Thursday, October 09, 2014

Footnote to a Kliff note

Walmart announced earlier this week that it would stop offering health insurance to 30,000 employees who work less than 30 hours per week. Sarah Kliff points out that many of them will be better off on ACA plans:
Think of the 36-year-old Walmart employee here in Washington, D.C. who works 29 hours per week at the company's average wage of $12.73 per hour. She earns just about $19,000 annually if she works every week of the year.

If Walmart doesn't offer her insurance, the Kaiser Family Foundation's subsidy calculator shows that she qualifies for a $1,751 subsidy from the federal government to help buy coverage on the exchange. With that financial help, she can buy insurance for as little as an $7 per month. As a low-wage worker, she gets some of the most generous financial help.

But if Walmart does offer her coverage, it becomes her only option. She doesn't qualify for federal help and the $7 plan disappears. Walmart's plan, meanwhile, is way more expensive. The average premium there works out to $111 per month.
For many Walmart part-timers, the ACA offers an even better deal than this snapshot shows.  In addition to a premium subsidy that covers three quarters of the monthly premium, this person (if single) is eligible for generous Cost Sharing Reduction (CSR) that dramatically reduces her deductible and maximum out-of-pocket (OOP) costs. DC is not on healthcare.gov, so I checked what would be on offer if she lived in Fairfax, Virginia. There, she could choose a silver plan that costs $64 a month, with a $600 deductible and a $2250 OOP max -- or a plan that costs $74 per month but has no deductible and a $2250 OOP max.

More generally, ACA silver-level* plans for buyers at this income level -- between 150% and 200% of the Federal Poverty Level (FPL)-- have to provide an actuarial value of 87% -- that is, they have to be structured to cover 87% of the average user's yearly medical expenses. That's comparable to top-tier employer-sponsored insurance, and probably better (for most people) than the Walmart deductible/coinsurance quote of  $1972 that Kliff cites (the Walmart quote doesn't specify whether that figure is an OOP max or an average).

If this worker earned $17,000, i.e. less than 150% FPL, a silver plan would have a mandated actuarial value of 94%.. In our Fairfax, VA example, that would drop the premium for the cheapest silver plan to $45, the deductible to deductible to $150, and the OOP max to $1250.

The ACA's Cost Sharing Reduction is much weaker for buyers whose incomes exceed 200% FPL, and it phases out entirely at 250% FPL.  Minus CSR, ACA coverage is generally skimpier than that offered by most employers.  If our Walmart employee is married, and she and her husband earn $40,000 between them (and neither has access to affordable employer-sponsored insurance), their best deal would be a $278/month combined premium, a $1350 per-person deductible, and a whopping $6350 per-person OOP max.

Some Walmart part-timers will earn under 138% FPL and so qualify for Medicaid. As a Bloomberg View editorial points out, the cutoff could be bad news for those who live in states that have refused the ACA Medicaid expansion -- that is, for people in those states who earn under 100% FPL and so don't qualify for subsidized exchange coverage.

Workers at that income level probably can't afford existing Walmart coverage in any case. As Kliff points out, only slightly more than half of the part-timers to whom Walmart offered coverage in 2013 accepted the offer.  But that just underscores the cruelty of denying the Medicaid expansion to the low-wage, low-hour workers that make up too large a portion of today's workforce.

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*CSR is only available to buyers of silver-tier plans -- a fact that healthcare.gov and the state exchanges ought to broadcast in neon for those who qualify for CSR.

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