The Cost of Affordable Care: A State-by-State Analysis

Regardless of the Supreme Court’s King v. Burwell decision later this session, Obamacare has provided anything but “affordable” health insurance. It has, instead, shifted the cost from consumers of health insurance to the taxpaying public.

The subsidies, in addition to transferring the expense of health insurance from the consumer to the taxpayer, are necessary to guarantee insurance is “affordable” for all Americans. For the individual mandate to apply, insurance offered through the federally established exchanges must be “affordable.” Obamacare defines “affordable” as “not exceeding eight percent of a household’s projected annual income.” This means households are required to purchase insurance as long as the premiums are not more than eight percent of their income. If premiums exceed eight percent of a household’s projected income, the individual mandate will not apply.

As the health insurance marketplace currently stands, and based on 2014 statistics from the Department of Health and Human Services (the most recent cost data available from the government), premiums for the least expensive qualifying plan for two adults in Alabama is roughly $1,824 per year. Similarly, In New Hampshire, the least expensive qualifying play costs a family with two adults roughly $2,400 per year, while in Pennsylvania, the same plan for two adults costs $2,016 per year.

Data from the Census Bureau covering a similar time period estimates that the state median family income for a family of four in Alabama was $52,664, in New Hampshire was $58,426, and in Pennsylvania was $49,438. This means that subsidized premiums in these states represented an estimated 3.46%, 3.11%, and 3.13%, respectively, of a household’s projected income.

If the Supreme Court determines that the IRS improperly expanded the definition of a state-established exchange, premiums will significantly jump. Again, drawing on data from the DHHS, estimated unsubsidized premiums for Alabama, New Hampshire, and Pennsylvania will costs families with two adults $8,016, $7,392, and $7,920 per year, respectively. Applying the median income levels from the Census Bureau, this represents 15.22% of a household’s projected income in Alabama, 12.13% in New Hampshire, and 12.31% in Pennsylvania.

If the Supreme Court rules against the IRS, premiums will exceed 8% of a household’s projected income in every state with a federally established exchange. If the premiums exceed 8% of a household’s projected income, the individual mandate will not apply and households earning near, or slightly above, median income levels may not be compelled to purchase insurance.

The upcoming decision in King v. Burwell will have a significant impact on the health insurance marketplace. That impact, though, will determine who bears the true costs of health insurance: the consumer or the taxpayer.

2014 Exchange Premiums, With and Without Subsidies, as Percentages of Median Household Income