Even with subsidies to make coverage more affordable, many people who buy health insurance on the marketplaces spend more than 10 percent of their income on premiums, deductibles and other out-of-pocket payments, a recent study found. Among those hit hardest, the researchers said, are people who spend nearly a quarter of their income on health care expenses.
“There’s been a lot of talk about how high deductibles and out-of-pocket costs are in the Affordable Care Act, and a lot of anecdotes about that, and this [study] quantifies that in a more systematic way,” said John Holahan, a fellow at the Urban Institute’s Health Policy Center who co-authored the study.
The study used a model to estimate expected household spending on health insurance premiums and out-of-pocket expenses by individuals and families at different income levels using the marketplaces in 2016.
The analysis incorporated tax credits that are available on a sliding scale to people with incomes between 100 and 400 percent of the federal poverty level ($11,770 to $47,080 for an individual) to help subsidize the cost of premiums. It also included cost-sharing reductions that lower out-of-pocket spending for people with incomes up to 250 percent of the federal poverty level ($29,425 for one person) if they purchase silver plans on the online marketplaces.
Despite the financial assistance provided by the health law, people with modest incomes and average medical expenses have relatively heavy financial burdens for health care, the study found.
For example, among marketplace enrollees with incomes between 300 and 400 percent of poverty ($35,310 to $47,080), half face total spending that’s greater than 14.5 percent of their income, the study found.
For people with significant medical needs, the financial burden can be heavy. Ten percent of people with incomes between 200 and 500 percent of poverty ($23,540 to $58,850) will pay at least 21 percent of their income toward premiums and out-of-pocket costs, the study found.
Older people can get hit especially hard, as the combination of higher premiums based on age and higher out-of-pocket health care costs boosts the total financial burden to 24.5 percent of income for exchange customers age 55 to 64 in the top 10 percent based on spending.
Unless policymakers address the affordability issues, it could deter people from buying coverage, Holahan said. One solution might be to tie premium tax credits to gold rather than silver plans, the researchers suggest. Gold plans provide more generous coverage than silver plans, including lower deductibles, potentially leading to lower out-of-pocket costs. Another option would be to improve the cost-sharing reduction subsidies available to lower income enrollees.
Both options could increase government spending and would need congressional approval, an option that seems unlikely under Republican control.
“Assuming you want the law to work and be broadly acceptable to people, you’re going to have to do some of these things,” Holahan said.
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