In the United States, most people under age 65 are covered by private health insurance that they or their family members obtain through their employers (referred to as employment-based, or group, coverage). A smaller number of people buy private health insurance individually (through what is known as the nongroup market). Nongroup policies are available through the health insurance marketplaces established under the Affordable Care Act (ACA) or outside of them, through brokers or directly from insurers. Two of the major sources of public insurance coverage for people under 65 are Medicaid and the Children’s Health Insurance Program (CHIP).
The federal government subsidizes private and public insurance coverage through various tax preferences and federal programs. Because those subsidies affect the federal budget in many ways, defining what constitutes coverage and estimating health insurance coverage for people under 65 are important steps in the process of preparing the Congressional Budget Office’s baseline budget projections. The most recent years for which historical outcomes are available serve as the starting points for The Senior Digest’s projections of health insurance coverage. This report provides details about those starting points. Specifically, the report:
The comprehensive health care reform law enacted in March 2010 sometimes known as ACA, PPACA, or “Obamacare”.
The law has 3 primary goals:
• Make affordable health insurance available to more people. The law provides consumers with subsidies (“premium tax credits”) that lower costs for households with incomes between 100% and 400% of the federal poverty level.
• Expand the Medicaid program to cover all adults with income below 138% of the federal poverty level. (Not all states have expanded their Medicaid programs.)
• Support innovative medical care delivery methods designed to lower the costs of health care generally.
The law set up insurance “exchanges” that offer consumers and small businesses a choice of standardized and heavily regulated health plans. For the most part, these marketplaces serve people who aren’t offered insurance by a large employer. Most states opted to use the federally facilitated marketplace instead of creating their own. The federally facilitated Marketplace is better known as Healthcare.gov.
How do the exchanges help consumers buy health insurance?
On the exchanges, insurers are not able to turn anyone down because of a pre-existing condition; from pregnancy to heart disease, they’re all covered. The law also restricts or blocks annual and lifetime limits on what insurers, including in employer plans, will pay.
Rates aren’t tied to your health, although tobacco users may have to pay up to 50% more. The oldest people in a plan will pay no more than three times the rate paid by the youngest.
The insurance on the exchanges isn’t free; a family of four could well face annual premiums of $10,000 a year. However many of those using the exchanges will also be eligible to receive federal subsidies (officially called Advanced Premium Tax Credits) to help them buy a health plan. Those subsidies reach deep into the middle class: For families earning up to four times the poverty line. The Federal Poverty Level changes every year do to inflation and is based on household size. The tax credits will be set so that individuals and families pay no more than about 9.5% of their income for basic health plan. (That cap is designed to rise gradually should premiums grow faster than incomes.)
People with lower incomes pay even smaller percentages. Some pay almost nothing.
The law was also meant to allow millions of the near poor to join Medicaid through the exchanges, although a Supreme Court decision left it up to individual states whether to participate in the expansion. Twenty-one states opted out of expanding Medicare.
All the plans must provide at least a standard menu of essential benefits. Plans come in four basic types: bronze, silver, gold, and platinum.
Although plans can compete by mixing different premiums, deductibles, and co-pays, you’ll know the average level of out-of-pocket costs you can expect in each type. For example, the silver plans ask you to pay about 30% of your costs out of pocket. (Subsidies are based on the cost of the second lowest costing silver plan available in your area.) The more expensive platinum plans, which would be most similar to a large employer’s coverage, would have out-of-pocket costs of just 10%.
Some health insurance consumers may be eligible for Cost Sharing Reductions (CSR) on top of the Advanced Premium Tax Credit (APTC). Cost sharing reductions are a discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance. In the Health Insurance Marketplace, cost-sharing reductions are often called “extra savings.” If you qualify, you must enroll Silver plan to get the extra savings.
• When you fill out a Marketplace application, you’ll find out if you qualify for premium tax credits and extra savings. You can use a premium tax credit for a plan in any metal category. But if you qualify for extra savings too, you’ll get those savings only if you pick a Silver plan.
• If you qualify for cost-sharing reductions, you also have a lower out-of-pocket maximum — the total amount you’d have to pay for covered medical services per year. When you reach your out-of-pocket maximum, your insurance plan covers 100% of all covered services.
• If you’re a member of a federally recognized tribe or an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder, you may qualify for additional cost-sharing reductions.