accepted by them: that of Medical Mutual of Ohio. Be forewarned that the Cleveland Clinic is not a part of the network of the others.
Subsidies for an individual end at $29,000/year.
Your premium would be approximately $194/month.
The deductible is $2000/year. To be clear, you get no benefits until paying $2,000 out-of-pocket. That does not include your premium payments.
Once you've satisfied that deductible, your plan will pay 70% of your bill. Your co-pay is the other 30%.
There is a yearly cap for your payments set at $6350.
What this means is that your out-of-pocket expenses will vary from $2328 to $8678 depending on how many services you use.
This is what I got from a few minutes on Medical Mutual's site. It's for an individual Silver policy with no subsidies. I think you mentioned you had a pre-existing condition. I believe that would increase your expenses, but I'm not positive and wouldn't know by how much if it does.
These are the sorts of costs you would be looking at. Perhaps you'll find it helpful in your planning.
Any clue as to how HSA plans dovetail or collide wuth the ACA?
bee, I know that at least some ACA plans are HSA compliant because I got one of them. There were a lot of choices where I live and I'm not sure but that was the only one that was HSA compliant.
Any clue as to how HSA plans dovetail or collide wuth the ACA?
bee, I know that at least some ACA plans are HSA compliant because I got one of them. There were a lot of choices where I live and I'm not sure but that was the only one that was HSA compliant.
Interesting. I thought the main sticky conflict with ACA plans and HSA was not the deductible limit but rather the HSA requirement that pharmacy benefits be subjected to the deductible. Are there ACA plans that offer pharmacy benefits with a deductible rather than just a co-pay? They do seem to vary a lot from state to state.
I think you mentioned you had a pre-existing condition. I believe that would increase your expenses, but I'm not positive and wouldn't know by how much if it does
Hi Vert,
If you are referring to monthly premiums, no. Only if you are a smoker and say you are a smoker.
The rich person with an AGI of approximately $50,000 living in New York City (or lower AGI but tax-free dividends to add back in to equal $50,000 or greater), gets no subsidy and subsidizes the ones with an AGI of less that $50,000.
If your annual AGI is $50,000, $500,000 or $5,000,000, are a single female or single male (individual plan), x years old, and reside in location y, your premium, depending on the the metal, is Z.
Redistribution of wealth? Guess it all depends on which side of the $50,000 you fall on.
Not to get into the politics of this, but strictly from an economic perspective, how much do people value the cost of insuring that they can be covered in case they get a serious afflication that may result in their primary insurer canceling their policy or pricing it at a level that is as good as canceling?
To get away from the politics and ACA, imagine in a parallel world, if there was a secondary insurer whose policy would kick in if and only when your primary insurer was no longer willing to underwrite you and provided the same level of benefits as your primary insurer while requiring you to pay that earlier primary insurer premium to them from then on.
How much per month would you be willing to pay for this secondary insurance alone just to ensure continuing coverage regardless of what might happen?
Any clue as to how HSA plans dovetail or collide wuth the ACA?
bee, I know that at least some ACA plans are HSA compliant because I got one of them. There were a lot of choices where I live and I'm not sure but that was the only one that was HSA compliant.
Interesting. I thought the main sticky conflict with ACA plans and HSA was not the deductible limit but rather the HSA requirement that pharmacy benefits be subjected to the deductible. Are there ACA plans that offer pharmacy benefits with a deductible rather than just a co-pay? They do seem to vary a lot from state to state.
Any clue as to how HSA plans dovetail or collide wuth the ACA?
bee, I know that at least some ACA plans are HSA compliant because I got one of them. There were a lot of choices where I live and I'm not sure but that was the only one that was HSA compliant.
Interesting. I thought the main sticky conflict with ACA plans and HSA was not the deductible limit but rather the HSA requirement that pharmacy benefits be subjected to the deductible. Are there ACA plans that offer pharmacy benefits with a deductible rather than just a co-pay? They do seem to vary a lot from state to state.
My plan has a pharmacy deductible of $500. That's definitely subsidized as well. This is Northeast Ohio. No co-pay after that.
Not to get into the politics of this, but strictly from an economic perspective, how much do people value the cost of insuring that they can be covered in case they get a serious afflication that may result in their primary insurer canceling their policy or pricing it at a level that is as good as canceling?
To get away from the politics and ACA, imagine in a parallel world, if there was a secondary insurer whose policy would kick in if and only when your primary insurer was no longer willing to underwrite you and provided the same level of benefits as your primary insurer while requiring you to pay that earlier primary insurer premium to them from then on.
