Middle-income and upper middle-income professionals and self-employed persons comprise much of the individual market. They are now being forced to choose between either purchasing far more expensive coverage through their state exchanges containing coverage they neither want nor need, or doing without health insurance entirely and paying a tax penalty. Additional millions of Americans who have chosen to be uninsured until now are facing the same choices. In California alone, according to the state’s Covered California exchange, this will affect about 2.7 million people who will receive no Obamacare subsidies to cushion the impact:
A March outside study commissioned by Covered California estimated that average monthly Silver and Bronze plan premiums for affected individuals across all age groups would be $450 and $386, respectively. That’s supposedly a 20 percent average increase for those who are currently insured, and $386 to $450 the currently uninsured haven’t been spending at all.
People who know they will have to spend hundreds of dollars extra every month on health insurance starting next year won’t wait until next year to sharply curtail their spending. They’ll start the minute they learn the bad news, taking billions away from November and December retail sales. Meanwhile, those who will supposedly be saving money on health care thanks to subsidies won’t change their spending habits until the lower premiums take effect in 2014.
It would only take $4 billion in reduced monthly spending by affected individual plan households each month with a Keynesian multiplier of 1.75 to clip a half-point from the nation’s $1.4 trillion monthly gross domestic product — and most forecasts for fourth quarter GDP were at 2 percent or below even before the ADP report and a recent dive in consumer confidence were known. There is also an undetermined number of people in “small group employer plans” who are seeing their plans terminated, and whose impact will only compound the damage.
Suddenly, thanks to the accumulated effect of years of poor economic policy choices combined with the sticker shock of Obamacare, no GDP growth in the fourth quarter is within the realm of possibility.
Merry Obamacare Christmas.