Just a few short days ago, we learned that the state Health Insurance Marketplaces enrolled more than 10.5 million persons during the initial open enrollment period, while the Medicaid expansion enrolled 7.5 million. This is a quite remarkable achievement, especially granted the very slow start last October. Now, as these new enrollees begin to use their insurance, it is important to check in to see how well the new insurance actually is performing.
Anecdotal reports suggest that most new enrollees are very glad to have health insurance coverage. And many are beginning to use their new coverage. Yet, most with insurance through the Marketplaces lack an understanding of the deductibles, copays, and coinsurance that govern their policies—collectively, out of pocket (OOP) expenses. Further, evidence is beginning to accumulate suggesting that we ought to raise questions about the affordability of OOPs, particularly for enrollees who have lower incomes and who receive federal subsidies.
A little technical background is necessary. The Marketplaces offer four levels of insurance plans (Bronze, Silver, Gold and Platinum) with different actuarial values (60 percent, 70 percent, 80 percent, or 90 percent, respectively) for covered medical expenses paid by the plan for healthcare items and services in 10 essential health benefits categories. The 10 essential categories include mental health and substance use care benefits, which must be provided at parity. The higher the share of covered medical expenses paid by the plan, the lower the consumer’s OOP costs. However, this scenario also translates into a higher monthly insurance premium.
Those whose incomes fall below 250 percent of the federal poverty level (FPL) ($28,725 for an individual) receive cost-sharing subsidies—these are in addition to any federal tax credit to purchase insurance for which the enrollee may be eligible. (Federal tax credits are based upon a Silver Level insurance plan and are available for persons with incomes between 100 percent and 400 percent FPL or $11,490 to $45,960 annual income, on a decreasing scale.) Cost-sharing is automatically applied based on income and helps with the cost of deductibles, copayments, coinsurance, and total OOPs spending limits.
Below, these concepts are illustrated for a Silver Level insurance plan for a person from New York state:
Let’s assume a person with an income of 150 percent FPL ($17,235) who pays $900 per year for a Silver insurance plan (conservative estimate), after federal tax subsidies, who also uses services heavily and, as a result, has OOP expenses of $1,000. Subtracting $1,900 from $17,235 leaves an annual income of $15,335, or $1,278 per month for all other living expenses. This person would be paying more than 11 percent of annual income for health insurance and care.
Let’s assume another person with an income of 400 percent FPL ($45,960) who pays $2,400 per year for a Silver insurance plan (conservative estimate) after federal tax subsidies, who also uses services heavily, and has OOP expenses of $5,500. This person would pay $7,900 for insurance and care, or about 17 percent of annual income, leaving $3,171 per month for all other living expenses.