Sen Cassidy explains his proposal to CNBC’s Andrew Ross Sorkin.
Basically the idea is to allow the Obamacare subsidies to only be used for a Bronze Plan, rather than the benchmark Silver Plan. The customer would then have the premium savings deposited in a Health Savings Account. This removes money subject to the 20% Obamacare skim, plus whatever the insurer can price gouge you with their captive Pharmacy Benefit Manager.
It really only makes sense to get an Obamacare Silver or Gold plan if you’re in the top 15% of the distribution for health care costs. About 85% of the population would be better off with a Bronze Plan and minimize the amount subject to health insurer “skim, scam and fraud”.
It’s pretty rare for me to endorse a GOP health care proposal. That’s a measure of how deep in the quicksand they’ve gotten themselves.
See, that’s the weird thing about insurance. You don’t know if you need it until you need it. The Bronze plan has the highest out-of-pocket expenses and the lowest payout percentage (60%), so of course the premiums are lower.
And if you choose that plan and don’t have any health costs, then that’s the second best strategy. The first, of course, is not to pay to have any insurance at all because you didn’t need it anyway.
But if you do suddenly find yourself with a serious issue (car accident, hospitalization from Covid, etc) then you gambled wrong. You saved a nickel and spent a dollar, as the saying goes.
Oh, the savings went into an HSA? Whoopee! That’s peanuts compared to the bills you’re going to be facing.
Is that really reducing the skim? Sure, there’s less insurance skim, but you’re just trading that for the financial industry skim on the HSA. They get maintenance fees and fees on the HSA investments.
Put in the hands of lower income folks, they’ll take premature withdrawals from the account for non-health expenses and lose a bunch to the tax and penalty skim. That will happen because they need the money for living expenses.
This proposal doesn’t cut the skim, it just moves it around.
Insurance company skim on Obamacare is 20% of premium paid, plus what they can price gouge you on prescription drugs through the captive PBM.
I don’t have a HSA account, but I suspect fees are no higher than 1% to 2% of your balance. That’s a big discount to the 20% plus with an Obamacare insurer.
Any time you can remove funds from the health insurance skim, scam and fraud machine, you’re way ahead.
Of course, people who don’t understand the game will manage it poorly and suffer as penalty as you point out.
Generally, there’s a monthly/annual account fee along the lines of $10 a month. A pittance for large accounts, but much larger percentage for small accounts. Depending on the provider/skimmer, there are a plethora of other fees possible. Paper statement fees. Withdrawal fees. And let’s not forget the fees on investments.
Of course, people who don’t understand the game
Which will be overwhelmingly the poor, who will get clobbered by this terrible idea.
Nonsense. You know if you have diabetes or another chronic condition that comes with a big, reliable annual health care bill. Those are the people in the top 15% of the annual individual health care cost distribution. Half the insured population never has a reason to see a doctor, the other 35% (the 51st through 85th percentile have varying degrees of out of pocket costs.
A Bronze Plan protects you against a catastrophic event that might only happen once every 10 or 20 years. No reason to buy a more expensive plan (i.e., Silver or Gold) unless you’re sure your expenses will be more than the annual out of pocket limit for the year. If you get diagnosed with an expensive illness with high ongoing treatment costs next year, then upgrade to Silver or Gold during the open enrollment period.
Health insurers love it when you use the “Goofy method” to choose your health plan. That’s where they’re collecting the most “skim”.
Case in point would be my failed vascular surgery and right leg amputation this year. That was probably a $600,000 event if it happened when I was on Obamacare, and a $120,000 Medicare Reimbursement through the acquisition of my prosthetic leg now that I’m on Medicare. I have a high deductible Plan G Medigap that has a premium of $48/month and caps my annual out-of-pocket at a bit less than $3,000/year for 2025. A regular Medigap plan is $264/month or $2600 a year more. Over the 4 plus years I’ve been on Medicare I saved about $10,000 in Medigap premiums. I’ve avoided the insurer’s 20% skim rate on that $10,000 in premiums and I’ve about doubled the money since it’s invested in the stock market (S&P 500 up about 85% (dividends reinvested) over that period).
I expect my out-of-pocket Medicare costs for 2026 to return to the $500-$800 range I enjoyed in the previous 4 years.
Good things happen when you avoid excessive “skim”.
For someone in my zip code, a 64-yr-old with an income of $62,000 gets you a free, $0/month Bronze Plan.
The benchmark plan used to calculate the size of the tax credit has a $199.49/month premium for the same individual, just short of $2,400 for 12 months. That $2,400 would be deposited to the HSA account of the savvy shopper who close the Bronze Plan.
Not too shabby. I suspect $2,400 is a significant sum to someone with a $62,000 income.
You just don’t understand the amount of skim in health insurance.
I guess. What happens if they get sick and are only reimbursed 60% of their costs? How far does that $2,400 go against a hospital bill in the tens of thousands?
You just don’t understand what “insurance” is for, maybe.
That’s not what an actuarial value of 60% means. And it demonstrates how even otherwise intelligent people have no idea of how health insurance works.
If you go to an in-network hospital and only use in-network doctors, your out-of pocket maximum for 2026 is $10,600 for an individual and $21,600 for a family. That would be true even if you had a $1 MM illness. So after 4 or 5 years of being in a Bronze Plan, he’ll have an HSA account balance large enough to cover the out-of-pocket cost on a catastrophic illness.
