The ACA Reduced Costs for People with Individual Health Insurance
As the U.S. Congress moves to repeal and replace the Affordable Care Act, it is important to understand the impact that this law has had, particularly for low- and moderate-income families burdened by medical expenses who the law was designed to help.
A new data analysis shows that between 2013 and 2015, there was a 6.7 percentage point decline in the rate of medical financial burden for people who purchased health coverage directly from insurance companies. The study, based on data collected by the Census Bureau, considered someone to have financial burden if they spent more than 10% of family income on premiums or out-of-pocket medical costs.
“The data provide a clear signal that people in the individual insurance market experienced financial relief after the implementation of the ACA,” said Dr. Michel Boudreaux, assistant professor of health services administration in the University of Maryland School of Public Health and first author of the study published in the May issue of Health Affairs. “Unfortunately we could see a reversal to these trends if consumers lose the financial protections that currently exist through the ACA.”
A major objective of the ACA was to reduce financial burden, especially for people in what is referred to as the “nongroup or individual market” (those purchasing directly through insurers and not through an employer). To make coverage and care more affordable, the ACA instituted reforms such as eliminating the practice of charging premiums based someone’s health status. The law also provides subsidies to mitigate the burden of premiums and cost sharing for low and moderate income families. The ACA subsidies vary by income and by how much premiums actually cost. The goal was to make sure that people with low and moderate incomes would not have to pay more than a certain portion of their income on premiums or out of pocket costs.
Notably, the study showed that the decrease in financial burden was concentrated among people with low and moderate incomes (those living at 400% or below of the federal poverty level). These people, whose incomes were below $47K for an individual or below $97K for a family of four, historically had the highest financial burdens, but were able to receive subsidies in the health insurance marketplaces established by the ACA. For them, the rate of financial burden was down 10 percent after the implementation of the ACA. The average annual spending for people in the “nongroup market” declined by about $800.
Dr. Boudreaux explains that under the Republican bill, the Affordable Health Care Act (AHCA), everyone will get a flat dollar amount that varies by age, having the effect of making some people better off and some people worse off. “Young healthy people might see lower costs, but sick older people will likely see much higher costs,” he said. “Additionally, because the subsidies are not pegged to actual premium costs, they will provide less financial protection in regions that have high premiums.” The AHCA also includes large cuts to Medicaid, the program that covers some 70 million people with lower incomes. Over the long term, these changes to Medicaid may have an even greater impact on families, Boudreaux said.
“Medical Financial Burden Declined For Consumers In The Nongroup Market” was written by Michel H. Boudreaux, Gilbert Gonzales, and Brendan Saloner and published in the journal Health Affairs, May 2017.