The Following post first appeared on FactCheck.org.
Americans for Prosperity’s latest anecdotal TV ad attacking the Affordable Care Act features a Michigan mom who says her family’s “new plan is not affordable at all” and that the law is “destroying the middle class.” In fact, her case is an example of how middle-class families can benefit from the law — if they choose to do so.
The ad, which features Shannon Wendt of Michigan, leaves the false impression that the family obtained its costly new insurance plan through the federal exchange set up by the new law. But that’s not the case. The family’s “new plan” is a temporary plan that does not meet the ACA requirements. Blue Cross Blue Shield of Michigan offered the plan to customers who had their old policies canceled but did not want to purchase insurance on the exchange. It turns out that Wendt found a cheaper, subsidized plan on the exchange, but declined to accept it because she did not want her children on the Children’s Health Insurance Program.
That’s her right, of course, but the ad is misleading because it fails to disclose that the Wendt family opted to pay more for insurance rather than accept the conditions that came with obtaining a cheaper, subsidized health plan on the exchange.
Meet the Wendt Family
The ad, called “Shannon’s Story,” is the latest in a series of anti-ACA ads by Americans for Prosperity, a conservative group founded by billionaire businessman David Koch. In it, Shannon Wendt — the married mom of five young children — criticizes the health care law and Rep. Gary Peters, a Michigan Democrat who voted for it. Peters is the likely Democratic nominee for the U.S. Senate and is expected to face Republican Terri Lynn Land in November for retiring Democratic Sen. Carl Levin’s seat. AFP has spent $5 million so far in Michigan — a key state if the Republicans hope to win control of the Senate.
Shannon Wendt, and her husband, Zach, are Republicans. They were elected precinct delegates for Tallmadge Township, a section of Grand Rapids, Mich., in Ottawa County, in the August 2012 primary. She sells Etsy products and operates a website called Organic Mama’s Shop. He is a real estate agent. Neither has insurance through an employer. As she explained in prior interviews, she had a Blue Cross Blue Shield of Michigan plan that she obtained on the individual market, but it was canceled because it did not meet the requirements of the Affordable Care Act.
In the ad, which began airing March 25, Wendt says her “new plan is not affordable at all.” She is shown with her five children, ages 3 to 10, and husband, Zach, who she said is “working a lot more hours” to pay for the insurance increases. But left out of the ad is why the new plan costs more and the family’s personal decision to opt for a more expensive plan.
Shannon Wendt told Fox Business in an article published Jan. 7 that she and her husband were eligible to buy a subsidized health insurance plan, but she said she was surprised and frustrated to learn that her family would be eligible for subsides on the exchange only if they enrolled their children in the Children’s Health Insurance Program. CHIP, as it is known, is a joint federal-state health care program that provides insurance at little or no cost for children of moderate-income families who are not eligible for Medicaid.
Fox News, Jan. 7: She found that because she and her husband are small-business owners — Zach is a real estate agent — and they take certain business deductions, they fall right under 200% of the federal poverty line. This makes them subsidy eligible, and their children Children’s Health Insurance Program (CHIP) eligible.
“If we want our children on our family plan — whether its two or 10 people — we lose the subsidy,” Wendt says. “It’s amazing that they are forcing families onto government health-care. It almost feels like an attack on small business owners. This revelation is more frustrating than the initial glitch.”
Wendt is right. As HealthCare.gov explains, a family cannot receive subsidies to help buy insurance on the exchange if the children in the family are CHIP-eligible and they do not sign up. But if the children do go on CHIP, then other members of the family, i.e., the parents, may be eligible for subsidized insurance on the exchange — which would have been the case with the Wendt family.
Since the Wendt family’s adjusted household income falls “right under 200% of the federal poverty line,” as Fox wrote, then that means the couple has a modified adjusted gross income of no more than $72,060, based on the 2014 federal poverty guidelines for a family of seven. That also means their children are eligible for the Children’s Health Insurance Program in Michigan, as Wendt said, since families earning up to 200 percent of the federal poverty level are eligible for Michigan CHIP.
Shannon Wendt has her reasons for not wanting her children to be on CHIP — reasons she explained in a March 31 op-ed she wrote for the Washington Times. In it, she acknowledges she and her husband “would be eligible” for subsidies and “would be paying less” for insurance but do not feel CHIP would provide adequate health care coverage for their children.
