By Tara Straw
Health Affairs Blog, December 3, 2019
The Affordable Care Act (ACA) extended health coverage to more than 20 million people and strengthened consumer protections for millions more, but it didn’t dramatically change employer-sponsored coverage, the primary source of private health insurance. Employer coverage often works well, allowing many people to enroll in comprehensive health benefits using employer contributions that make premiums affordable. But compared to middle and upper-income employees, low-income workers are often offered less robust coverage, get less employer help with their premiums, and must pay a greater share of their income toward health care costs. Among workers with job-based coverage, those with income below 200 percent of the poverty line spend 14 percent of their income on premiums and out-of-pocket costs, on average. That’s far more than people between 200 and 400 percent of poverty, who spend 7.9 percent of their income, and people over 400 percent of poverty, who spend only 4.5 percent.
Some low-income workers are actually worse off with an offer of employer-sponsored coverage than without one because it locks them out of premium tax credit (PTC) eligibility in the ACA’s health insurance Marketplaces, a prohibition known as the “firewall.”
Under the ACA, the worker’s share of the employee-only premium must not exceed 9.86 percent of family income (in 2019), irrespective of the cost of family coverage, and the plan must cover at least 60 percent of expected medical costs. When an employer’s coverage offer meets that low federal bar, the ACA’s firewall provision makes low-income workers and their family members ineligible to receive a PTC for Marketplace coverage. However, employer coverage that meets the ACA standard may be more expensive and less comprehensive than Marketplace coverage. For example, under the ACA standard, a worker making $18,000 (about 150 percent of poverty) could pay up to nearly $1,800 toward premiums for single coverage in an employer plan. But if allowed to purchase a benchmark Marketplace plan, the worker’s expected contribution, net of the PTC, would be less than $750 (4.15 percent of income in 2019).
Out-of-pocket costs for low-income workers also can be much higher in a typical employer plan than in the Marketplace, after accounting for income-based cost-sharing reductions. To enable more low-income workers to purchase affordable coverage, policymakers should consider eliminating, modifying, or working around the firewall, as well as more far-reaching changes.
Eliminating The Firewall
Fixing The “Family Glitch”
Raising the Bar for Employer-Sponsored Coverage
- Requiring Employers to Pay a Higher Share
- Boosting the Value of Group Plans
Helping Workers Navigate The Options
Modifying The Employer Mandate
These options are discussed in greater detail in a Center on Budget and Policy Priorities policy analysis.
“Trapped by the Firewall: Policy Changes Are Needed to Improve Health Coverage for Low-Income Workers”
By Tara Straw
Center on Budget and Policy Priorities
For a more comprehensive report on this topic (highly recommended):
By Don McCanne, M.D.
When the policy community was designing the Affordable Care Act, you would think that they would have paid particular attention to the design of health care coverage for low-income workers and their families. In fact, the system does not work very well for far too many of them.
Tara Straw describes some flawed design features and then suggests several possibilities to improve coverage. Most of the recommendations have tradeoffs. More importantly, in the overall picture, they are only minor tweaks to our highly dysfunctional health care financing system. Yesterday’s Quote of the Day on the public option listed major structural problems with our health care financing system, none of which would be corrected by a public option, nor would they be corrected by merely tweaking the Affordable Care Act.
Many of the politicians and members of the media are now parroting the meme that people who want their private plans should be able to keep them. That means keeping the horrendous injustices built into our highly flawed health care financing system.
For a reminder of what those flaws are that would persist unless we enacted and implemented a single payer model of an improved Medicare for all, use the following link:
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