Supreme Court ruling is only one factor in health insurance decisions
At the end of its 2014-15 term the Supreme Court decided that the key component of the Affordable Care Act---the tax subsidies available to help people buy health insurance---would continue in all states. Justices addressed a challenge that the subsidies were legal only in the 17 states that ran their own shopping exchanges and not in the rest that chose to use the marketplaces operated by the federal government.
That’s good news for the more than six million Americans whose subsidies were in doubt. The government’s own statistics make clear that most of these people would not be able to buy coverage without the extra help.
The law was aimed at providing health insurance primarily for the poor and near poor, and the government’s numbers show that indeed people in those groups are buying policies on the exchanges and qualifying for subsidies. This year 87 percent of ACA enrollees qualified for subsidies, which averaged $263 a person for the year in the states with federally-run exchanges. For many that sum substantially reduced their premiums. Losing the subsidies would have thrown these people back into the ranks of the uninsured.
Millions of those who bought the silver plans—a middle level of coverage---also qualified for additional help paying high deductibles, copays, and coinsurance (a percentage of a bill) that come with most health insurance policies these days. For those in that group the extra subsidies make insurance more affordable.
What about everyone else?
Lost in the cheering over the Supreme Court’s decision is the fact that only about 40 percent of Americans eligible for policies in the exchanges signed up in the first and second enrollment periods. That leaves about 18 million people who are eligible to sign up when open enrollment starts again on Nov. 1.
Among them no doubt are lots of families with middle incomes in the $40,000 to $80,000 range. Subsidies decline as family income rises so those with incomes near the top of the subsidy range actually receive very little help, and if they buy the better gold or platinum policies which cover more, they get no subsidy for any cost-sharing.
This may help explain why enrollees are concentrated among those with lower incomes. Experts are not sure whether overall growth in the ACA exchanges will simply be smaller than predicted--meaning more people will be uninsured--or whether it will just take longer to prod them to sign up.
Either way, it’s troubling. “Obamacare will neither be politically or financially sustainable if it does not sign up enough people,” says health insurance consultant Robert Laszewski.
Whether the number of enrollees climbs higher in the next enrollment period will depend on whether families and individuals think they can squeeze an insurance premium into their monthly budgets. They will make that calculation whether or not they are eligible for subsidies.
The decision will depend on how expensive the premiums turn out to be, and while most of the states have yet to approve the final rates for 2016, an actuary for a major consulting firm told me, “there’s a tendency for higher rate increases than last year.”
Oregon just announced final rates, the first state to do so, and the news was not good with the state insurance commissioner approving double-digit increases. Health Republic Insurance, for instance, one of the Oregon co-ops, asked for a 37.8 percent average increase on its silver plans for a 40-year-old. The state’s other co-op got a 19.9 percent increase. (The ACA authorized co-ops in order to inject more competition into the market.) Insurers in other states are also are asking for double-digit increases.
What’s the reason? The actuary told me that medical costs, which drive a large chunk of the total premium, are up about one percentage point this year, and this increase appears to be greater than last year. He added some companies that had lower rates last year have higher ones this year. Companies with high rates in the past may opt for lower ones this year to grab new customers seeking cheaper premiums.
We won’t know for several months whether premiums will be affordable enough to attract some of those 18 million Americans who still haven’t signed up. But in the long run it will be the dollars and cents calculations about family budgets not the Supreme Court that will determine the future of the Affordable Care Act.