OPINION – September 19, 2012 -- When the Affordable Care Act (ACA) was first passed into law (2010) and then when it was largely upheld by this year’s SCOTUS ruling, I was anxiously anticipating that the ACA would not just be providing for improved benefits—but, that it would also be providing at least a degree of some much needed financial relief, through its premium tax credit and cost-sharing subsidy provisions.
For as a 61 year old self-employed individual and after having already endured almost continuous double-digit premium rate increases for the last several years (an effective rate of increase of 93% within five years, alone and despite remaining within the same age band), I have struggled to afford the $1,200/mos. that I was/am incurring, between my new or older age band’s higher premium rates and a $2,500 deductible—never mind, my additional dental, vision and other uncovered health care expenses. And, I was/am also particularly anxious as to what the next few years will bring before I finally qualify for Medicare, as I had already incurred some $24,000 in uncompensated costs for a single hospitalization in 2008, despite having been insured within an 80% Actuarial Value (AV) PPO Plan with a supposed maximum out-of-pocket limit of $7,500 over and above the deductible.
But upon closer examination of the ACA and what I hadn’t at all anticipated, was that the ACA will more than likely leave many of those of us who are currently insured, far worse off and substantially more fiscally vulnerable than we currently are today—and, particularly, for those of us who earn relatively modest or middle-incomes and who are currently and who anticipate having to continue to be reliant upon the Individual or Non-Group health insurance market.
That is, yes, it is true that a 61 year old self-employed individual with an annual income of up to 400% ($46,000/yr.) of the Federal Poverty Level (FPL), who would not otherwise be eligible for an employer sponsored group health plan and who desired to purchase at least a “Silver” tier plan (AV of 70%), would be eligible for the ACA’s premium tax credit and cost-sharing subsidies.
Indeed, even at 400% of the FPL, this individual’s premiums and cost-sharing expenses would be limited to just 9.5% of their income. However, that same individual would be ineligible for the ACA’s subsidies, if their income was $47,000 or just $5,000 above OR’s current average annual wage of $42,000 (2011), because their income would be above the ACA’s subsidy threshold. Put simply and in this case, an income of $47,000 would be 409% of the FPL or just 9% above the ACA’s 400% subsidy threshold.
Moreover, that subsidy ineligible individual will still be required to purchase a health care plan, unless that person can not find a plan that costs less than 8% of their income. In effect, this would mean that self-employed individuals with incomes of between $47,000 and $62,500 and who still desire to purchase at least a “Silver” tier plan, should expect to pay between 21.4% and 20.3% or one fifth of their income for their premiums, alone. Put somewhat differently, the “Silver” tier plan’s estimated premium of $10,172/yr., would not reach the ACA’s individual 8% affordability index, until an individual’s actual income reaches $127,500 per year. (See charts below)
This same individual, however, may at least be able to pay a lower premium cost for a less comprehensive or “Bronze” tier plan (AV of 60%), which is the minimum level or tier for a plan that an individual who is over 30, would be required to purchase under the ACA. (Note: the ACA does allow for the provision of high-deductible “catastrophic” plans on the exchange, but only for individuals who are age 30 or younger.)
If, however, an older individual’s “Bronze” tier premiums were to still exceed the ACA’s “8%” affordability threshold, the individual would be exempt from having to purchase health insurance, as they would at least be eligible for the ACA’s hardship exemption.
Of further import and while the ACA does not provide for deductible limits for Individual Plans, it does provide for Maximum Out-of-Pocket or MOOP limits, that are tied annually to the Consumer Price Index. And, the estimated MOOP limits (excluding premium costs) for 2014, is estimated to be $6,250. Whether a person reaches their MOOP limit, will depend upon the health services that they use. However, this would in effect mean that individuals earning between $47,000 and $62,500 and who still desire to purchase a “Silver” tier coverage, should expect to pay an estimated $16,422/yr. or $1,369/mos.—before they would reach their MOOP limit.
In sum, middle-income Oregonians who earn between $47,000 and $62,500/year should in the least expect to pay between 21.54% and 20.34% of their total income just for their premiums alone under the ACA, and most probably for a plan of much lesser actuarial value than the plans that they currently may have. And, should they need to actually use medical services that are over and above the ACA’s “free” preventative services, these same individuals should expect to at least pay between 26% and 43% or over a quarter and up to nearly a half of their incomes, before they would reach the ACA’s Maximum Out-of-Pocket limits.
