Affordable Health Insurance Is On Its Way
In 2014, health insurance marketplace exchanges will be up and running in every state across the United States. As a major part of the Affordable Care Act (ACA), these exchanges will provide an easy and consumer-friendly place for people to find and buy affordable health insurance. Perhaps the best feature of the health insurance exchanges is the federal assistance that will be offered through tax-subsidies and cost-sharing to individuals and families to help pay for insurance premiums and out-of-pocket expenses. People with household incomes less than 400 percent of the federal poverty level, or $74,124 for a family of three, will qualify for the subsidies and out-of-pocket help in the exchanges.
Looking ahead to 2014, authors of a recent study released by The Commonwealth Fund set out to see just how affordable health insurance might really be once these insurance marketplace exchanges are up and running. Using survey data, the authors determined how much “room” people have in their budgets, after covering costs of household necessities, to determine whether the federal tax-subsidies and cost-sharing offered in the exchanges will actually create affordable coverage options for most Americans. The results were cause for cautious optimism.
According to the study, an overwhelming majority of individuals and families will be able to find affordable health insurance in the 2014 exchanges. Thanks to those premium tax subsidies and help with out-of-pocket costs, around 90 percent of households will have enough room in their budgets to pay for the health insurance they need. This is promising news for folks struggling with the burden of run-away health care costs and a private insurance market too expensive to enter.
As to the remaining 10 percent who may not be able to find affordable health insurance, the study’s authors point out three major factors worth addressing: out-of-pocket health care costs, family structure, and place of residence.
The authors predict that high out-of-pocket costs will be the most common reason why some people will run out of money to pay for their medical bills. High out-of-pocket costs double and sometimes nearly triple the percentage of households that can’t afford to meet their health care needs. Because of the way the cost-sharing structure is set up in the exchanges, the financial burden of high out-of-pocket costs will hit individuals and families with household incomes from two to three times the federal poverty level the hardest. These are households with $37,060 to $55,590 annual income for a family of three. Unless states address this when creating their exchanges, one in four families in this income range with high out-of-pocket costs will not have enough money left in their budget to cover their health care expenses.
Family structure is also a significant factor in determining affordability of health insurance on the exchanges. When looking at family size, the study reveals that single individuals, compared to childless couples and families, have less room in their budgets to pay for health care. Regardless of income level, single individuals may find themselves unable to pay for their health care more often than childless couples and families in the 2014 exchanges.
Geography plays a role as well. The study’s authors pooled the states into three different categories: high cost of living, middle cost of living, and low cost of living. It turns out that households in higher-cost states have less room in their budgets for health care than households in lower-cost states. So, for instance, a family of two making $22,068 a year will find health insurance less affordable in a high-cost state like California when compared to a low-cost state like Oklahoma.
States can address all of these factors when setting up their exchanges. They can give exchanges an active role in finding and negotiating health plans with insurance companies so that the coverage options offered are of the highest quality and at the lowest prices. They can create strong conflict-of-interest rules so that the decision-makers in the exchanges have the public interest at heart rather than profit. They can pass laws making the rules for insurance companies inside and outside of the exchanges the same so that the exchange marketplaces can attract enough insurers and consumers to offer competitive and affordable insurance plans. With rules like these in place, most people will be able to find affordable health insurance, giving our families and our children a real chance for healthy futures.
This blog post was coauthored by Rachel Gielau.
