Senate bill out-of-pocket and premium caps

I have said that the Senate health bill caps out-of-pocket expenses in the individual market at 10% of income or $5,950 for individual plans, whichever is less.  It came to my attention that while not far from the truth, it is not entirely the case, although there are absolute caps of $5,950 for individual and $11,900 for family plans for those with income over 400% of the Federal Poverty Level.  I will explain in a minute what had me confused, but let me actually set the record straight on the numbers first.

Here are the actual out of pocket limits, straight from the horse's mouth (Senate Democratic Policy Committee analysis of bill as passed):
Sec. 1402. Reduced cost-sharing for individuals enrolling in qualified health plans. The standard out-of-pocket maximum limits ($5,950 for individuals and $11,900 for families) would be reduced to one-third for those between 100-200 percent of poverty, one-half for those between 200-300 percent of poverty, and to two-thirds for those between 300-400 percent of poverty. The plan’s share of total allowed costs of benefits would be increased to 90 percent for those between 100-150 percent of poverty (i.e., the individual’s liability is limited to 10 percent on average) and to 80 percent for those between 150-200 percent of poverty (i.e., the individual’s liability is limited to 20 percent on average). The cost-sharing assistance does not take into account benefits mandated by States.
Now, keeping in mind that Medicaid will cover people up to 133% of poverty under the Senate bill, here are actual individual caps (family in parentheses) in the individual market (for small groups market, deductibles are capped at $2,000 for individual and $4,000 for family plans).  I have used the midpoint in each of 100-200%, 200-300% and 300-400% of Federal Poverty Level.  Above 400% of FPL, of course, the limits are $5,950 or $11,900.  So for the last number, I have used 450% of FPL, which does not have subsidies, just to be consistent with a 100-point jump in the rest of the table.

% of FPL 150 250 350 450
Income (first line = individual, second line = family of 4) $16,245
Out-of-pocket cap (first line = individual, second line = family of 4) $1,983
Out-of-pocket cap as percentage of income 12% 11% 10% 12%
Premium cap* as percentage of income 4.6% 8.1% 9.8% N/A
Worst case scenario cost as percentage of income 17% 19% 20% N/A
Dollar amounts rounded to the nearest dollar, percentages rounded to two significant figures.
For FPL, the Federal Poverty Guidelines from 2009 were used.

*Premium caps taken from both this table prepared by the Center for Budget and Policy Priorities, and from Kaiser Family Foundation's subsidy calculator.  If you choose the Senate-passed bill on the KFF calculator, and try out numbers, one of the lines you see will be "Cap on premium as % of income."

As you can see, roughly, it does not change the bigger picture a whole lot.  Keep in mind that "worst case scenarios" are only reached for someone in a year for which they have to get a lot of care beyond preventive and routine care, since preventive care will cost nothing after your premiums.  At the end of the day, it still establishes caps where there are none under the status quo, dramatically expands coverage, and saves lives.  In addition, there are a couple important thing that might get lost in the above four sections that no one should forget:

First, the above table does not change, and is not related to the fact that one is not subject to the individual mandate to obtain insurance under the Senate bill if one does cannot find comprehensive coverage for under 8% of income in their portion of premiums.

Second, insurance companies are not allowed to discriminate based on income.  That means, for example, that if an insurance company wants to make sure a 40-year old healthy non-smoking individual making 450% of FPL, or $48,375 a year and buying in the individual market is subject to the legal mandate to buy coverage (which has a threshold of 8% of income), they have to offer that individual a policy with an annual premium of roughly $3,900.  That means they have to offer the same policy to every 40-year-old non-smoker in the exchanges.  The Kaiser subsidy calculator will tell you how much your premium will be and how much of it you will pay and how much the subsidies will be, if any.

I have been getting the misconception from this article on Bloomberg, which states,
[The Senate bill] would increase to 10 percent the threshold for deducting out-of-pocket medical expenses for most people in 2013.
I took the "10 percent threshold for deducting" to mean 10 percent deductible.  I apologize for the confusion.  It turns out that what they meant was this: the Wall Street Journal explains it better:
In the past, relatively few people have been eligible to take the deduction because it allows no write-off for expenses equal to the first 7.5% of adjusted gross income. (The Senate Finance Committee has voted to raise this hurdle to 10% next year.)
I want to thank the commenter jim bow on a Daily Kos thread for pointing this out.  I have updated all the posts I can find about this, and continue to believe that the Senate bill is still a pretty good bill.

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