Put somewhat more bluntly, individual or non-group members with richer income resources will undoubtedly have the option to purchase more generous coverage, than the minimum required by the ACA. And, even those at lower-income levels will have access to subsidies that will at least allow them to opt for a higher-level Actuarial Value plan, while at the same time decreasing their out-of-pocket expenses. However, those of us who are stuck somewhere in the middle ($47,000 to $62,500) will apparently have no options, other than (1) to settle for a plan that will undoubtedly be much less generous and substantially more expensive than plans we are likely to currently have; or (2) to go without insurance entirely, and pay the penalty.
Thankfully, Oregon’s Department of Consumer and Business Services Insurance Division (DCBS-OID) had the good sense to pro-actively commission an actuarial study to determine the ACA’s actual impact on OR’s Individual and Small Group Health Insurance Markets (Wakely, etal., July 31, 2012). And, thanks to that study, the DCBS-OID, OR Health Policy Board and OR’s Health Insurance Exchange Corporation are already well aware that OR’s individual market premiums are projected to rise by 34% in 2014 and by 42% in 2015 and 2016 (p.4). And, that if they were to take no action to mitigate these adverse findings, that half of those who are currently enrolled within OR’s individual market plans will be ineligible for financial assistance under the ACA’s subsidy guidelines (approx. 88,496 current policy holders).
Carol Gundlach, RN-BSN, MPA, is a rural health and policy analyst.
Estimated ACA Individual “Silver-Tier” Plan Costs for a 61 y/o, across “Middle-Income” Levels: (1)
Projected Income (2014)
Per Year: ($)
Per Month: ($)
Percent of Federal Poverty Level:
Unsubsidized “Silver-Tier”
(AV 70%) Premium, age adjusted:
Per Year: ($)
Per Month: ($)
Max. % of Income the Person/Family
Pays, if eligible for subsidy: (%)
Actual Premium that Person/Family
is REQUIRED to pay:
Percent of Overall Premium: (%)
Percent of Total Income: (%)
Federal ACA Premium Tax Credit ($)
Percent of Overall Premium
$42,000
$3,500
365%
$10,172
$848
9.5%
$3,990
39%
9.5%
$6,182
81%
$46,000
$3,833
400%
$10,172
$848
9.5%
$4,370
43%
9.5%
$5,802
57%
$47,000
$3,917
409%
$10,172
$848
n.a.
$10,172
100%
21.64%
n.a.
n.a.
$50,000
$4,167
435%
$10,172
$848
n.a.
$10,172
100%
20.34%
n.a.
n.a.
$62,500
$5,208
543%
$10,172
$848
n.a.
$10,172
100%
20.34%
n.a.
n.a.
Estimated ACA Individual “Silver-Tier” Plan Costs for a 61 y/o, across “Middle-Income” Levels: (1), cont’d.
Projected Income (2014)
Per Year: ($)
Per Month: ($)
Percent of Federal Poverty Level:
Unsubsidized “Silver-Tier”
(AV 70%) Premium, age adjusted:
Per Year: ($)
Per Month: ($)
Max. % of Income the Person/Family
Pays, if eligible for subsidy: (%)
Actual Premium that Person/Family
is REQUIRED to pay:
Percent of Overall Premium: (%)
Percent of Total Income: (%)
Federal ACA Premium Tax Credit ($)
Percent of Overall Premium
$75,000
$6,250
652%
$10,172
$848
n.a.
$10,172
100%
13.56%
n.a.
n.a.
$100,000
$8,333
869%
$10,172
$848
n.a.
$10,172
100%
10.17%
n.a.
n.a.
$125,000
$10,417
1086%
$10,172
$848
n.a.
$10,172
100%
8.14%
n.a.
n.a.
$127,000
$10,583
1104%
$10,172
$848
n.a.
$10,172
100%
8.1%
n.a.
n.a.
$127,500
$10,625
1108%
$10,172
$848
n.a.
$10,172
100%
7.98%
n.a.
n.a.
(Source: KFF, “Health Reform Calculator” at: http://healthreform.kff.org/subsidycalculator.aspx?source=QL)
(1) For the purposes of this exercise, the age of 61 yrs. was used to reflect an individual who might reasonably be expected to need to consume a higher level of health care services; in addition, it should also be noted that the KFF calculator has assumed a “Silver-Tier” Plan w/an AV of 70% to estimate premium costs, etal.; KFF also made specific note that it does recognize that one would be able to pay a lower premium for less Comprehensive coverage under the ACA’s “Bronze-Tier” plan level, which has an AV of 60%.
Image for this story by s_falkow (CC BY-NC 2.0) via Flickr.
