The case for Medicaid-like coverage at high-middle incomes: Alex Sheff of Health Care For All Massachusetts

Line up those ducks for ConnectorCare expansion

My last post focused on a plan in Massachusetts to extend eligibility for ConnectorCare, the state's unique low-cost health insurance program for marketplace enrollees with income up to 300% of the Federal Poverty Level, to residents with income up to 500% FPL. This past July, the state legislature passed a budget provision funding the eligibility extension for a two-year pilot period, but  Republican Governor Charlie Baker vetoed it.

Yesterday I spoke to Alex Sheff, policy director at nonprofit Health Care Access for All Massachusetts, a prime mover of the proposal, about the rationale for focusing new state spending on a relatively affluent income segment -- those with household income ranging from $40,770 to $67,950 for an individual and from $83,5250 to $138,750 for a family of four. HCFA commissioned an actuarial study, conducted by Gorman Actuarial Associates, that sketched out the proposal's parameters. HCFA provides phone help to Massachusetts resident who need help enrolling in health coverage and stresses that its policy proposals derive from trends gleaned from the call line.

To keep background as short as possible here (see the last post for more): ConnectorCare features a standardized benefit design (varying somewhat by income bracket) with zero deductibles, low copays, and annual maximum out-of-pocket (MOOP) cost limits lower than those generally available in a conventional state ACA marketplace. Those costs are modestly lower than in the ACA marketplace at the lowest incomes, but much lower at the 200-300% FPL level.* ConnectorCare premiums range from $0 at incomes up to 150% FPL** to $130 per month for a solo enrollee with income in the 250-300% FPL range.

At present, Massachusetts residents with income over 300% FPL can seek coverage in a more-or-less conventional ACA marketplace that adheres to the national subsidy schedule. Enrollees with income in the 300-400% FPL range pay between 6% and 8.5% of income for the benchmark (second cheapest) silver-level plan, while those with income over 400% FPL pay 8.5% of income for the benchmark plan. 

Given the low OOP exposure in ConnectorCare plans, Massachusetts residents just over the 300% FPL face a real "benefit cliff," particularly with regard to maximum out-of-pocket exposure. In ConnectorCare's current upper income bracket, 200-300% FPL, plans have a single-person MOOP cap of  $1,500 for medical expenses and $750 for drugs. By contrast, the bronze and silver plans in which 95% of current Massachusetts enrollees in the 300-500% FPL bracket are enrolled in general have all-in MOOPs of $9,100 ($7,500 for HSA-compatible plans). Standard gold plans, priced about 20% above silver, have a $5,000 MOOP cap.***

A major additional subsidy at 300-500% FPL

The vetoed budget resolution stipulated that ConnectorCare plans offered in the 300-500% FPL would have an actuarial value no lower than 90% -- only marginally below, or possibly matching, the 92% AV of plans now offered at the 200-300% FPL level. While the legislation did not specify premium levels, Sheff said that the plan envisioned a premium of about 6% of income -- the lower end of the income required in the ACA marketplace in the 300-500% income bracket. That's for a plan with an actuarial value at least 20 percentage points above that of silver plans (70%) and 10 points above that of gold  plans (80%).

Sheff stressed that "the combination of lower premiums, lower copays and no deductible – those things together are what make the program more accessible and affordable to folks."

Not poor, but struggling with healthcare costs

According to the U.S. Census Bureau, in 2021, 57% of Americans lived in a household with income above 300% FPL. In Massachusetts, about 46% of enrollees in the ACA marketplace-- all those who are ineligible for ConnectorCare --  have income above 300% FPL.

That said, most progressive nonprofits focus mainly on improving benefits at lower incomes. So my main question for Sheff was why this initiative focused on a relatively affluent cohort.

To venture a somewhat interpretive spoiler: in a state with a best-in-the-nation 2.5% uninsured rate, underinsurance is a bigger problem than uninsurance.  And thanks to ConnectorCare, which picks up where Medicaid eligibility leaves off (139% FPL), underinsurance for those relying on public benefits pretty much begins at 300% FPL. 

Sheff stressed that the program focus was grounded in HCFA's call center experience. "We take almost 25,000 calls a year [from people seeking help finding health insurance] -- and  we hear so consistently from people with income just over the 300% FPL level who really experience the fall off that cliff.  We’d been hearing about this for so long that we felt that that was the place where you could do the greatest good  for greatest number of folks."

What about political feasibility? "It resonates when we talk to legislators," Sheff asserted, "that these are folks who are earning too much to qualify for ConnectorCare but are really struggling to make ends meet, particularly with high costs across the board at the moment. It’s a lot of folks -- a lot of people in the service sector. Bartenders, waiters..."

Bartenders and waiters earning 300-500%  FPL? Well, Massachusetts is one of the highest-cost states in the nation, and the second highest in per capita income. Its current minimum wage, $14.25, is second-highest to Washington's $14.49.  Moreover, according to Sheff, a lot of service-sector people in this income bracket "are not offered insurance from their employer and buying it on their own, and for them, what’s available is really not affordable."

