New research from Avalere finds that under the American Health Care Act (AHCA), low-income individuals who purchase insurance on an exchange would lose access to cost sharing subsidies that help make accessing healthcare affordable. In a nutshell, the AHCA as written will lead to higher costs for low income and vulnerable Americans.
Currently, these cost sharing reduction (CSR) subsidies reduce deductibles by up to 93 percent and maximum out-of-pockets (MOOPs) by up to 85 percent. The AHCA, as approved by the House, repeals CSR subsidies that reduce out-of-pocket costs for low-income consumers earning less than 250 percent of poverty ($29,700 for an individual). Approximately 5.9 million individuals (56 percent) who purchase coverage on the exchange receive some form of CSRs.
“Eliminating the CSRs could lead to significantly higher costs for a large number of low-income individuals,” said Caroline Pearson, senior vice president at Avalere. “Even if people can pay their monthly premiums, the out-of-pocket costs or other restrictions on benefits may render the coverage unaffordable.”
The Affordable Care Act (ACA) included CSRs to lower cost sharing, including deductibles and maximum out-of-pocket limits or MOOPs (the maximum an individual can pay out-of-pocket for the year). CSRs are available at differing levels of generosity depending on an individual’s income. For example, individuals earning between $12,000 and $18,000 a year (100% to 150% of the FPL) who receive the most generous CSRs had their deductibles reduced from $3,703 to $243 on average and their MOOPs lowered from $6,528 to $978 in 2017.
While the AHCA eliminates CSRs, it also allows states to grant insurers additional flexibility to design benefits, including cost sharing and covered services. In some cases, insurers may choose to offer lower-priced plans or products that include low cost sharing in combination with other design elements (i.e. high-value networks). However, without the CSRs, the scope and affordability of such plans will depend on decisions by states and insurers.
“Compared to the ACA, the AHCA provides no guarantee of affordability for low-income consumers purchasing on the exchange,” said Elizabeth Carpenter, senior vice president at Avalere. “Depending on how states and insurers choose to approach market rules and benefit design, you could see significant variation across states in terms of affordability for low-income consumers.”
Health reforms should build a workable system that helps transition people on the threshold of Medicaid eligibility into the exchanges. Unfortunately, the AHCA doesn’t do this, and the elimination of the CSRs in combination of the AHCA age-based tax credits ensure that low-income individuals will not receive enough financial assistance for health care. So those who are on Medicaid, would rather stay on Medicaid because the benefits are better at a much lower cost. And really, who wouldn’t?