Sunday, March 19, 2017

AHCA vs. ACA: Total subsidized shares of costs at different income levels and ages

Late last year I cooked up a simple measure of the value of any given health insurance subsidy: the percentage of the premium paid multiplied by the actuarial value (AV) of the insurance obtained. AV is the estimated percentage of the average enrollee's medical costs paid for by the insurance.

In traditional Medicare, for example, for all but the highest-earning 5% of enrollees, the federal government pays about 85% of the combined premium for Parts A,B and D - which have a combined actuarial value a bit north of 80%. Hence the total subsided share of costs (can we call it TSS?) is about 69%.  Employers, according to the Kaiser Family Foundation, pay an average of 82% of the premium for individual insurance and 71% for family coverage. Given an average AV of 82% -- also a Kaiser estimate -- that yields a TSS of 66% for individual coverage and 58% for family.

I've previously estimated (see first link above) that the average subsidized ACA marketplace enrollee obtains a TSS of 59% -- with the federal government picking up an average of 73% of the premium for insurance with an average AV of 81%. Subsidies vary tremendously, however, ranging from 0% for the half of individual market enrollees who don't qualify for any help to over 90% for the lowest income enrollees obtaining silver plans enhanced with Cost Sharing Reduction.

Now, with the help of CBO analysis of the House repeal-and-replace bill, the American Health Care Act, it's possible to compare the federal TSS for people of varying income and ages under the ACA and the AHCA.

Under the ACA, subsidy-eligible enrollees pay a sliding percentage of income for benchmark silver plans, which have AVs that also vary by income up to the 250% FPL threshold, at which point silver AV levels off at 70%.  Under the replacement AHCA, premiums vary by age only, up to a phase-out threshold of $75k for an individual and $150k for joint filers.,Insurers can charge a 64 year-old five times as much as a 21 year-old, compared to three times as much under the ACA.

I've used the CBO's premium, subsidy and AV estimates as reflected in Table 4 of their AHCA analysis, interpolating an extra age level, 52 with my own estimates, as explained in notes below. CBO compares the plans at 175% FPL (and at 450% FPL, where the ACA provides no subsidy and the AHCA numbers are the same as at the lower income). I've added the other income levels.

In the ACA scores, TSS is marked in red when higher for the ACA than for the AHCA, and in green when the reverse is true.

Federal Subsidies for individual market insurance: 
ACA vs. AHCA in 2026

TSS = Total Subsidized Share of average user's medical costs

AHCA: Individual earning under $75,000

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
 3,900
  1,450
63%
65
40%
40
 6,050
  2,400
60%
65
39%
52
12,775
  8,500
33%
65
21%
64
19,500
14,600
25%
65
16%

ACA: Individual earning 140% FPL ($21.200 in 2026)

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
  5,100
848
83%
94
78%
40
  6,500
848
87%
94
82%
52
  9,926
848
91%
94
86%
64
15,300
848
95%
94
89%

ACA: Individual earning 175% FPL ($26,500 in 2026)

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
  5,100
1,700
67%
87
58%
40
  6,500
1,700
74%
87
65%
52
  9,926
1,700
83%
87
72%
64
15,300
1,700
89%
87
77%

ACA: Individual earning 225% FPL ($34,072 in 2026)

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
  5,100
2,555
50%
73
37%
40
  6,500
2,555
61%
73
45%
52
  9,926
2,555
74%
73
54%
64
15,300
2,555
83%
73
61%


ACA: Individual earning 250% FPL ($37,858 in 2026)

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
  5,100
3,180
38%
73
28%
40
  6,500
3,180
51%
73
37%
52
  9,926
3,180
68%
73
50%
64
15,300
3,180
79%
73
57%

ACA: individual earning 300% FPL ($45,429)

Age
Premium
Enrollee pays
Gov share
AV
TSS
21
  5,100
4,543
11%
70
 8%
40
  6,500
4,543
30%
70
21%
52
  9,926
4,543
54%
70
38%
64
15,300
4,543
70%
70
49%


A few notes and thoughts:

1. One advantage of this TSS measure: it incorporates the value of Cost Sharing Reduction subsidies that raise AV for enrollees with incomes under 250% FPL who select silver plans. Among enrollees with incomes up to 200% FPL, where CSR is strong, about 85% do select silver.