The “actuarial value of 60%” means that when you add up all the annual medical expenses of the 100,000 people in the health plan, the insurer is only paying 60% of the costs for the whole population of 100,000 people. They do this by finding people like Goofy who will pay a high premium for a Gold Plan even though he has low annual medical expenses thinking that gives him better protection. In reality, all Goofy is doing is giving the health insurer a larger pot of premium revenue to skim from.
Here’s another video where Senator Cassidy is more fully describing his proposal.
Basically he wants to take the 20% skim rate on Obamacare, and credit that back to the patient in the form of a deposit to a Health Saving Account.
This will be anathema to every other Republican and the Corporate DEMs who profit from the bipartisan culture of corruption in Washington. But I’m sure Bernie Sanders will support it.
We may be in a situation where the average voter has to actually see his Obamacare premium increase by 200-300% before they understand the concept of “skim, scam and fraud”.
While I agree that putting money into HSA accounts instead of paying insurance premiums is a good idea, is that going to bring down healthcare costs? I don’t think so.
Kinda feels like we’re shuffling the deck chairs around on our sinking Titanic healthcare system.
You’re still paying the insurance premium under Sen. Cassidy’s proposal. You’re just eliminating the 20% skim rate going to the insurer under Obamacare. After a few years, you’ll have an HSA account balance equal to the maximum annual out-of-pocket charge on a severe injury or expensive illness.
It can be done – even in America. Traditional Medicare operates with only 1.2% of program costs going to admin expenses. Taxpayers are getting swindled with the 20% skim rate on for-profit Obamacare.
Bronze plans require the insurance company to cover 60% of the cost where as a silver plan requires coverage of 70% of the cost - and are of course more expensive due to the added coverage.
Because the insurance company pays less of the cost on a bronze plan, the profit margin can actually be HIGHER on a bronze plan.
Ya, you keep singing that song, you secret Trump voter.
Yeah, I understand that. But the extended subsidy would go into an HSA, not to the insurers directly to help bring down premium cost. Again, I think giving people money to pay for their deductibles…their very high deductibles…might be a good idea.
That’s assuming you don’t use any of the money to pay for medical care, prescriptions, or HSA approved expenses. You know what they say about making assumptions…
And healthcare consumers are getting swindled because billing rates aren’t capped, like they are for Medicare.
For-profit healthcare will always screw the consumer.
Nonsense. It’s all about the skim. The higher premium on the Silver Plan gives the insurer a larger pot of money to skim from.
The “actuarial value of 60%” relates to the entire risk pool, not the individual patient. If you happen to be the patient that gets a $1 MM illness, your out-of pocket maximum for the 2025 plan year, is $9,200 for an individual and $18,400 for a family. You’re not going to be on the hook for 40% of the $1 MM. This is why many people get swindled in buying a Silver or Gold Plan. Your max annual out of pocket cost is the same, you just have a $500 or $1,000 deductible before the insurance kicks in rather than $5,000 with a Bronze Plan.
If you’re one of the 50% of the population that don’t have a need to visit a doctor, or someone with modest ongoing medical expenses, the Bronze Plan is the smart choice. It only makes sense to buy a Silver or Gold Plan if you currently have a chronic medical problem with large, ongoing medical expenses.
Trump is the most “honest” politician we’ve seen in our lifetime. He pushes the massive corruption in your face and dares you to criticize it. Ordinary Republicans and Corporate DEMs keep the corruption on the down-low while promising middle-class voters they’re going to address the issues the Middle-Class care about. That’s not true, they are advancing the agenda of their billionaire donors on both sides.
Your position was not about savings for the individual, it was about reducing the skim. Making up a hypothetical of a single person having an astronomical expense IN NO WAY diminishes the fact that bronze plans pay LESS per person for required coverage. It isn’t even related to the topic of skim at all but more toward your own personal bias of paying as little as possible for everything - as if that somehow translates to the other party not being able to make a profit.
The Law of Large Numbers easily illustrates how an insurance company will spread the risk of that single $1 million expense over the other millions of covered persons that never have an expense that exceeds their deductible. The aggregate of the customers (or the government) will pay more in premiums than they get in health coverage savings.
No insurance company does this for free. Bronze plans generate revenue - even when there are a handful of atypical very expensive individual cases.
Are you next going to try and tell us Medicare Advantage - which over 50% of the policies are free for the insured, are not profitable for insurance companies?
Oh, but you seem to think Bronze Plans are different?
Not this this is necessarily valid, but here is what Google AI states:
Profitability considerations for Bronze plans
Lower premiums: Bronze plans have the lowest premiums, which makes them appealing to price-sensitive consumers. This can also make them more profitable for insurance companies on a premium-only basis.
Higher out-of-pocket costs: Bronze plans have the highest out-of-pocket costs, meaning consumers pay more when they use services. This can result in fewer claims paid by the insurer, which could increase profits if their costs for medical care are lower than expected.
Actuarial Value (AV): A Bronze plan has an AV of 60%, meaning the insurer pays 60% of the average costs, while a Silver plan has an AV of 70%. The insurer pays out less in a Bronze plan on average, but premiums are also lower.
Conclusion
It is difficult to say definitively whether Bronze or Silver plans are more profitable for insurance companies. Profitability depends on a variety of factors, including the plan’s actuarial value, premium pricing, claims experience, and the number of people who are eligible for subsidies. Insurers can be profitable on both plan types by carefully managing costs through network design and utilization management strategies.
