Enrollees who don't quality for
ACA marketplace subsidies face extraordinary premiums and out-of-pocket costs.
By Sara Heath
March
07, 2019 - Affordable Care Act (ACA) marketplace premium increases
are proving unmanageable for middle-class enrollees, as high premiums and
out-of-pocket costs prevent these individuals from purchasing health plans,
according to a recent issue brief from the Kaiser Family
Foundation.
These
high premiums and health plans have become cost prohibitive specifically for
patients who do not qualify for ACA subsidies.
“After
several years of rising ACA plan premiums, premiums are falling in many parts
of the country for 2019,” the report authors explained. “Despite this trend,
premiums for even the cheapest exchange plans are still out of reach for many
middle class people who are not eligible for ACA subsidies, particularly those
who are older or live in high-premium areas.”
The
ACA marketplaces offer subsidies for individuals with incomes below 400 percent
of the federal poverty level, defined as $48,560 income for an individual and
$100,400 for a family of four. These subsidies are intended to make it easier
for individuals to comply with the ACA’s individual mandate and purchase health
plans.
But
a significant cohort of enrollees do not qualify for these subsidies, meaning
they face the full increases in premium costs that have
occurred in the past several years. As a result, fewer unsubsidized patients
are purchasing ACA marketplace plans.
The
number of unsubsidized enrollees on the ACA marketplaces fell from 6.4 million
individuals to 3.9 million between 2015 and 2018, the report authors stated.
This is likely because middle-income individuals struggle to afford the high
premiums associated with ACA marketplace plans.
The
issue is compounded by what the report authors call the subsidy cliff. The
subsidy program strictly applies to patients making below 400 percent of the
federal poverty level. There is no taper off, meaning if a patient makes 401
percent above the federal poverty level, she will not receive any subsidy and
will incur the entire cost of the marketplace premium.
And
that full premium makes a significant difference financially, the report
authors pointed out.
On
average, an individual making $50,000, or 412 percent above the federal poverty
level, pays $340 each month for her insurance premiums. This accounts for 8
percent of her income.
In
contrast, a patient making $45,000, or 371 percent above the federal poverty
level, pays $227 each
These
figures vary significantly by county, the authors added. Enrollees living in
rural areas pay much more for their premiums, and this is more pronounced for
unsubsidized individuals.
Patients
making $50,000 in rural areas pay about 10 percent of their incomes on
premiums. In metropolitan counties, only 5 percent of patients are spending
that much on premiums.
It’s
even worse for older people in rural areas, the authors stated. In Nebraska, a
60-year-old making $45,000 would receive a fully subsidized plan premium. A
patient making $50,000 would pay $1,314, or 34 percent of her income, on
insurance premiums, making plans essentially cost-prohibitive.
Healthcare
policymakers have introduced numerous solutions to this issue, including
introducing more short-term plans that have lower premiums, expanding access to
Medicare and Medicaid, extending the subsidy threshold beyond 400 percent, and
creating state-based reinsurance programs.
However,
there are some flaws with these proposals, the authors stated. For
example, short-term plans’ exceptionally low
premiums come with a quality cost because they are less comprehensive than
marketplace plans.
“Short-term
plans generally have significantly lower premiums than ACA-compliant coverage,
in large part because these plans can exclude people with pre-existing
conditions and may not cover certain services,” the report authors noted.
“Thus, while short-term plans come with lower premiums, these
plans are generally not an option for people who have pre-existing
conditions or expect to need high-cost services.”
These
plans may also detract healthy enrollees from the ACA marketplace pool.
Reinsurance
programs also have their pitfalls in that they do not benefit all enrollees.
“How
much a reinsurance program can reduce premiums depends on the level of funding
dedicated to it,” the authors explained. “Reinsurance reduces premiums somewhat
for all enrollees ineligible for premium subsidies. However, this reduction in
prices will not be enough to make plans affordable for all unsubsidized middle
class people, particularly those facing the highest premiums as a share of
income.”
Reworking
the subsidy program, specifically by addressing a subsidy cliff, may also be
problematic because it would eventually be costlier for tax payers. Aside from
that shortcoming, it may be one effective strategy for protecting middle-class
marketplace consumers.
These
conflicting policy proposals indicate the complicated path forward for the
premium subsidy issue, the authors stated. Although industry leaders are aware
of the cost limitations many middle-income patients face, they have yet to
develop a viable solution.
“So
far, while there seems to be a consensus that individual market premiums are
out of reach for some middle-class people ineligible for ACA subsidies, there
is little consensus around what to do about it,” the researchers concluded.
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