How the Affordable Care Act of 2010 Will Help Low- and Moderate-Income Families
At the heart of the Patient Protection and Affordable Care Act of 2010 (ACA)—which will provide health insurance coverage to some 32 million uninsured people over the next 10 years—is a recognition of the needs of low- and moderate-income people.1
People in these lower-income groups have been the most affected by the nation's inability to enact comprehensive health reform until this year. While most people in the U.S. have health insurance through an employer, the chances of having job-based benefits decline dramatically with income. Nearly two-thirds of the 45.7 million uninsured people under age 65 have incomes that are less than 200 percent of poverty, or about $44,100 per year for a family of four (Exhibit). In addition, of the estimated 25 million underinsured adults—those who cannot afford their out-of-pocket medical costs despite having insurance—more than half have incomes under 200 percent of poverty.2
These statistics are about to change: the ACA will have significant effects on the coverage of families with low and moderate incomes (under $88,000 a year). Beginning in 2014, many of these families will gain access to affordable, comprehensive coverage through a substantial expansion in Medicaid eligibility and the provision of subsidized private insurance.
State exchanges and subsidized coverage. The ACA also establishes state health insurance exchanges for small employers and individuals without employer or public coverage. People buying insurance on their own will have far better information about what health plans cover than they do today. Through the exchange, employers and individuals will be able to choose among plans that have a federally determined "essential benefit package" comparable to employer-sponsored plans, with four different levels of cost sharing: bronze (covering an average of 60 percent of an enrollee's medical costs), silver (70 percent of medical costs), gold (80 percent of medical costs), and platinum (90 percent of medical costs). For all plans, out-of-pocket costs will be limited to $5,950 (single policies) and $11,900 (family policies).
For the first time, people buying coverage on their own will have access to a premium subsidy. Premium credits will be tied to the silver plan sold through the exchange and will cap premium contributions for individuals and families to about 3 percent of income at just over 133 percent of poverty ($14,404 for a single adult or $29,327 for a family of four). The cap will gradually increase to 9.5 percent at 300 percent to 400 percent of poverty ($43,320 for a single person and $88,200 for a family of four) (Exhibit). This subsidized private coverage has the potential to provide health insurance to up to 44 percent of those currently uninsured, or 20 million people. (Exhibit 1).4
People with low and moderate incomes will also benefit from cost-sharing credits that effectively reduce out-of-pocket costs under the silver plan from 30 percent of total medical costs to 6 percent for people with incomes up to 150 percent of poverty. Costs will drop to 13 percent of total costs for those with incomes up to 200 percent of poverty and to 27 percent for incomes up to 250 percent of poverty (Exhibit 1). In addition, out-of-pocket expenses will be capped for people earning between 100 percent and 400 percent of poverty from $1,983 for individuals and $3,967 for families, up to $3,967 for individuals and $7,933 for families.
In addition, new insurance regulations will prohibit carriers from denying coverage or charging premiums on the basis of health, placing limits on what an insurer pays annually or over a lifetime, and rescinding insurance when someone becomes ill.
The essential benefit package, out-of-pocket limits and cost-sharing subsidies, and the new insurance market regulations all will help reduce the number of people who are underinsured.
Individual mandate. Some may be concerned about the impact on low-income people of the requirement that all U.S. citizens and legal residents maintain health coverage or pay a penalty, which is set to begin in 2014. However, those who cannot find a health plan for which their contribution is less than 8 percent of their income are exempt from the penalty, as are those with incomes below the tax-filing threshold ($9,350 for an individual and $18,700 for a family).
The Congressional Budget Office estimates that about 23 million people will still lack health insurance in 2019, one-third of whom will be undocumented residents who are not eligible for coverage under the law. The remaining 15 million uninsured people are likely to be those eligible for but not enrolled in Medicaid and those exempt from the penalty or who chose to pay the penalty over enrolling. In order to achieve near-universal coverage under the ACA, it will be necessary to ensure barrier-free enrollment, seamless transitions between coverage sources, and the affordability and comprehensiveness of benefits over time.
1Congressional Budget Office, Letter to the Honorable Nancy Pelosi, March 20, 2010.
2C . Schoen, S.R. Collins, J.L. Kriss, M.M. Doty, "How Many are Underinsured? Trends Among U.S. Adults, 2003 and 2007," Health Affairs Web Exclusive (June 10, 2008): w298–w309.
3Analysis of the 2009 Current Population Survey by Nicholas Tilipman and Bhaven Sampat of Columbia University.