How can your study be helpful to policymakers as they discuss extending tax subsidies?
We looked at the pre-subsidy cost of insurance, comparing it to median household income, to evaluate the proportion of ACA plans that are unaffordable, both for people at 400% of the Federal Poverty Line (FPL) — which is $14,580 for an individual and $30,000 for a family of four — as well as those below 400% FPL. Guided by Commonwealth Fund definitions, we defined unaffordability as spending greater than or equal to 10% of household income on insurance premiums and/or spending greater than or equal to 5% of household income on deductibles.
We found that for a 50-year-old person with an income at 400% of the FPL, more than 75% of ACA plans available nationwide would be unaffordable without subsidies. This is problematic since more than 50% of people at this age have one or more chronic condition, meaning that they need health insurance and proper access to medical care. Thus, not extending premium tax subsidies creates affordability challenges for ACA consumers.
On the other hand, ACA premium tax subsidies are estimated to cost $350 billion over the next 10 years, meaning that American taxpayers will bear the high cost of subsidizing what is a lot of for-profit private insurance companies. As such, we are encouraging Congress to investigate the reasons why ACA premium costs are so high in the first place.
Based on your findings, even if premium tax credits are extended, they won’t offer the best long-term solution for ACA insurance plan affordability. What more is at play?
One thing that is important to keep in mind is the premium-deductible tradeoff. For many insurance plans, even if premiums stay relatively stable, deductibles go up.
Other research I have produced as well as a host of other research shows that deductibles inhibit people with serious illness from obtaining necessary medical care. Policymakers concerned about affordability need to keep an eye on both deductibles and premiums. Deductibles have, to date, been underdiscussed in policy conversations regarding the ACA and are a real challenge for those seeking access to care.
About 7.2% of the U.S. population is on an ACA plan. Why should those not on these plans pay attention to the governmental debate on premium tax credits?
The fact that the individual American taxpayer is the single biggest source of revenue to the General Fund, which is what funds the ACA premium tax credits, is why all Americans should be concerned about high premium costs. These premium subsidies represent an opportunity cost to the American taxpayer and they are taking up funds that could be used for public health, education, roads, bridges, etc., rather than being funneled to insurance companies.
You note that 85% of ACA consumers chose two specific plan tiers – Bronze and Silver – out of five offered. Why is that?
These plans have historically had more federal subsidy support, such as premium tax credits or cost sharing reductions. However, I would like to point out that other research shows that 34% of the 29 million uninsured Americans are eligible for premium tax credits but do not get insurance, indicating that even though the Bronze and Silver plans have these benefits, many Americans who should enroll in these plans do not.
Finding an affordable plan can be challenging with the surplus of insurance plans available on the ACA marketplace. Can you explain why choosing a cost-effective healthcare plan is hard to do with more options?
There are two components of health insurance selection that are highly complex. One is the sheer number of plan options to parse through — an ACA consumer has a median of 100 plan options. That’s far too many plans to consider at one time to be able to make a good decision. In contrast, employees at CU Anschutz have four insurance plans to choose from, so whittling down our choices is much easier.
The other component is the multiple variables within insurance plans — premiums, deductibles, out-of-pocket maximums, and cost sharing — that an ACA consumer needs to consider, especially because each variable will not be equally important for their individual health needs. For example, not every consumer will need cost sharing for tier 3 medications — typically brand-name drugs with higher price tags — if they are not on prescription drugs, or out-of-network infertility support if they are not a person of reproductive age. But most Americans have poor health insurance literacy, meaning they have difficulty understanding terms like deductible, tier, and in- versus out-of-network, let alone being able to figure out which variables are and are not of critical importance to consider in making good health insurance decisions.
One option many ACA marketplaces offer is navigators — someone whose job it is to help consumers select appropriate insurance options. You noted that this may not be the best cost-saving choice. Why is that?
Navigators themselves have costs, estimated by other researchers to be $1,061 per enrollment. In 2023, other investigations found navigators received $98 million and enrolled less than 1% of ACA consumers. The cost of navigators is directly passed on to ACA enrollees in the form of higher premiums, so from these data, their value is questionable.
What can consumers do to better understand health plans offered through the marketplace?
Each website selling ACA insurance is required to have some level of educational support that consumers can access. The quality and availability of the information is variable. Kaiser Family Foundation also has some helpful documentation on insurance terminology. But the reality is that we need to fund interventions that help consumers improve their health insurance literacy, and right now the grant funded landscape does not support such work and needs to shift to be able to do that.
