Monday, December 02, 2019

Fewer Americans qualify for ACA marketplace subsidies

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Regardless of whether ACA marketplace enrollment for 2020 is lagging 2019 totals, one persistent marketplace headwind that should get more attention is the long economic recovery. In an article by Bloomberg's Sara Hansard, Andrew Strohman of the American Action Forum puts one finger to this wind:
Unemployment is now about 3.6%, compared with 4% in January. “You could see some more people taking up employer-sponsored insurance rather than enrolling in the individual market,” Strohman said.
Regardless of whether more people are in jobs that offer affordable insurance, the population with incomes in ACA subsidy range (100-400% of the Federal Poverty Level in states that have refused the Medicaid expansion, 138-400% FPL in states that have implemented it) has shrunk since the ACA marketplace launched in 2014. At the same time, the population with incomes above 400% FPL (and so ineligible for ACA subsidies) has swelled.

Changes in Income-to-Poverty Ratio, 2014-2018
Numbers in thousands. FPL = Federal Poverty Level
Pop 100-400% FPL
Pop > 400% FPL
% 100-400% FPL
% over 400% FPL
     Source: Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2018, 2014

The picture is somewhat complicated by the fact that the population in the 300-400% FPL range has grown; the shrinkage is concentrated in the 100-200% FPL range.

Pop 100-300% FPL
Pop > 300% FPL
% 100-300% FPL
% over 300% FPL
      Source: Census Bureau, Current Population Survey, Annual Social and Economic Supplement, 2018, 2014

The 5% percentage point increase in the population in households with incomes over 300% FPL is worth considering in light of these facts:

1. As ACA benchmark premiums spiked 61% from 2016-2018, unsubsidized enrollment in ACA-compliant plans cratered from 6.4 million in 2014 to 3.9 million in 2018.

2. As I noted recently, the uptick in the uninsured rate in 2018 recorded in the Census's annual report on health insurance in the U.S. was steepest at high incomes. At 300-399% FPL, the insured rate dropped a full percentage point, from 92.9% to 91.9%, while at over 400% FPL, the insured rate dropped 0.8%, from 97.3% to 96.6%.

3. A drop in the Medicaid population of 2 million in 2018 is probably due in part to this growth in household income. The shrinkage of the population with incomes below 100% FPL is much sharper than at 100-300% FPL. From 2017 to 2018 alone, the under-100% FPL population shrank by 1.4 million, according to the Census. From 2014-2018, the under-100% FPL population shrank 18.4%, from 46,657 to 38.056.

4. In 2018, the income distribution of enrollees in the ACA marketplace shifted upward across the 200% FPL threshold a couple of percentage points.

Caveats, caveats:

1. The Census income categories (as a percentage of FPL) don't exactly match those used by the marketplace, as the Census defines a household as all who live under one roof, while the marketplace considers household income on the basis of who's included in one tax return.

2. The premium spikes in 2017-2018 probably helped boost enrollment in the 300-400% FPL category, which rose 10% in states (39 states) 2018. People with incomes in ACA subsidy range only qualify for subsidies if the benchmark silver plan in their area costs less than about 10% of income. The premium spikes reduced the number of people with incomes in the 250-400% FPL range who didn't qualify for subsidies, while silver loading* increased the value of those subsidies.

3. Notwithstanding the upward shift in household income, the drop in Medicaid enrollment remains troubling, as it correspondents to a spike in the uninsured rate for children and probably also reflects red tape barriers thrown up by many states and the chilling effect of Trump's threatened changes to the public charge rule, currently stayed by the courts.

Uninsurance goes upscale:The Census's health insurance update for 2018
The ACA as recession insurance
Drop in low income uninsured is partly due to drop in low income population
Shifts in the enrollment population in the ACA marketplace in 2018

*  Silver loading is the byproduct of Trump's October 2017 cutoff of direct federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are required to provide to low income marketplace enrollees who select silver plans. Faced with the cutoff at the brink of open enrollment for 2018, most state insurance departments allowed or encouraged insurers to price CSR into silver premiums only. Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark (the second cheapest silver plan), inflated silver premiums create discounts for subsidized buyers in bronze and gold plans. When the benchmark silver premium drops more than other plans, those plans become more expensive for subsidized enrollees.

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