Health Reform WK-EDGE Who can afford ACA premiums without subsidies?
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Wednesday, March 20, 2019

Who can afford ACA premiums without subsidies?

By Cathleen Calhoun, J.D.

Older adults in rural areas are struggling the most to afford ACA premiums, although they aren’t alone in their struggle—many middle-class people are shut out financially.

Individual market premiums are out of reach for some middle-class people because they are ineligible for Affordable Care Act (ACA) (P.L. 111-148) subsidies. Most enrollees receive premium tax credits when they purchase health coverage through ACA exchanges. However, middle-income people with incomes above 400 percent of the Federal Poverty Line (FPL) ($48,560 for an individual and $100,400 for a family of four in 2019) are not eligible for subsidies. According to research by the Kaiser Family Foundation (KFF), affordability is most difficult for older adults with incomes just above the premium subsidy cutoff (400 percent of FPL). The KFF issue brief noted that the struggle is particularly difficult for these older adults who live in rural areas where premiums are the highest.

Enrollment. According to the KFF study, while marketplace enrollment for subsidized enrollees rose from 8.7 million in 2015 to 9.2 million in 2018, premiums increased significantly. Also, the number of unsubsidized enrollees in ACA-compliant plans is down over this same period from 6.4 million to 3.9 million. Unlike subsidized enrollees, those with incomes over 400 percent of FPL must pay the full cost of premium increases if they buy an ACA-compliant plan.

State differences. The study found that Rhode Island has the lowest average premiums for middle-class people ineligible for subsidies in 2019—a 40-year-old making $50,000 would pay about 5 percent of his or her income in premiums, on average, for the cheapest plan. Wyoming has the highest average premiums for unsubsidized people—a 40-year-old making $50,000 would pay about 14 percent of his or her income in premiums for the cheapest plan, on average, with Nebraska and West Virginia in a close second and third place.

Possible changes. Policy options have been suggested to help people buying their own coverage without a subsidy: (1) expanding more loosely regulated short-term plans, (2) creating state-based reinsurance programs, (3) extending subsidies beyond 400 percent of poverty, and (4) expanding eligibility for Medicaid or Medicare. Issues or hurdles were found with all the options, however:

  • Short-term plans. The short-term plans have lower premiums but are generally not an option for people who have pre-existing conditions or expect to need high-cost services, since those would not be covered.
  • State reinsurance. Alaska, Maine, Maryland, Minnesota, New Jersey, Oregon, and Wisconsin have created their own reinsurance programs. While they have been successful, how much a reinsurance program can reduce premiums depends on the level of funding dedicated to it.
  • Expanding tax credits. Expanding tax credits to those over 400 percent of the poverty line would provide much needed assistance, although having no limits at all would come at a high cost to taxpayers.
  • Expanding Medicaid or Medicare. The last option, expanding Medicaid or Medicare eligibility, has recently come up in congressional proposals. One bill would let people 50 or older buy into Medicare, another bill would allow states to set up programs allowing people to buy into the Medicaid program, with the premiums capped at 9.5 percent of income.

Companies: Kaiser Family Foundation

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