Tuesday, November 30, 2021

Is the ACA marketplace catching a surge in entrepreneurship?

The Wall Street Journal's Josh Mitchell and Kathryn Dill report that the pandemic has triggered a surge in self-employment and small business formation:

The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic, Labor Department data show, to 9.44 million....Entrepreneurs applied for federal tax-identification numbers to register 4.54 million new businesses from January through October this year, up 56% from the same period of 2019, Census Bureau data show.

That surge underscores the value and good timing of the boosts to premium subsidies for plans sold in the ACA Health Insurance Marketplace provided by the American Rescue Plan Act, enacted in March 2021. Those subsidy increases brought the ACA much closer to fulfilling its promise of providing affordable insurance to those who lose or leave their jobs and so lose access to employer-sponsored plans, which insure the majority of working age Americans.

Enacted through 2022, the ARPA subsidy increases eliminated the ACA's notorious "subsidy cliff" -- the income cap on eligibility for subsidies, which since enactment had stood at 400% of the Federal Poverty Level ($51,040 for an individual and $104,800 for a family of four in 2021). ARPA capped premiums for a benchmark silver plan at 8.5% of income for those previously over the eligibility threshold. At the lower end of the income scale, benchmark silver plans with strong Cost Sharing Reduction became free at incomes up to 150% FPL -- and for anyone who received any unemployment insurance income in 2021. Between those poles, the percentage of income required for a benchmark silver plan dropped sharply at every income level.

ARPA was enacted in the midst of an emergency Special Enrollment Period created by the Biden administration, running from February 15 through August 15 in the 36 states using the federal exchange, HealthCare.gov, and for varying durations in 15 state-based exchanges. The public responded with 2.8 million new enrollments, more than triple the amount enrolled in the same period in 2019.  In August 2021, total enrollment in the ACA marketplace was up 26% since August 2019.  

In the wake of that off-season surge, enrollment in the first three weeks of Open Enrollment for 2022 is 9.5% ahead of enrollment in the same period last year (in HealthCare.gov states), according to Charles Gaba's estimates

A significant number of the new entrepreneurs noted by the WSJ have likely found marketplace coverage -- while on the low end, many have also ended up in Medicaid. From February 2020 to May 2021, Medicaid enrollment increased by 12 million, or 17%  -- and the growth rate among those rendered eligible for Medicaid by the ACA expansion (most adults with incomes up to 138% FPL in 38 states that have enacted the expansion) was about twice that.

The unfulfilled promise to end job lock, 2014-2020

In the runup to enactment of the ACA, freeing working people from "job lock" -- remaining stuck in a job for fear of losing health insurance -- was one of the core selling points of the pending legislation. In March 2012, two years after enactment (and almost two years before the ACA marketplace opened for business), as reported in The Hill, Nancy Pelosi

explained that the law gives people the flexibility they need to pursue these goals, since it makes it easier for them to switch jobs in order to pursue their career or family goals.

"A healthier life, the liberty to pursue happiness, free of the constraints that lack of healthcare might provide to a family," she said. "If you want to be photographer, a writer, an artist, a musician, you can do so. If you what to start a business, if you want to change jobs, under the Affordable Care Act, you have that liberty to pursue your happiness."

That proved to be a very partial truth, however, as premiums proved unaffordable for many on the wrong side of the subsidy cliff, and inadequate subsidies left many who were in fact subsidy-eligible feeling that coverage was still unaffordable. For example, a single person with an income of $32,000 might pay $200 per month for a silver plan with a deductible in the $4,000 range. While widespread ignorance of ACA offerings -- deliberately fostered by Republicans, both through out-and-out disinformation and through Trump administration's gutting of funding for advertising and enrollment assistance -- was a major factor in many uninsured telling surveyors that coverage was "unaffordable," a significant number who did view their options doubtless also found coverage too rich for their blood.

In March 2017, the Huffington Post's Jonathan Cohn published a revealing diptych of the marketplace's benefits and limitations, zooming in on two families with children in North Carolina research triangle that sought coverage in the ACA marketplace.  

The first was a couple in their forties with two teenage children, the husband self-employed as a consultant and the wife working part-time for a nonprofit., Together they earned too much to qualify for ACA premium subsidies (i.e., more than $100,000 for their family of four).  In 2013, before the main provisions of the ACA took effect, they paid about $7,200 per year for a Blue Cross policy. By 2016, they were paying $16,000 per year off-exchange for an ACA-compliant plan, rejecting some cheaper (bronze) and narrow-network options (see Cohn's in-depth narrative for the nuances of the decision). 

Cohn contrasts their plight with the situation of a couple with a young child, in which both the father and the child had intense medical needs. The father's preexisting condition  would have rendered coverage for him in the pre-ACA marketplace extremely problematic if not impossible (the child would have been eligible for CHIP). But with an income in the $30,000 range, thee parents not only were not penalized for the father's health; they paid a moderate premium for a plan with strong Cost Sharing Reduction, available at low incomes.

While benchmark silver ACA marketplace plans still impose high out-of-pocket costs on most enrollees with incomes above 200% FPL ($25,760 for an individual, $53,000 for a family of four in 2022), the ARPA subsidy boosts make it credible to claim that coverage is "affordable" for anyone who qualifies for subsidies. The ARPA-enhanced marketplace is well positioned to catch a wave of Americans breaking out of job lock. Those subsidies are currently funded only through 2022, however - -and the pending Build Back Better bill would fund them only through 2024. 

That short-term funding -- induced by the massive scaling back of the BBB imposed by Senators Manchin and Sinema --  will likely leave the enhanced subsidies to Republicans' tender mercies in 2024.

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