2. On the other hand, TSS doesn't reflect the share of income required of enrollees at different income levels. A major weakness of the ACA is the steep rise in share-of-income requirements determining premium subsidies; they rise swiftly from 2% of income for those in the 100-139% FPL range to around 10% in the 300-400% FPL range. In a double whammy, AV for benchmark silver falls as share of income required rises, effectively falling off a cliff at 201% FPL, from AV 87% to AV 73%.

3. Largely because of that cliff, the AHCA subsidy structure does serve a significant population better than the ACA: younger buyers with incomes a bit north of 200% FPL (the younger the buyer, the lower the income at which the lines cross).

4. Back in December, I suggested a compromise replacement bill that would accommodate some Republican proclivities as well as Trump's campaign promises: expand Medicaid, or something like it (with a sliding-scale buy-in) up to perhaps 300% FPL, and adopt the age-adjusted subsidies in Tom Price's ACA repeal-and-replace bill for people over that income threshold. Price's subsidies are even skimpier than the AHCA's, and his market is less regulated -- so this compromise would work better with the AHCA. Bit the subsidies would still be grossly inadequate for older buyers, especially with 5:1 age rating. And then there's two other wee impediments: 1) Republicans are sworn to repeal the ACA's taxes on the wealthy and various healthcare industries, and 2) Republicans hate Medicaid and are sworn to strangle it more or less slowly. But if there were any reality to "populist Trump" beyond words, and if he really were committed to "insure everybody," such a hybrid might be worth talking about.

5. According to the Census Bureau's Current Population Survey (CPS), in 2013, the year prior to ACA implementation, 56% of the uninsured had incomes under 200% FPL, and 74% had incomes under 300% FPL. FPL probably registers somewhat higher in the CPS than in the marketplace, as the CPS defines a household as everyone living under one roof, and the marketplace, as a tax household. Of those under 200% FPL, a large share were rendered Medicaid-eligible by the ACA, though a large share of those were rendered ineligible by 19 states' refusals to adopt the expansion. Very loosely, though, about a third of those who might make use of the individual market have incomes under 200% FPL (over 2 million current ACA marketplace enrollees are in the 100-138% FPL range), a third, roughly, are between 200-300% FPL, and another third likely have incomes over 300% FPL. If AHCA subsidies adjusted more adequately for age (ah, money...), they might serve the upper half of the market decently and my Medicaid-AHCA graft might be viable. Honestly, though,a public Medicaid-plus buy-in program for everyone who needs to obtain insurance on their own would probably work better and provide better value for the dollar.

Some notes on methodology:

1. The CBO report's Table 4 provides estimates of premiums, subsidies and AV (for the AHCA) for ages 21, 40 and 64 in 2026 for the ACA and AHCA. To add age 52, I used the Kaiser subsidy calculator to determine that this year, the average benchmark premium for a 52 year-old was 52.7% higher than for a 40 year-old. I then bumped up the CBO estimate for a 40 year-old in the ACA marketplace in 2026 by the same percentage. Since that checked out roughly as half the difference between a 40 year-old and a 64 year-old, I went halfway between premiums for those ages in CBO's AHCA estimate to get a 52 year-old's premium there.

2. For FPL in 2026, I worked back from CBO's 175% FPL estimate of $26,500 to $15,143, and multiplied accordingly for other FPLs.

3. CBO modestly bumped up ACA percent-of-income requirements at 175% FPL for subsidized premiums in 2026. I tried to update accordingly (if approximately), using 4% to get a premium for 140% FPL, 8.4% at 250% FPL and 10% at 300% FPL

4. Because the AHCA doesn't vary premiums by income until an individual reaches a threshold of $75,000 ($150,000 for joint filers),  I've included just one table for TSS under the AHCA.  Under the ACA, TSS of course varies enormously by income and age and hits zero at much lower thresholds -- 400% FPL maximum ($60,572 in 2026, by CBO's estimate), and much lower for many young enrollees. That's why I've included 4 income levels for the ACA. 401% FPL would of course be zero subsidy and so zero TSS across the board.


3 comments:

  1. "TSS is marked in red when lower for the ACA than for the AHCA, and in green when the reverse is true." It seems to be the opposite.

    ReplyDelete
    Replies
    1. Fixed, thank you -- I wonder what I was thinking? Lower costs for enrollees?

      Delete
  2. What exactly is this TSS number supposed to represent? I can't figure out that it actually means anything.

    The name "total subsidized share of costs" suggests that it is the proportion of all medical costs (insurance + care, I guess?) that are not paid by the individual. But of course it is immediately obvious that it is not that. So I can't quite figure it out.

    ReplyDelete

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