Less than half (48 percent) of Americans who currently buy health coverage for themselves and their families in the individual market will qualify for advance tax credits to subsidize coverage purchased in the state health benefit exchange marketplace, according to a Kaiser Family Foundation paper issued this month. (That figure does not include those who qualify for Medicaid coverage in states that elect to expand coverage for households earning up to 133 percent of the federal poverty level.) The exchange advance tax credit subsidy is available in six income tranches for those with incomes between 100 and 400 percent of the federal poverty level. Those earning more than 400 percent of the federal poverty level ($45,960 for singles; $92,200 for a family of four) are ineligible for the subsidies.
A big question as the exchanges prepare to open for 2014 enrollment this October is to what extent this cohort will find their premiums exceed eight percent of their incomes. The Affordable Care Act and implementing regulations regard premiums at this level as unaffordable and exempt those meeting this test from the law’s individual responsibility requirement and associated penalties for not having coverage. They allow these individuals to obtain a certificate of exemption from state exchanges that entitles them to purchase lower cost “catastrophic” coverage on or off the exchange marketplace. (Pending California legislation, SB 639, would restrict off-exchange sales to plan issuers offering catastrophic plans through the exchange marketplace). Catastrophic plans must include the 10 essential benefits required for all individual plans beginning in plan year 2014 as well as at least three primary care visits – with a flat deductible of $6,250 for individuals and $12,500 for families.
Federal rules (45 CFR § 156.155(c)) specify that for family catastrophic coverage, each enrolled family member must meet the eight percent income to premium affordability exemption or be under age 30. Lower premiums for catastrophic plans would enable these individuals and families to avoid going without coverage in case of a major, unexpected accident or illness as well as potentially facing very costly standard hospital “rack rate” charges for those without insurance.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email