Struggling with high costs

Sheff added that healthcare policymaking in Massachusetts is blessed with "great data" from the Center for Health Information and Analysis (CHIA), a state agency. "The most recent statistics show that [in 2021] 41% of residents in state reported trouble affording care in the last year, and that’s with our very high insurance coverage rates. It really tells you there’s a problem here -- even with the high coverage rate."

I'll add that the cited CHIA survey (slide 64 here) shows a higher level of "problems paying family medical bills in the 300-400% FPL range (18.9%) than at incomes below the Medicaid eligibility threshold, 138% FPL (15.3%), though modestly below the level for state residents in the 138-300% FPL bracket (23.1%). Then again, the majority of insured respondents with income over 300% FPL were in employer sponsored plans (68.4% at 300-400% FPL, 84.0% at incomes over 400% FPL).  Given that the state has a 97.5% insured rate, it's not surprising that 88% of medical debt was held in fully insured families. At the same time, respondents with an uninsured family member were three times as likely to report a payment problem.

Sheff added that the effort to expand ConnectorCare eligibility “is intensely linked to health equity. We see significant disparities, challenges affording care, significantly higher for black or Hispanic residents. In one survey, it [the percentage reporting a healthcare affordability burden] was 75% for black residents and 66% Hispanic residents compared to 46% for white residents. One of the places where you see the largest gaps is in this group above 300% FPL. For that group, Hispanic residents are one and half times more likely than white residents to report a challenge affording care. So again, the greatest disparities are in that just-over-the-eligibility threshold group.”

That last claim is derived from CHIA's most recent health equity report, which finds that at incomes above 300% FPL, 28.2% of Hispanics report forgoing care because of cost, compared to 22.3% for blacks and 18.7% for whites. Black respondents were most likely to report medical debt or problems paying medical bills (28.3%), compared to 23.6% for Hispanics and and 18.7% for whites.

The CHIA equity survey, like the annual health insurance survey, shows that these affordability problems -- trouble paying for care and forgoing needed care -- are substantial at incomes over 300% FPL, particularly in the 300-400% FPL slot.  In the equity survey, the same percentage of respondents in the 300-400% FPL bracket, 28.4%, report forgoing care due to cost as in the below-139% FPL bracket. At incomes over 400% FPL the percentage drops off, but is still substantial: 21.4%. The 139-400% FPL bracket reports the highest percentage, 30.3%. The pattern is similar among those reporting medical debt or problems paying for care. 

At incomes over 139% FPL, these findings mostly reflect experience in employer-sponsored plans. The conviction that problems for those seeking coverage in the individual market is most acute at the far side of the 300% FPL "cliff" probably derives more from HCFA's enrollment assistance experience. It also stands to reason, given the sharp jump in out-of-pocket costs and, to a lesser extent, premiums at 301% FPL.

Pay-fors and prospects

As noted in the prior post, ConnectorCare's low costs for enrollees are made possible by state subsidies that supplement federal subsidies for ACA marketplace enrollment. Those extra subsidies are paid out of a state trust fund, which is funded in part by cigarette taxes, a state "individual mandate" penalty for those who go uninsured, and assessments on employers. A federal contribution via a Medicaid waiver,  which predates the ACA and has been renewed several times,, accounts for about half the funding.  

The ConnectorCare expansion proposal estimates that the boost to federal marketplace subsidies provided by the American Rescue Plan Act produced a surplus that will fund the expansion for the two years of the proposed pilot program. After that, continuation of the ARPA subsidy boost, extended via the Inflation Reduction Act through 2025, is uncertain.

While legislative action is never fully predictable, Sheff is optimistic about the expansion proposal's prospects in 2023, under Democratic Governor-elect Maura Healey. "We were disappointed that this was blocked by the current governor. We were really excited, as the legislature showed an enormous amount of leadership in taking this proposal up. The fact that this passed legislature twice is a great sign and shows a lot of momentum. We're hopeful it will get consideration under a new administration."

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*In conventional ACA marketplaces, Cost Sharing Reduction (CSR) subsidies drop sharply at the 200% FPL threshold, creating a steep "cliff" in exposure to out-of-pocket costs. CSR is weak in the 200-250% FPL income bracket and not available at incomes over 250% FPL.

** Under the increased premium subsidy schedule established in March 2021 by the American Rescue Plan and extended through 2025 by the Inflation Reduction Act, premiums for a benchmark silver plan with strong Cost Sharing Reduction are also set at zero for enrollees with incomes up to 150% FPL. 

*** While the federal American Rescue Plan Act, passed in March 2021, increased premium subsidies at every income level and removed the notorious 400% FPL cap on subsidy eligibility, it did not improve out-of-pocket exposure at the various ACA metal levels. 

Update, 11/21/2022: I've added further statements from Alex Sheff derived from the Altarum survey  (p. 4) linked to above, and adjusted some language describing CHIA results.