How much per month would you be willing to pay for this secondary insurance alone just to ensure continuing coverage regardless of what might happen?
State insurance boards regulate these things differently, don't they? I know that in Ohio insurance companies can't cancel individual policies whose premiums are still being paid, they can only cancel the entire class of policies by not offering them anymore. The idea of reinsurance isn't a new one, Buffet does a lot of that, doesn't he? Dealing with 50 different states makes things next to impossible, but making something like that a rider to all health insurance policies (after all, they aren't insurance if they're cancellable when needed most, and in any event insurance companies will go bankrupt from time to time) would seem logical.
Heaven knows many changes could improve matters. As another example, tying health insurance to employers was an idea that caused nothing but problems in my opinion. But we're moving far afield now.
My plan has a pharmacy deductible of $500. That's definitely subsidized as well. This is Northeast Ohio. No co-pay after that.
Then, I don't see how that plan is HSA-compatible. Something isn't right here.
Regarding co-pay vs deductible, a $500 deductible and a $30-$50 copay with no deductible are pretty much equivalent to the insurance company in expected pay outs. Prior to any of these ACA things, you could see that in the almost equivalent premiums between plans that differed in those two. I have been in both types if plans.
The insurance company computes an average expected payout in the pool and prices it so that they get that back averaged over the pool in premiums plus their margin.
In the deductible plan, the people who use little or nothing over the deductible up to the premium cost of the pharmacy benefit (folded into the total premium) subsidize those that need more. So you could land up subsidizing or getting subsidized by others depending on how much you use. That is how insurance works in terms of deductibles and copays.
It is not subsidized in the sense that you are hinting at BECAUSE of the deductible vs copay. Your premiums may be subsidized but that is independent of the plan structure. Total ACA premiums without subsidy are computed to the actuarial tables of the insurance company. They are not under or overpriced as a subsidy or penalty because of ACA. Then depending on the income, you may get a premium subsidy as you have noted.
I am NOT making a case for or against ACA here. Just discussing the economics of insurance. Sometimes, the politically charged nature of this issue hides that.
State insurance boards regulate these things differently, don't they? I know that in Ohio insurance companies can't cancel individual policies whose premiums are still being paid, they can only cancel the entire class of policies by not offering them anymore.
That doesn't change anything because insurance companies created buckets after every couple of years for new classes of insurance and stopped writing new policies in the old buckets. This made the premiums go up in the old bucket as people there aged because pricing in each bucket was based on the costs in that bucket according to insurance regulations. People who had no preexisting condition could move to a current bucket and escape those increases which increased the premiums for people stuck there even more until it became completely unaffordable and same as cancelation. All this was legal. Anthem was sued in California for this but the settlement was just to allow a one time transfer not to prevent it.
The idea of reinsurance isn't a new one, Buffet does a lot of that, doesn't he? Dealing with 50 different states makes things next to impossible, but making something like that a rider to all health insurance policies (after all, they aren't insurance if they're cancellable when needed most, and in any event insurance companies will go bankrupt from time to time) would seem logical.
The reinsurance is for insurance companies to cover themselves if the payouts exceeded their expected scenario, not what I was thinking. No insurance company can afford to offer that kind of insurance as I suggested (unless there was a ACA like mandate that everyone had to pay into it) so it is hypothetical. But there must be a value to such insurance that people are willing to pay.
I am just trying to arrive at the true cost of insurance from economics. Without subsidies or ACA or any such complications, there is a value to me of the medical benefits of the insurance, the insurance for keeping the insurance regardless of what happens to me and the insurance so that costs from people who are underinsured or uninsured are not passed on to me (like such insurance in auto insurance). The premiums should reflect that. Otherwiae, somebody is subsidizing somebody regardless of Govt participation.
Comments
Regards,
Ted
I have not read this book but found one point quoted from that book interesting. The rate of return on capital in this economy is greater than the growth rate of the economy. That is an astounding statement if true for its implications.
I have commented on the increasingly favored treatment of capital over labor several times in thus forum that is at the root cause of this problem for the people without capital.
My approach has been a pragmatic one, to change my life choices and structure finances to divest from depending on labor for building wealth to primarily leveraging capital. A very early retirement from wage economy being a good side effect of this made possible by a healthy attitude to saving and building capital in my early years of good wages.
Filing the tax this year reinforced again how bad this disparity in capital vs labor treatment is in policy as I have been in both camps over time. While I am certainly not at Mitt Romney's level in magnitude of income, I can certainly identify with his tax treatment over the average working stiff.
