How “Affordable” Is the Affordable Care Act?

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January 14, 2014; Stateline

In his recent piece for Stateline, Michael Ollove asks whether the Affordable Care Act will give low-income people health insurance that is truly affordable. Increasingly, anti-poverty agencies are raising questions about the affordability of new health insurance. “For those with very low wages trying to raise kids, after paying for housing, electricity, food, transportation, and child care,” said Sireesha Manne, an attorney at the New Mexico Center on Law and Poverty, “asking people to pay another $50 or $100 a month, that’s just out of reach.” Manne’s concerns are shared by others. “Even with the subsidies,” Janet Varon, the executive director of Northwest Health Law Advocates added, “some people simply won’t be able to manage to pay their health insurance premiums consistently with all the other costs facing them.”

Ollove writes that there is a mechanism in the Affordable Care Act that allows states to address the problem of people whose incomes are above Medicaid eligibility thresholds but are still too poor to afford health insurance purchased on the exchanges even with the availability of federal health insurance subsidies. The law allows states to create programs called the “Basic Health Program,” which would involve federal subsidies paid to the states which would then use the funds to pressure insurers to offer less expensive coverage. Unfortunately, the federal government hasn’t issued regulations for the creation of Basic Health Program mechanisms, regulations that the advocates expected much earlier so that these state pools could have been initiated in 2014. Now, with no Basic Health Program regulations, advocates fear that these programs might not get started until 2016.

Here’s part of the problem. Families with incomes up to 400 percent of the poverty level, but too high for Medicaid, are expected to be able to pay 9.5 percent of household income on health insurance. A family of three with an income of $73,240 is supposed to be able to afford health insurance premium costs of $6,958, with subsidies available for premium costs above that. In addition, families with incomes between 133 percent and 250 percent of the poverty level can get some federal assistance with other medical expenses such as co-payments, but only if they purchase at least a “silver” plan on the exchanges (less expensive and less comprehensive coverage than “gold” and “platinum” plans, but more expensive than the bare-bones “bronze” plans).

Ollove raises an important question of what “affordable” really means. A lower income family in Mississippi may not have to pay housing costs that are anywhere near as high as a comparably poor family living in New York City. That 9.5 percent of income for a family at 400 percent of poverty in Mississippi might be much more tolerable than 9.5 percent for a family in New York City. There may, however, be factors that reverse that equation, making health expenses for a family in Mississippi more difficult than for a New York family. Unfortunately, as Sherry Glied, the dean of New York University’s Robert F. Wagner Graduate School of Public Service, said, “It isn’t like there’s a fixed definition of affordability.”

This is ultimately the challenge of the Affordable Care Act. As the website gets operational and the Republicans run out of mechanisms to attack the legislation, the challenge will be whether the new structure of expanded health insurance coverage becomes one of affordable health insurance coverage.—Rick Cohen

  • Steven Plourde

    The UNaffordable Care Act was heralded by liberals as a mechanism to expand medical insurance to everyone, regardless of their ability to pay. Its passage was a knee-jerk reaction to the election of Scott Brown to the Senate.

    In their frenzy to pass ANY law, no one in Congress or the Senate had had read the law, already passed by the Senate. It turns out that tens of millions of Americans will still fall through the cracks.

    If the rollout looks like it will be financially burdensome to low-income folks, remember that this law was written by insurance company lobbyists! The law protects insurance company premium rates and insurance company profits. Consequently, the cost of this law will be astronomical to most American families — even if it’s only $50 per month.

    I provided care to the familes who fell through the cracks (too “wealthy” for Medicaid and not “wealthy enough” to afford medical insurance), so I realize what a stretch it was for them to pay even $10 for a doctor’s visit. Even $50 a month for ObamaCare’s exchange will break the family budget.

    Under ObamaCare, no one can be denied coverage based on pre-existing conditions, but the insurance companies or exchanges can charge the going rate to cover the pre-existing conditions. Children can be covered on family plans to age 26, but the premium will not be free to keep them on the family insurance program.

    Those young, healthy folks who did not purchase insurance before will be asked to pay thousands of dollars per year to sign up for the insurance plans, but fined only $95 per year if they do not sign up. I’d pay the $95! Besides, if they develop a medical condition, they cannot be denied coverage after the medical catastrophe occurs. Financially, these people must join ObamaCare in droves and pay the full insurance premium if the program has any chance of being solvent.

  • Dennis Thompson

    This point was discussed between Hillary and Obama! They could not find a mutual agreement then.So here we are!Universal is the only way or give those who qualify access to Medicaid.It is the only way it will work as long as the economy is the way it is!Jobs jobs jobs!!!are the only way to alleviate this and Conservitatives are in the way!