Wendt, Washington Times op-ed, March 31: What about the subsidies? My husband and I would be eligible, but only if we put our children on MIChild, a taxpayer-funded state health insurance program run through Medicaid. My husband and I would be paying less, but we’d also have to leave the family doctor I’ve been with since I was 6 years old.
That’s a path we would never take. We’d be sacrificing our children’s health for the sake of our wallets.
She goes on to say that her children were briefly on the Michigan CHIP plan several years ago and had a bad experience with one of the doctors who “failed to give my daughter the right immunizations.”
The 30-year-old mom has every right, as we said, to make that decision. We don’t take issue with Wendt’s decision, but rather her assertion that the Affordable Care Act is “destroying the middle class,” when other families faced with the same choices may have made a different decision that could save them thousands of dollars a year.
Let’s consider what would happen if a family with a similar profile to the Wendts decided to enroll their kids in CHIP and accept the federal subsidies for an exchange plan.
Subsidized Insurance Plans
We took the information publicly known about the Wendt family and plugged the values into the Kaiser Family Foundation subsidy calculator and the HealthCare.gov website to obtain subsidy and premium estimates for a family that fits the Wendt profile.
On the KFF site, we provided this information: state (Michigan), zip code (49534), county (Ottawa), adjusted annual household income ($69,000, which is 194 percent of the FPL), employer coverage (none), number of people in family (7), number of adults enrolling in the exchange (2), ages (30 and 34), tobacco use (no), number of children enrolling in the exchange (none).
We don’t know the Wendts’ exact adjusted household income, but $69,000 is “right under” 200 percent of FPL. We also don’t know if either smokes, but for this exercise we assumed the couple does not.
KFF says children in the household might be eligible for CHIP depending on the state (actually the Wendt children would be eligible for CHIP in Michigan, as we know) and the adults would be eligible for subsidized insurance on the exchange.
There are two kinds of subsidies available to those who purchase insurance on the exchange: an advanced premium tax credit, which is used to lower premiums; and the cost-sharing reduction, which lowers out-of-pocket expenses for people who purchase a silver plan. (There are four levels of plans available for people 30 and over, from cheapest to most expensive: bronze, silver, gold and platinum. Silver covers 70 percent of health care costs.)
The KFF subsidy calculator said a Michigan family of seven with an adjusted income of $69,000 could expect to receive $121.75 per month in premium tax credits. KFF said the couple could purchase, with subsidies, a bronze plan for $220 per month and a silver plan for $345.75 per month — plus the couple’s out-of-pocket maximum would be limited to no more than $4,500 if they go with the silver plan. KFF did not provide information on the family’s annual deductible, which would depend on what kind of silver plan the family chooses.
We went to HealthCare.gov to get more specific information about the plans that are available to such a family. Again, we plugged in all the same values: a family of seven in Ottawa County, Mich., with an adjusted household income of $69,000, seeking coverage for two adults ages 30 and 34. HealthCare.gov says that the two adults are eligible for a $121 per month tax credit — the same amount KFF gave — and a reduced out-of-pocket maximum (OOPM) for the silver plans.
HealthCare.gov also says there are 33 plans offered by three insurance companies in Ottawa County: eight bronze, 14 silver and 11 gold. Bronze plans cover 60 percent of health care costs, silver 70 percent and gold 80 percent.
A sample of the exchange plans, including subsidies, that were listed on HealthCare.gov for a family that fits the Wendt profile:
- Blue Cross Select Bronze HMO, $221 per month/$11,900 deductible/$12,700 OOPM per family
- Blue Cross Premier Bronze PPO, $292 per month/$12,700 deductible/$12,700 OOPM per family
- Blue Cross Silver Select HMO, $322 per month/$900 deductible/$2,900 OOPM per family
- Blue Cross Premier Silver PPO, $421 per month/$600 deductible/$2,800 OOPM per family
- Blue Cross Select Gold HMO, $454 per month/$500 deductible/$10,200 OOPM per family
- Blue Cross Premier Gold PPO, $534 per month/$300 deductible/$10,200 OOPM per family
In her op-ed in the Washington Times, Wendt said that last year she paid $221 per month for coverage that included a family deductible of $5,000, 20 percent coinsurance, and a $10,000 out-of-pocket maximum. This year, she has a policy that costs $381 per month, with a $10,000 deductible, 30 percent coinsurance, and a $17,000 out-of pocket maximum. That’s a premium increase of $160 per month ($1,920 per year) for a policy that has a higher deductible and out-of-pocket maximum.
