Households Facing Obamacare "Rate Shock" Will Get an Average of $2,672 in Free Money

A blog about business and economics.
Aug. 14 2013 12:19 PM

Study: Households Facing Obamacare "Rate Shock" Will Get an Average of $2,672 in Free Money

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The conservative campaign against the Affordable Care Act is largely motivated by dislike of the large subsidies that it will make available to help people buy insurance. At the same time, the conservative campaign against the Affordable Care Act largely consists of ignoring the existence of these subsidies. But the subsidies are a big deal—that's why Republicans hate them.

The Kaiser Family Foundation did a very interesting study looking specifically at households that currently purchase insurance on the individual market. These are the folks who might be facing "rate shock" when Obamacare is implemented and insurers can no longer freeze high-need patients out of the marketplace. They found that these households will, on average, get $2,672 in subsidy, or about 32 percent of the total cost of a silver plan. If you opt for a bronze plan, the subsidy will cover an even larger share of the premium.

Ta-da!

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It's really worth dwelling on this because something like 90 percent of the commentary I read on Obamacare involves a kind of bad-faith denialism about these subsidies. The thing about subsidies is that money doesn't grow on trees. It comes from taxes. In this case, largely taxes on rich people. And one of the core beliefs of the modern-day Republican Party is that taxing rich people in order to give money to nonrich people is economically ruinous. Another of the core beliefs of the modern-day Republican Party is that taxing rich people in order to give money to nonrich people is deeply immoral. These two ideas, alone and in combination, are the heart and soul of GOP economic policy. So it's no surprise that Republicans really dislike this law, since it's a major transfer of income from the rich to the nonrich. But from the flip side, if you're a normal person who thinks this kind of redistribution is neither immoral nor economically ruinous, this is a big part of the appeal. It's one of the main reasons Obamacare will make many more people better off than it makes worse off.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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