Monday, June 27, 2016

A close look at one more ACA glitch

Georgetown University's Sabrina Corlette highlights a glitch in the ACA's provisions aimed at helping young adults obtain health insurance:
Consumer assisters receive frequent questions from parents who want their son or daughter to enroll in their family plan. The Affordable Care Act includes a requirement that health plans permit children under age 26 to stay on their parents’ health plan, regardless of whether or not the child is a tax dependent. However, the FFM currently requires adults under age 26 who are not tax dependents to be assessed separately for subsidy eligibility. The FFM platform does not allow them to enroll together under a family plan if they want to receive subsidies.*

This can have significant financial implications. For example, a young adult whose eligibility for subsidies is screened separately from his or her parents may not have sufficient income to meet the income threshold for premium tax credits (100 percent of the federal poverty line). In a state that hasn’t expanded Medicaid, this may mean that the young person falls into the coverage gap. In addition, a young adult child enrolling separately into a QHP must pay a separate premium and meet a separate deductible and out-of-pocket maximum from the rest of his or her family
Point taken about the Medicaid coverage gap: allowing young adults to be considered part of their parents' household would shield some from it. To put that in perspective, according to Kaiser Family Foundation estimates, there are probably just under a million adults under age 26 in the coverage gap (income 100% FPL in nonexpansion states). Relatively few of them would have parents in subsidized marketplace plans, but perhaps that few is in the tens of thousands.

What about young adults who live in states that have accepted the Medicaid expansion, or those who earn too much to qualify for Medicaid? In expansion states, those earning under 139% of the Federal Poverty Level (FPL), $15,800 this year, are eligible for Medicaid, and so would be better off financially -- if not necessarily with regard to the quality of care available -- on their own.
Cases in which a young adult earning more than 138% FPL could do better on his parents' plan than applying on his own in the marketplace are, I think, either vanishingly rare or nonexistent. ACA subsidies are based on income as a percentage of FPL. In almost all cases, adding a third income over 138% FPL (the Medicaid eligibility cutoff) raises FPL for the family. For a family of two, for example, 200% FPL is $31,860; for a family of three, it's $40,180.**

Using the price-checker on, I tested subsidy scenarios*** for a 50 year-old couple with a 25 year-old offspring at various income levels. Let's assume that the parents' income is $47,500, or just under 300% FPL. I chose an income toward the upper end of subsidy-elgible range because at lower levels (under 250% FPL), the parents would qualify for Cost Sharing Reduction (CSR) subsidies, and adding a third income over 138% FPL would reduce or zero out the CSR.

For two 50 year-olds with an income of $47,500, the benchmark silver plan, covering 70% of the average user's yearly medical costs, would cost $382. Add a 25 year-old earning $16,500, and the premium goes up to $518, an additional $136. That 25 year-old could get her own benchmark silver plan for just $48 per month, and it will be enhanced with CSR, reducing the deductible from an average of  about $3000 per person on her parents' plan to somewhere usually in the range of $0-500.

Bump our 25 year-old's income up to $24,000, a shade over 200% FPL (a cutoff for "strong" CSR), and the benchmark silver family plan for three will cost $576, the young adult adding $194 to the tab. On his own, the youngun will pay $131, with a deductible probably in the $1500 range.

If the adult child earns $32,500, the household of three slips in just under the 400% FPL subsidy cutoff -- and pays $647 for benchmark silver. That's $265 for Ms. Thirdwheel -- as opposed to $234 if she shops on her own (with or without subsidy -- in some regions the unsubsidized price of benchmark silver at age 25 will be less). This income ($32.5k) is beyond CSR elgibility range, so the solo child's deductible and other plan terms will be the same as the parents'.

Now, there are a zillion possible permutations, and in some of them the threesome might come out ahead together if the marketplace allowed it. In particular, since unsubsidized premiums rise with age, but the subsidy for benchmark silver covers the price difference, in some cases older buyers' subsidies exceed the cost of bronze plans, and a third enrollee could share that bounty. But I suspect that would be a rare case indeed, though I could be wrong about that.

Notwithstanding the number of people affected by this glitch,Sabrina Corlette's broader point is that the ACA purports to grant adults under age 26 the right to be covered by their parents' plans, and that this right is effectively being denied to those whose parents are in subsidized marketplace plans. That's not right -- and those who are left in the Medicaid coverage gap by this glitch are severely harmed. Others are seeing their choices unduly reduced, even if in most cases the foreclosed choice is not optimal.

*  The brief post quoted here draws from a longer report on ACA marketplace enrollment issues, co-authored by Corlette, and based on ACA assister call logs.

** At the very upper edge of subsidy eligibility, a couple earning just under 400% FPL could add a third member earning just over 138% FPL and remain under 400% FPL. If the family earns too much to qualify for subsidies, the young adult's insurance will cost the same whether she applies singly or as part of a threesome.

*** Since the "shoparound" tool asks only for the family's aggregate income, I was able to assume a $47,500 baseline for the couple and add various amounts for one adult child. whom I billed as a dependent. 

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