Tuesday, September 22, 2015

ACA exchanges in 2016: targeting just 6.4 million subsidy-eligible uninsureds?

In a speech at Howard University College of Medicine today, HHS Secretary Sylvia Burwell laid out a few facts about the target market for the ACA exchanges -- those still uninsured and eligible for private plan coverage. A couple of key points:
  • About 10.5 million uninsured Americans are eligible for Marketplace coverage in the upcoming open enrollment.

  • Almost 40 percent of the uninsured who qualify for Marketplace plans are living between 139 and 250 percent of the federal poverty level (about $34,000 to $61,000 for a family of four).
HHS has confirmed for me that the 10.5 million estimate is not limited to the subsidy-eligible. At present, according to Kaiser estimates, about half of those who have bought plans in the nongroup market are ineligible for subsidies, and most of the subsidy-ineligible have bought their plans off-exchange. 

Does that, then, suggest a target market of just 5 million subsidy-eligible uninsureds? Not quite.* HHS's estimate of the target market between 139% and 250% FPL (4.2 million or a bit less) provides a basis for estimating the size of the subsidizable target market.  In 2015, about 76% of private plan buyers on the exchanges had incomes under 251% FPL.*  According to HHS's most recent enrollment snapshot, 83.7% of all exchange enrollees qualified for premium subsidies. Thus 91% of subsidy-eligible buyers were under 251% FPL. Not all of them, however, fit HHS's "40 percent" category of 139-250% FPL - because in states that refused the Medicaid expansion, eligibility for subsidized marketplace coverage begins at 100% FPL.*** In 2015, about 15% of all enrollees**** (and 20% of those under 250% FPL) were under 139% FPL and so outside HHS's category. Those between 139% and 250% FPL thus constituted about 60% of total enrollment. If that percentage holds in 2016, that would suggest that about 7 million of the 10.5 million in the target market are subsidy eligible.

But the percentage of potential buyers under 139% FPL will probably be considerably lower this year. Takeup among that group was disproportionately high: Avalere Health estimated that 76% of eligible buyers from 100-150% FPL did in fact enroll, and the percentage was probably still higher under 139% FPL (and dramatically lower for all higher income bands). Moreover, two (small states) have accepted the Medicaid expansion for 2016. If, in 2016, 10% rather than 20% of those under 250% FPL are also under 139% FPL, then that suggests about 580,000 fewer subsidizable targets. Since we're now in the realm of educated guesswork, let's say that HHS's estimate of the 139-250% market suggests that about 6.4 million of their 10.5 million overall target market is subsidizable.

At present, 83.7% of 9.9 million exchange enrollees are subsidized. If there indeed are only about 6.4 million subsidy-eligible uninsured still out there, then about 57% of the subsidy-eligible target market has been enrolled. That doesn't sound right. Kaiser has pegged the percentage of potential exchange population enrolled through June 20 at 35%.Though that estimate is not limited to the subsidy-eligible, uninsured rates are much higher in lower income brackets.

The 10.5 million estimate excludes the Medicaid-eligible and -- I assume but have not confirmed -- those in the Medicaid gap, who theoretically could buy unsubsidized plans on the exchanges. Those who earn too little to qualify for premium subsidies are unlikely to pay full price for plans on the marketplace -- although, confusingly (to me), the just-released census report on health insurance showed greater gains in private coverage than in government insurance for those whose incomes should qualify them for Medicaid under the ACA expansion.

The still uninsured: can't afford coverage or don't know what's on offer? (Or both?)

With respect to reaching the still-uninsured, Burwell cited findings from a PerryUndem study that reflect a tension between two key factors:
  • About half of the uninsured have less than $100 in savings.
  • Nearly three in five of the uninsured are either confused about how the tax credits work or don’t know that they are available.
The first point is a proxy for several points highlighting the financial precariousness of the uninsured. Another: 58% of respondents report having less than $100 left over each month after paying bills. In other words, many would have a very tough time with the average premium paid for marketplace plans, net of subsidies: $101 per month. At the same time, most who consider coverage unaffordable do not know what's on offer.

I have noted the same tension in data from the Urban Institute, and in other surveys of the uninsured. If the still-uninsured who qualify for premium and cost-sharing subsidies knew what was on offer, would they still consider it unaffordable? Doubtless some would and some would not. The proportion in each camp will go a long way toward determining how viable the ACA private plan marketplace will prove over the long haul.

Researchers at the Urban Institute and healthcare reporter Jed Graham have argued that the ACA subsidy structure is too skimpy to meet the needs of large percentages of the uninsured.  To whatever extent that's true overall, it's increasingly true as you move up the income scale -- as Avalere Health's analysis of takeup rates at different income levels indicates. Avalere estimated that about 76% of the subsidy-eligible uninsured with incomes under 150% FPL bought subsidized private plans, compared to 41% for those from 151-200% FPL, 30% for those from 201-250% FPL, 20% of those from 251-300% FPL, and so on down.  The threshold for really strong Cost Sharing Reduction, 200% FPL, is one dividing line between strong and weak aid.  The ACA works best for those up to that income level. At the same time, that's where most of the uninsured are concentrated.

P.S. The PerryUndem study, conducted in May 2015 and surveying some 1,270 adults, is full of interesting info about the finances and priorities of the uninsured.

UPDATE, 10/14/2015: Kaiser yesterday estimated that 7.1 million uninsured people are eligible for subsidized private plans in the ACA marketplace.
* I originally oversimplified this calculation, simply taking the percentage of exchange buyers under 250% FPL. Correction is in this paragraph.

** I calculated the percentage of exchange enrollees with incomes under 251% FPL in this post.

*** Thanks to Jed Graham for pointing out that HHS's estimate began at 139% FPL (rather strangely, when you consider the doubtless still-sizable number of uninsureds between under 139% FPL in states that refused the Medicaid expansion. Also among subsidized buyers under 139% FPL: legally present immigrants who are time-barred from Medicaid; they are eligible for premium subsidies even if their income is under 100% FPL (in nonexpansion states) or 139% FPL (in expansion states).

**** See this post for a calculation of 2015 exchange customer with incomes under 139% FPL. In this post, I've slightly dropped the estimate, from 16% of all buyers to 15%, in light of the recent purge of those who failed to verify their state income when asked.

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