Friday, July 08, 2016

Commonwealth: Lower income ACA marketplace buyers get a tolerable substitute for employer-sponsored insurance

The Commonwealth Fund writeup* of its 2016 survey of adults under age 65 with health insurance stresses that lower income marketplace enrollees (under 250% FPL) pay premiums and deductibles comparable on average to those paid by enrollees in employer-sponsored plans.

Overall, survey results suggested, 57% of marketplace enrollees spend less than $125 per adult per month on premiums, compared to 60% in employer-sponsored plans. And among the 59% of marketplace enrollees with incomes under 250% FPL, 30% have per-person deductibles over $1,000, versus 26% at that income level in employer plans. At higher incomes, the discrepancy is sharper: 68% of marketplace enrollees over 250% FPL have deductibles over $1,000, compared to 42% of those in employer plans.

These survey findings track roughly with my own calculation that the weighted average actuarial value of a marketplace plan in the 38 states using  is 81.4%** -- quite close to various estimates of average AV in employer-sponsored plans, I also found, though, that the weighed average AV for enrollees with incomes under 200% FPL (not 250%)  was 86.3%. For those over 200% FPL, it was just 69.3%.

In my view, 200% FPL is a more useful dividing line for marketplace enrollees than 250% FPL -- because Cost Sharing Reduction (CSR) subsidies, while available up to 250% FPL, fall off a cliff at 201% FPL. CSR raises the actuarial value of a silver plan from a baseline of 70% to 94% for those up to 150% FPL, to 87% for those up to 200% FPL, but to just 73% for those in the 201-250% FPL range. To relate this to the Commonwealth survey: the average deductible for a silver plan at the weakest CSR level (200-250% FPL) is $2491.

According to HHS enrollment stats for, about 19% of enrollees with incomes under 250% FPL are in the 200-250% FPL range (the percentage is somewhat higher in the state-based marketplaces). Almost no one in that income range will end up with a deductible under $1,000 in the marketplace (a few will buy gold or platinum, and a few will find low-deductible silver). And while deductibles at each AV level in the ACA marketplace are at once rising and becoming more porous (with more services covered before the deductible kicks in), the deductible remains a reasonable proxy for the much higher overall out-of-pocket costs an enrollee is exposed to at AV 73% than at AV 87%.

While subsidies bring lower-income marketplace enrollees' premiums  line with those provided by typical employer-sponsored plans, marketplace enrollees have a harder time affording them:

While marketplace enrollees with incomes under 250% FPL may be paying close to the same on average as those with employer sponsored plans, their incomes are lower. Half of adults in employer plans in the Commonwealth survey had incomes of 400% FPL or higher, compared to 19% of those in marketplace plans.

The under-250% FPL category encompasses large differences, however, Of the 59% of respondents enrolled in marketplace plans with incomes under 250% FPL, 26% (that is, about 15% of marketplace enrollees as a whole) paid no premium at all, according to the survey. Among survey respondents in marketplace plans, about a quarter would be eligible for Medicaid if they did not live in states that refused the ACA Medicaid expansion. Premiums for a CSR-enhanced benchmark silver plan are supposed to be 2% of income for those with incomes below 138% FPL (the Medicaid eligibility cutoff in expansion states). Thus those paying no premiums at all either found a silver plan much cheaper than the benchmark (second cheapest) or bought bronze and are subject to high deductibles.

It's also worth noting that the affordability gap in premiums between enrollees in marketplace and employer-sponsored plans is considerably steeper for wealthier marketplace enrollees. who either get no subsidy at all or a subsidy that requires them to pay 8-10% of income for a benchmark silver plan. On the other hand, higher-income marketplace enrollees are closer to their counterparts with ESI than lower income enrollees are in response to the question of  how confident they are that they could afford needed care. Over 250% FPL, the marketplace-ESI split is 70--82, compared to 55-72 for the under-250% FPL set.

The broad takeaway, I think, is that while marketplace plans certainly improve healthcare access and affordability for subsidy-eligible buyers, the blanket is very thin. And the barely subsidized and not-so-wealthy unsubsidized -- say, those, in the 250-600% FPL range -- are out in the cold.

* By Munira Z. Gunja, Sara R. Collins, Michelle M. Doty, and Sophie Beutel.

** Taking state marketplaces into account does not change the average much, as I suggested in this post.

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