Bloomberg recently ran a great story on a family that is facing hard times affording health insurance because they don’t qualify for ACA subsidies and they don’t get coverage through work. The key take-away for me is that this population is one of the few insured groups that receives very little direct assistance.
David and Maribel Maldonado seem the very definition of making it in America….David’s annual salary reached about $113,000 by the time the children were in their teens. It was more than enough to live in a pretty suburban house outside Dallas, take family vacations, go to restaurants and splurge at the nearby mall. And to afford health insurance.
Then, in 2012, Maribel discovered she had breast cancer. “Your world comes crumbling down,” David says…
Health insurance offered through the company would soon be discontinued. It had simply become too expensive for the small company to provide it.
For David, the responsible head of a thriving middle-class family, having health insurance was non-negotiable. But the coverage he found to replace the company plan cost $1,375-a-month, up from the $260 a month he had been paying.
By the end of the story, a family of four has one person insured.
This family gets no explicit help. People who make between 100% and 400% Federal Poverty Level (FPL) are eligible for premium assistance subsidies. People who are insured through work have their insurance paid with pre-tax dollars. More importantly, those payments are mostly invisible so people only react to the employee contribution coming out of their paycheck. The elderly have their healthcare from Medicare while the poor or the disabled have Medicaid. People who buy on the individual market and who make more than 400% FPL get nothing. They are some of the few people who pay full freight.
The ACA has helped this family. In an underwritten system, the mother is uninsurable at any rate that looks vaguely affordable for an upper middle class family. It has not helped enough.
Solutions that allow for healthy people to pay lower premiums by splitting the risk pool might help cover the son with affordable coverage. The daughter and the father have medical history that could lead to uprates or rejections. Splitting the risk pool will significantly increase the premiums for the mother as she can only be covered through guaranteed issue policies. As healthy people leave, the ACA risk pool is more morbid and expensive on a per-capita basis. The family would absorb a dollar for dollar increase in premiums.
Medicaid buy-in proposals could be useful as Medicaid tends to pay doctors and hospitals significantly less than commercial plans. These lower provider payments lead to lower premiums but the trade-off tends to be narrower networks and less convienent access. The other solution that is plausible is a national cap on the percentage of family income that can be assumed to be reasonable and affordable to pay for a benchmark Silver plan. A cap of 10% would allow the family to buy Silver coverage for $11,300 a year which is still significant and presumably painful but far less painful than spending almost a fifth of their pre-tax income to pay for the entire family.
A cap and a split market are not neccessarily opposing policies. I argued last year that these policies could work in conjunction with each other:
Removing the cap on ACA subsidies so every family can access the ACA Silver plan for no more than 10 percent of its family income would provide immediate relief for Senator Cassidy’s constituents and others in similar situations. At the same time, the proliferation of underwritten plans will offer less expensive options for families without health challenges.
Patients and families will be able to choose the plans that will work for them. The ACA market will mostly cover the working poor who receive high subsidies and low deductibles, as well as the very sick who need to have comprehensive benefits and broad provider networks.
The underwritten market, which Republicans support and are seeking to expand, will consist of healthier individuals whose premiums no longer subsidize the care of the chronically ill in the individual market.
This type of solution is plausible if both parties want a healthcare ceasefire over the next couple of years.