I do empathize with the angst/fear of this generation as discussed by @dex in another thread. Except for a tiny percentage in well compensated wage professions, people that have to depend on labor alone for their income are really screwed at the moment, for any real chance at a financially secure life. That covers most of the poor and middle class.
I can only say, there but for the grace...
The guys who gave us Facebook are multi-billionaires, which hasn't done much for income equality. Now I personally couldn't care less about Facebook, but obviously many millions of people do. If we had prevented Facebook from ever coming into existence it would have left incomes more equal, but who exactly would have been better off?
On the other hand, we do have central banks which create and direct money to the owners of capital, and do so (among other means) by denying those who work any significant return on their savings. This certainly increases income inequality at the expense of those workers. (I might also say that they have the impudence to brag about saving us from the depression that they themselves did most to cause, but that would be another subject.)
We do have a country which, uniquely in the world, accepts millions of uneducated (illegal) immigrants annually who drive down the wages of low income workers and simultaneously drive down the prices that the wealthy need pay to have various services performed. This certainly increases income inequality at the expense of those low wage workers.
We have government energy policies which subsidize (for the owners of capital) methods of production (solar, wind power and the like) which increase prices of energy for consumers (most seriously for those with low incomes to pay the increased prices) while discouraging those methods (fracking) which decrease such prices.
Oh yes, and we implement a health care system which seems specifically designed to crush the middle class (not those like me, and perhaps cman is in similar shape, who can almost completely control their taxable income and therefore can make sure that they can grab up the subsidies paid for by those poor workers).
I might also question why it's income rather than wealth that's considered an injustice by the authors of such papers, but this is more than enough. Generally I'd say that income inequality which results from someone solving some problem is good; income inequality which results from someone creating some problem is bad.
I believe Lower, Middle or Upper Class shouldn't be thought of as a destination we arrive at or even a label we're assigned. I have never aspired to be Middle class or Upper class. I do enjoy the freedom to follow my dreams and my personal aspiration for happiness. Most of us were not born with a silver spoon so, generally speaking, it's critical to have a set of skills that help us build capital and accumulate wealth.
My personal interest in building capital started very young with my desire to frequent the neighborhood corner market. I would regularly build and destroy capital on Bazooka bubble gum, baseball cards, and Mad magazines. Later in my youth it would be on wine, women and song. The best consumers in the world are boys and girls under age 30.
Back then I derived capital from a paper route, a lawn / snow service, or a concession stand. Not much different than today where I buy tag sale items and sell them on EBay or fix up an old car or piece of furniture (for resell or personal pleasure) or, most recently, renovate a foreclosed property I call home for six month of the year.
Each of these enterprises required a variety of skills, some I learned on the fly, others I developed formally. The point of all this focused energy (work and acquired skills) is to basically follow my dreams. Whether it's lower, middle or upper class I have no clue, but I do know that I created this lifestyle by piecing together a thousand little actions (good and bad).
I still believe opportunities exist for enterprising and hard working American to follow their dreams, at least I hope so.
Income is a measure of how the benefits of the economic growth is flowing into the society. If these benefits get too lopsided then it has side effects.
One problem is in how you treat income generated from wealth vs income generated from labor and what opportunities exist for both. If you favor the former too much, it leads to compounding income inequality as well as extreme wealth concentration.
I agree with you on differentiating how income is generated. But income inequality creates social problems when taken to extremes regardless of how it came about.
Ideally, you want to create opportunities for good income generation (win-win outcomes) and prevent bad income generation (win-lose outcomes). Income primarily from asset inflation is more of the latter in the long run.
This might be leading to the loss of hope in this generation while the hope still exists within our generation simply because it worked for us more broadly/diversely.
If he's referring to so-called "Obamacare", I'm just watching to see if in fact it is an improvement- I think the jury's still out on that, as it should be- but whatever it is, it doesn't seem to be designed to "crush" anyone, but rather to promote some sanity between healthcare costs and results.
Will it actually work? If so, will it be any sort of an improvement? I have no idea at this point, but almost anything was worth a try considering the absurdities of the non-system we've had up to this point.
Frankly, the ACA will allow me to retire early (hopefully later this year at 59 1/2) since I will be able to buy some insurance which is reasonable... I am currently pretty much uninsurable without the ACA.
Press
OJ
I should say that I'm probably somewhere around the 10th percentile in wealth while managing to keep myself on the edge of poverty by way of income. I know I'm eligible for food stamps thanks to recent changes in that program (don't take them) and God knows what else. Good luck, PRESSmUP, you should tell us how this works out for you.
