The bitterest complaints about the Affordable Care Act, the health care program enacted in 2010 under President Barack Obama, come from people who buy insurance individually and earn too much to qualify for subsidies or tax credits.
They face double-digit percentage-rate increases in the coming year, as New York State approved new rates with increases ranging from 4.4 percent to as high as 31.5 percent for the 14 insurers selling individual plans on the state’s insurance exchange, with a weighted average of 14.5 percent. A small portion of the increases are adjustments due to uncertainties over some ACA subsidy payments.
The good news, according to the state Department of Financial Services, which approves the rates, is that consumers eligible for tax credits will pay about the same or in some cases less next year compared with 2017.
That won’t be the outcome, however, for those earning more than 400 percent of the federal poverty line. They get no subsidies or tax credits to defray the costs of premiums and out-of-pocket expenses, including deductibles and copays. In 2018 the income cutoff will be $48,240 for an individual and $98,400 for a family of four.
Earlier this summer, the Republican-controlled Congress failed to agree on a plan to repeal and replace the ACA. Some insurers in various states have asserted that their rate increase requests were higher this year because of uncertainty about the future of the ACA. The Trump administration hasn’t yet committed to paying insurance companies subsidies for eligible policyholders’ out-of-pocket expenses or to enforcing the mandate that individuals buy insurance. But it cut funds to reach and enroll new people.
While the New York State marketplace exchange provides a large choice of insurers offering plans, some states have few.
Polls find increasing support for the ACA, also known as Obamacare, in the wake of the Congress’ failure to agree on a path to its repeal and replacement. A recent tracking poll by the Kaiser Family Foundation, a nonprofit that studies health care issues, found about 4 in 5 Americans want the Trump administration to take steps to make the current health care system function better rather than undermine it.
While there is a growing call by some liberal Democrats for a single-payer form of universal health coverage, such as “Medicare for all,” or other versions found in almost all developed countries, conservative Republican House members have renewed their call for an outright repeal of the ACA. But now, there are bipartisan stirrings: in the House, a group of Republican and Democratic congressmen, including Rep. Thomas Suozzi (D-Glen Cove) called the Problem Solvers Caucus has a proposal with ideas from both sides of the aisle, while the Senate health committee announced it would hold bipartisan hearings in September on how to fix the individual market.
The 44-member Problem Solvers Caucus wants to ensure subsidies for out-of-pocket health care costs, but mandate that employers provide health coverage only if they employ 500 or more, and end the medical device tax. It would protect mandated benefits but allow states room to innovate, and create a stability fund of federal money that insurers could tap into if costs for an individual policyholder rose above a certain point.
“We have to stabilize the individual market, and we have to preserve the positive aspects of the Affordable Care Act,” said Suozzi, who is vice chairman of the caucus. “The key is for us to continue to build this from the bottom up so leadership has no choice but to do this. People want us to work together.”
The number of people, 18 million to 21 million, in the individual market is small compared to the 160 million covered by employers, and the 70 million in Medicare and 50 million in Medicaid, he said, but that is where many of the problems occur. Instability or losses there could spill over into the larger market for employer plans, experts say, as insurers raise premiums to cover their costs.
Even with fixes to stabilize markets, “premiums could end up rising regardless if more sick people are in the (insurance) pool, but it would help lower premiums below what they would otherwise be,” said Larry Levitt, senior vice president at the Kaiser Family Foundation and a co-author of a recent report there that found premium rate requests in various cities were higher because of uncertainties about the ACA. He said stability funding, which had been in place during the first three years of the ACA, “would help lower premiums but the money to pay for them has to come from somewhere, so there are trade-offs.”
The foundation, which analyzes the health care system, said that about 83 percent of the 12 million people buying insurance on ACA exchanges receive some subsidies that help defray the effect of premium and cost increases, but that some of the rest and some of the approximately 8 million to 9 million who buy insurance off the exchange could find their insurance becoming unaffordable.
The rise in premiums that individual policyholders complain about resulted in part from the move to more comprehensive plans and the adjustments of insurers to an influx of millions of new clients, many of them with pre-existing conditions.
It reflected “carrier misunderstanding of what the market would be and playing catch-up with sharp increases,” said Gary Glaxton, a Kaiser vice president and director of its Health Care Marketplace Project. “Basically they thought the risk pool would be healthier than it turned out to be.”
It went from a relatively small market that based the cost of a policy on the health of the applicant, to one that had to admit everyone and price policies evenly, he said. “It wasn’t clear who was going to enroll and what the average health would be.”
Dr. Eric C. Schneider, senior vice president for policy and research at the Commonwealth Fund, a New York-based nonprofit that focuses on health care policy, attributed some of the spike in premiums to “a lot of churning in the individual market as people moved into [ACA] compliant plans that met the minimum mandatory health benefits [required under the ACA]; those plans have typically been at higher premiums.”
Higher deductibles had been a trend in health insurance even before the ACA, he said, as a way to lower premiums. “It’s a trade-off that can work well for people with adequate income,” but hit hardest at people “in the middle who earn too much for subsidies and cost-sharing reduction payments.”
He added that the real driver behind higher premiums was the escalating cost of medical care, especially in drugs and new technologies. “The big challenge is trying to get medical costs under control,” he said. “It would have been worse if the ACA hadn’t moderated the growth in spending. That’s pretty cold comfort to someone paying more in premiums, deductibles and out of pockets expenses every year.”
While conservatives in Congress prefer market-based approaches to health coverage and object to growing government entitlements and expenditures, some policy analysts see a fix for middle-income people in simply lifting the threshold to get subsidies and tax credits to defray the cost of premiums and out-of-pocket expenditures.
Instead of only giving help to those earning up to 400 percent of the federal poverty line (in 2018, that will be $48,240 for an individual, and $98,400 for a family of four), “Congress could simply lift that cap and change the tax credit schedule so no one pays more than 9.6 percent of their income for individual market policies through the marketplace,” said Sara R. Collins, vice president for health care coverage and access at The Commonwealth Fund. “It’s not particularly costly for the relatively small number of people it would affect.”
She said she did a cost analysis for that “relatively straightforward solution to a problem that affects a relatively small number of people.” Extending tax-credit eligibility to those earning more than 400 percent of the federal poverty level would increase insurance enrollment by 1.2 million, at a total federal cost of $6.0 billion, her analysis found. And those benefiting the most would be mostly middle-income adults ages 50 to 64.
Andy Slavitt, former acting administrator of the Centers for Medicare and Medicaid Services under Obama, said bringing down costs on the exchanges was achievable with bipartisan support from Congress, especially if cost-sharing reduction subsidies were guaranteed for out of pocket expenses. Subsidies for premium cost reductions are an entitlement and not at risk.
He pointed to Alaska and Minnesota, two states that brought premiums down substantially by offering reinsurance to carriers, which are funds that covered high expenses for medically costly policyholders.
Bipartisan efforts to “work together on these initiatives very quickly, and earning the support of the president, is important to this goal,” he said.