Based on the Kaiser Family Foundation and HealthCare.gov results, a Michigan family of seven with the same profile could get a silver plan with the same coinsurance as the Wendt’s current plan, a monthly premium that would be roughly the same (somewhat less for the HMO and somewhat more for the PPO) and far less than the $10,000 annual deductible. Plus, such a family would be eligible for subsidies to reduce out-of-pocket expenses to around $3,000 — which could represent a significant savings since Shannon Wendt told MLive.com, a Michigan news website, that her family paid $10,000 in out-of-pocket expenses last year.
Of course, the silver plan also provides more benefits because it provides “essential benefits” and meets other requirements that Wendt’s old and current plan do not meet.
In explaining her frustration with the new law, Shannon Wendt told Fox News that she was happy with her old plan because the family prefers paying low monthly premiums and high deductibles. “We feel it makes financial sense for us to have a higher deductible plan and just pay these little things out of pocket and then the money we’ve been able to save every month on our premium we’ve been putting away for years and years in the event that something comes up where we would need our deductible, where we would have significant medical needs,” she said.
In that case, the HealthCare.gov website shows that a family fitting the Wendt profile could get a bronze plan, which covers only 60 percent of health care costs. A bronze plan would have a low monthly premium ($221 for the HMO and $292 for the PPO) but a high deductible ($11,900 for the HMO and $12,700 for the PPO).
Either way, the bronze or silver plans would provide better benefits at less cost than the plan Shannon Wendt currently has.
Blue Cross and Rate Shock
There’s one other thing that we know about Wendt’s insurance coverage that is important. She was covered by Blue Cross Blue Shield of Michigan — the state’s largest writer of individual health plans — and the insurer caused a stir in the market when it canceled all of its non-compliant plans except one called “Keep Fit.” That plan was grandfathered in because, the company said in a November 2013 press release, it was “the only plan in Blue Cross’ individual portfolio to have a 2013 ‘plan year.’ ”
When Obama, the Michigan governor and state insurance commissioner all said that insurance companies could re-issue non-compliant plans, Blue Cross declined to do so — in part because it said it hadn’t raised premiums in the individual market since 2011 in anticipation of phasing them out. The company said in the November press release that to extend all of its non-compliant individual plans would result in a “rate shock.” The company said, “Keeping the plans open in 2014 would require a ‘catch-up’ premium rate increase of 30 percent or more.” They did allow people like the Wendts to transition into the “Keep Fit” plan – but only through 2014.
This is what Wendt means when she writes in her op-ed that she now has “a ‘grandfathered’ plan that will be canceled at the end of 2014.”
Despite the company’s stated desire to prevent “rate shock,” Blue Cross members complained that that is exactly what happened. Wendt wasn’t the only one complaining about high rates. A Detroit Free Press story told a similar story about the Mulder family in Wixom, Mich.
Detroit Free Press, Nov. 15, 2013: The Mulder family in Wixom, for instance, received notice last month that their bare-bones Blue Cross Blue Shield of Michigan policy — costing $291 a month and carrying a $5,000 deductible — would end Dec. 31. Given the choice of it and his other options — one with a $930 monthly premium and another with a cheaper premium but a $17,000 annual deductible. Josh Mulder said he’d rather continue his current policy.
Tiffany Jones, a spokeswoman for BCBSM, told us in an email that 140,000 of its members moved from the canceled plans to either the non-compliant Keep Fit plans or ACA-compliant exchange plans. She could not provide us with the average rate change — increase or decrease — for those who selected Keep Fit or for those who went on the exchange. In November, BCBSM spokesman Andy Hertzel told Crain’s Detroit Business that about 50 percent of its customers who had non-compliant individual policies were eligible for subsidies.
“Many people could receive better benefits at lower prices” on HealthCare.gov, Hertzel told Crain’s.
Shannon and Zach Wendt could have been among those people if they went on the exchange — but they decided against it.
– Eugene Kiely
Update, April 1: This article has been changed to clarify that federal subsidies are based on adjusted household incomes using the modified adjusted gross income, or MAGI, definition of income. Also, one reference to the Wendt’s current plan initially said it had a $17,000 deductible. It has a $10,000 deductible and $17,000 out-of-pocket maximum.