The incoming Biden administration released a very big blue-print for COVID disaster relief, vaccination and testing last night. The package also contained significant policy proposals to lower the net premiums paid by some Americans for health insurance and also to reduce transitions of coverage:
Two big health coverage proposals in Biden's emergency relief package:
An increase in ACA subsidies and extension to the middle class by capping premiums at 8.5% of income.
A temporary subsidy of COBRA continuation coverage for people who have lost job-based insurance.
— Larry Levitt (@larry_levitt) January 14, 2021
COBRA subsidies were used in 2009-2010. I had one when I was out of work. COBRA was still unaffordable. COBRA is good to reduce transitions of care, learning costs and out of pocket resets. It also tends to be very expensive for everyone involved with notable administrative burden on both the recipient and the group manager. In the context where we expect jobs to rapidly come back as we envision COVID-19 as a global, slow moving hurricane instead of a massive burst of exogenous creative destruction, COBRA keeps people tied to their former and plausibly future employer and reduces transaction and transition costs. If we think that the pre-COVID jobs won’t come back and new businesses will need to form first to absorb the currently unemployed and underemployed people in the workforce, then making the ACA more attractive makes a lot more sense.
8.5% of income for a standard silver plan is a lot of premium for a modest plan. It is also a boon to families making over 300% FPL. Families that make over 400% FPL would be newly exposed to a lot of low to no premium bronze plans and these families are likely to have either the assets or the access to non-onerous credit to make a high deductible plan design a reasonable-ish choice. Senator Cassidy’s friend from Louisiana would be prime beneficiaries of this policy:
They work so much they don’t get a subsidy. There is a fellow back home with a special-needs child. He’s paid over $40,000 a year for his premiums…
This year, he said, his premium for a Blue Cross Blue Shield Blue Max plan is $2,654 a month, for a yearly total of $31,848. His deductible is $3,300. Under the law, the out-of-pocket maximum for 2017 is $14,300 for a family plan, so the family would easily hit that with the cost of medicine. So, that’s a total of almost $46,150.
Capping benchmark premiums to 8.5% will mostly make the ACA more attractive to upper income families. It won’t help low income families who make up the majority of currently uninsured and underinsured. Improvement in risk adjustment methods to boost silver benchmarks over gold is needed. Lubrication for the squeaky points of incidental and deliberate administrative friction is needed. Reducing choice confusion is needed. Reducing out of pocket spending for common care is needed. Lots of things are needed to make the ACA as useful and practical as possible.
But last night, we started to engage in an actual policy process again.