But let me repeat, if you can't control your income as I can, and not many in the middle class can, then you're adding the costs of all those subsidies onto your own healthcare bills. I was forced out of my, I believe it's often described as a "crappy health plan", so that's the way it is. Good luck to one and all.
By the way...you didn't mention how the ACA was going to crush the middle class. $186 a month in your example is about the same as the average cell phone or cable bill.
Press
There must be many others making out like a bandit as well as being enticed to leave the work force prior to eligibility for Social Security.
After all, my premiums have tripled for far inferior coverage.
Mona
Howdy,
You noted to Vert: "I'm about the same age as you, and plan to continue my coverage at the Cleveland Clinic under the Affordable Care Act when I retire."
You're stating that your current health care plan at Cleveland Clinic will remain in place after your retirement and that the plan will be blended with/into ACA guidelines, yes?
Trying to get the full meaning of your statement.
Thank you.
Regards,
Catch
If you want to use the Cleveland Clinic, only one company's plan under the Affordable Care Act will be accepted by them: that of Medical Mutual of Ohio. Be forewarned that the Cleveland Clinic is not a part of the network of the others.
Subsidies for an individual end at $29,000/year.
Your premium would be approximately $194/month.
The deductible is $2000/year. To be clear, you get no benefits until paying $2,000 out-of-pocket. That does not include your premium payments.
Once you've satisfied that deductible, your plan will pay 70% of your bill. Your co-pay is the other 30%.
There is a yearly cap for your payments set at $6350.
What this means is that your out-of-pocket expenses will vary from $2328 to $8678 depending on how many services you use.
This is what I got from a few minutes on Medical Mutual's site. It's for an individual Silver policy with no subsidies. I think you mentioned you had a pre-existing condition. I believe that would increase your expenses, but I'm not positive and wouldn't know by how much if it does.
These are the sorts of costs you would be looking at. Perhaps you'll find it helpful in your planning.
Didn't mean to strike a nerve and am only stating the facts.
But if the shoe fits, wear it.
If you are referring to monthly premiums, no. Only if you are a smoker and say you are a smoker.
The rich person with an AGI of approximately $50,000 living in New York City (or lower AGI but tax-free dividends to add back in to equal $50,000 or greater), gets no subsidy and subsidizes the ones with an AGI of less that $50,000.
If your annual AGI is $50,000, $500,000 or $5,000,000, are a single female or single male (individual plan), x years old, and reside in location y, your premium, depending on the the metal, is Z.
Redistribution of wealth? Guess it all depends on which side of the $50,000 you fall on.
Mona
To get away from the politics and ACA, imagine in a parallel world, if there was a secondary insurer whose policy would kick in if and only when your primary insurer was no longer willing to underwrite you and provided the same level of benefits as your primary insurer while requiring you to pay that earlier primary insurer premium to them from then on.
How much per month would you be willing to pay for this secondary insurance alone just to ensure continuing coverage regardless of what might happen?
Heaven knows many changes could improve matters. As another example, tying health insurance to employers was an idea that caused nothing but problems in my opinion. But we're moving far afield now.
Regarding co-pay vs deductible, a $500 deductible and a $30-$50 copay with no deductible are pretty much equivalent to the insurance company in expected pay outs. Prior to any of these ACA things, you could see that in the almost equivalent premiums between plans that differed in those two. I have been in both types if plans.
The insurance company computes an average expected payout in the pool and prices it so that they get that back averaged over the pool in premiums plus their margin.
In the deductible plan, the people who use little or nothing over the deductible up to the premium cost of the pharmacy benefit (folded into the total premium) subsidize those that need more. So you could land up subsidizing or getting subsidized by others depending on how much you use. That is how insurance works in terms of deductibles and copays.
It is not subsidized in the sense that you are hinting at BECAUSE of the deductible vs copay. Your premiums may be subsidized but that is independent of the plan structure. Total ACA premiums without subsidy are computed to the actuarial tables of the insurance company. They are not under or overpriced as a subsidy or penalty because of ACA. Then depending on the income, you may get a premium subsidy as you have noted.
I am NOT making a case for or against ACA here. Just discussing the economics of insurance. Sometimes, the politically charged nature of this issue hides that.
I am just trying to arrive at the true cost of insurance from economics. Without subsidies or ACA or any such complications, there is a value to me of the medical benefits of the insurance, the insurance for keeping the insurance regardless of what happens to me and the insurance so that costs from people who are underinsured or uninsured are not passed on to me (like such insurance in auto insurance). The premiums should reflect that. Otherwiae, somebody is subsidizing somebody regardless of Govt participation.