Experts say the two-year expansion of subsidies for most people who buy insurance through the government exchanges would be among the most significant changes to the affordability of private insurance since the passage of the Affordable Care Act.
As President Joe Biden’s pandemic relief package steams through Congress, Democrats have hitched a ride for a top health care priority: strengthening the Affordable Care Act (ACA) with some of the most significant changes to insurance affordability in more than a decade.
The bill would spend $34 billion to help Americans who buy insurance on the marketplaces created by the ACA through 2022, when the benefits would expire. The Senate sent its relief package, one of the largest in congressional history, back to the House where it could come up as early as Tuesday. It is expected to pass and then go to Biden for his signature.
Those who have studied the legislation said it would throw a lifeline to lower- and middle-income Americans who have fallen through the cracks of the government’s eligibility requirements for ACA assistance. Stephanie Salazar-Rodriguez of Denver, for instance, is hopeful it will make a difference. Without changes, she expects to spend more than $10,000 on premiums this year after losing her primary job, and her insurance, last month.
If her annual income were $3,000 less, she could pay as little as $3,000 a year after subsidies.
“To me, that’s not affluence,” Salazar-Rodriguez said. “You’re talking about people who are struggling to survive.”
The legislation could also provide relief to others who purchase insurance on the exchanges and opt for policies with lower premiums but high deductibles—and often avoid seeking care because they don’t have the cash to cover those costs. Most of the nearly 14 million people enrolled in plans sold on the marketplaces would pay less under the new provisions, with the option to use those savings to buy a new plan with a lower deductible.
The Congressional Budget Office (CBO) also estimated an additional 1.7 million people would enroll in the exchanges under the proposal, about 1.3 million of whom are currently uninsured.
Republicans, who have repeatedly tried to repeal the ACA, hammered Democrats over the years with allegations that many of the marketplace plans are not affordable and prevent people from buying coverage. They argue the new legislation offers unnecessary help to wealthier Americans while doing nothing to lower the cost of insurance.
Now that Democrats have control of the White House and Congress for the first time since the passage of the ACA, they are moving quickly to make changes to the landmark health care program.
The COVID relief package also includes other proposals to increase health care affordability, particularly for the unemployed. Those receiving unemployment benefits, typically ineligible for subsidies on the exchange, would be temporarily eligible.
In addition, the Senate version of the bill would pick up 100 percent of the cost of premiums for those on COBRA, the program allowing recently unemployed workers to privately purchase coverage offered by their former job, often at a high cost. The House had included a similar provision but provided only an 85 percent subsidy. According to CBO, the House COBRA changes would have cost nearly $8 billion with about 2.2 million people expected to enroll—a huge expansion of the subsidy program.
The legislation, which includes a bevy of anti-poverty provisions, also offers an extra financial incentive to about a dozen states that have not expanded Medicaid, the program that covers low-income Americans.
Pandemic spurs effort
Advocates and public health experts say it is critical to help people afford health insurance since millions lost their jobs and their job-based health insurance in the pandemic and about 59,000 Americans are contracting COVID-19 every day.
“It just becomes the thing people can’t afford when they’ve lost their job,” said Katie Keith, an expert on the ACA with Georgetown University’s Center on Health Insurance Reforms.
About 15 million uninsured people could buy insurance through the exchanges, most of whom would be eligible for new or larger subsidies under the proposal, according to Kaiser Family Foundation (KFF). (Kaiser Health News is an editorially independent program of KFF.)
Frederick Isasi, executive director of Families USA, which advocates for health care affordability and supported the passage of the ACA, said more than half of those eligible for coverage cannot afford it. “Health insurance is about financial security and health security,” he said.
Under the ACA, subsidies are calculated based on the recipient’s income, age and their area’s average premium costs.
The proposal would ensure no one who buys insurance on the exchanges pays more than 8.5 percent of income. Currently, subsidies are available only to those making between 100 percent and 400 percent of the federal poverty level (for those seeking subsidies in 2021, between $12,760 and $51,040, for an individual).
Some marketplace customers near the federal poverty level who now must pay some of the premiums out-of-pocket could get a subsidy that pays the entire cost of a silver, or midlevel, plan.
The change would also benefit Americans who make more than the subsidy cutoff. About 3.4 million uninsured people fall into this category, according to the KFF analysis.
For example, currently, a 60-year-old who makes $50,000 annually pays no more than $410 per month out-of-pocket for a silver plan on the exchanges, with the government chipping in $548 per month.
A 60-year-old who makes $52,000 annually would receive no subsidy and would be expected to pay the full premium herself, at a cost of about $957 per month for the same plan, KFF found.
For Salazar-Rodriguez, that cutoff carries a heavy cost. She was recently laid off from her job at a community health organization that has struggled during the pandemic, and now she pays $913 per month out of her own pocket for insurance.
In a little less than a year, at age 65, she will qualify for Medicare. For now, her age is a liability. Older, pre-retirement Americans pay some of the highest premiums in the nation.
Having once worked assisting people enrolling in the exchanges, Salazar-Rodriguez went straight to the marketplace for coverage when she lost her job. But she was startled to discover how high her premiums would be—and that, because of her income from her other work as a consultant, she is ineligible for a subsidy or Medicaid.
She opted instead for COBRA coverage, which she said was comparable in cost and had more of the benefits she needs than the unsubsidized plans she found on the exchanges in that price range.
She worries she will have to run up her credit card and find extra work to afford her premiums. The pandemic has made forgoing insurance unthinkable, she said. Many of her loved ones have had covid-19. Some friends are still suffering symptoms months after falling ill. She lost a brother-in-law in Texas.
“That’s why I am paying that nearly $1,000 a month, because I know one hospitalization could bankrupt me if I didn’t have it, and I can’t take that chance,” Salazar-Rodriguez said.
Changes are temporary
Though the subsidy fixes are temporary, lasting two years to address the economic impacts of the pandemic, experts and lawmakers expect the new subsidy criteria would eventually become permanent.
The KFF analysis found that subsidies would gradually phase out for those with higher incomes for instance, a single 60-year-old making about $160,000 would not receive a subsidy because no silver plan would cost more than 8.5 percent of his income.
Brian Blase, a senior fellow at the Galen Institute, a nonprofit group that researches free-market approaches to health reform, criticized the proposal in a recent analysis, saying it shifts the burden of paying premiums from private payers to taxpayers without addressing the causes of high premiums.
He argued a family of four headed by a 60-year-old earning almost $240,000 could qualify for a nearly $9,000 subsidy.
The Wall Street Journal seized on Blase’s example in a recent op-ed. “These are not the folks hit hard by the pandemic,” the editorial staff wrote.
Many of the changes in the relief package date back to the passage of the ACA, President Barack Obama’s signature domestic policy that overhauled the nation’s health care system. At the time, those who wrote the law expected Congress would observe how it worked and make adjustments over time. But the law became a lightning rod for GOP opposition.
The proposal is part of the ACA’s “unfinished business,” said Keith of Georgetown University.
She noted there are other coverage gaps not addressed by this package, such as the so-called family glitch, in which a family’s eligibility for marketplace subsidies is based on whether the cost of job-based coverage for one individual rather than the family is affordable.
The current bill “is narrow compared to the wish list Democrats have, but it would do so much with premium affordability in this way right now,” Keith said.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.