Key Implementation Issues: Affordability
Medicaid and CHIP provide affordable coverage options to children in low-income families. To create more affordable coverage options for individuals and families at higher-income levels, the federal government will provide an Advanced Premium Tax Credit (APTC) for individuals and families who purchase marketplace coverage with incomes between 100 and 400 percent FPL and cost-sharing subsidies for those with incomes between 100 and 250 percent FPL. Some challenges and considerations for states related to affordability of insurance plans in and out of the marketplace include:
- “The family affordability glitch”: Individuals and their dependents are only eligible for APTC and cost-sharing subsidies if their employer-sponsored insurance is deemed unaffordable. This is challenging for families because ‘affordability’ is defined and based on the total cost of coverage for the employee, not the family, being less than 9.5 percent of household income. Since individual-only premiums average $5,400 per year while family premiums average $15,000,1 many families earning less than 400 percent FPL will not qualify to receive a federal tax credit or cost-sharing subsidy.
- The final rule (Federal Register Vol. 78 No. 22) from the Department of Treasury allows spouses and children to forego employer-sponsored dependent coverage and be exempt from the individual mandate penalty since they would pay more than 9.5 percent of their income on family coverage. (If the employee also chooses to forego self-only coverage, he or she would be liable to pay the tax penalty.)
- When Should Uninsured Family Members of Employees with Access to Affordable Self-Only Employer Coverage Qualify for Premium Tax Credits? This Health Reform GPS update and brief discusses coverage options for the 6.6 percent of children that will be affected by the family affordability glitch.
- “Premium stacking”: The calculation for APTC does not take into account premiums that families may already pay for children enrolled in some Medicaid or CHIP programs. For these families who purchase coverage through multiple programs, this will mean additional financial burden. The final rule (Federal Register Vol. 77 No. 100) from the Department of Treasury states that premium tax credits offered through the marketplace cannot be increased to cover premiums associated with other minimum essential coverage, such as CHIP.
- States could consider the option to eliminate or waive CHIP or Medicaid premiums for families facing premiums in multiple coverage programs.
- Keeping Coverage Affordable: Addressing CHIP “Premium Stacking”: This FamiliesUSA fact sheet lists CHIP premiums charged in each state and discusses options to prevent or minimize the harm of premium stacking.
- Cost sharing: Despite limitations on cost sharing, out-of-pocket costs for lower-income families purchasing coverage in the marketplace will be higher than costs typical of Medicaid and CHIP, which may pose a significant barrier to coverage for many families. For example, according to an April 2013 letter to issuers from the Centers for Medicare and Medicaid Services, stand-alone dental plans sold in the marketplace are not subject to the same annual limits on cost sharing that apply for comprehensive qualified health plans. This may mean that families enrolled in stand-alone dental plans could be responsible for more out-of-pocket cost sharing per child than families enrolled in a comprehensive qualified health plans that includes pediatric dental benefits. However, analysts have questioned this policy.
- States could consider helping families understand all costs associated with their coverage by providing a combined health coverage statement that would include the total amount owed by the family—including the cost for the parents’ marketplace coverage minus any premium tax credit, and the cost of a premium for a child in CHIP or Medicaid. Potentially, the total owed by the family could then be paid to a single entity.
Additional State Resources
Utah: This Georgetown University Center for Children and Families blog post examines Utah’s experience designing a small business marketplace that allows employers to decide how much they contribute per month to employees’ health premiums.
What a Difference a Dollar Makes: Affordability Lessons From Children’s Coverage Programs: This NASHP issue brief examines the affordability of coverage options that will become available as states implement the ACA and highlights examples of states that have implemented modified cost-sharing requirements for CHIP families.
Finding Coverage in a Health Insurance Exchange: Coverage, Benefits, and Subsidies for Families and Children: This Mathematica presentation summarizes and compares cost for children and families to have coverage through the marketplace versus CHIP.
How Much Will a Family Spend Under the New Federal Health Law? The University of California Berkeley Labor Center created an interactive calculator that estimates how much individuals and families will spend on premiums and their maximum out-of-pocket costs under the health law.
Realizing Health Reform’s Potential: Will the Affordable Care Act Make Health Insurance Affordable? This Commonwealth Fund issue brief explores whether the subsidies available through the ACA are enough to make health insurance affordable for low-income families.
Unaffordable Affordability in Health Care Reform? The First Focus blog explores the idea that for many families coverage will remain too expensive even with the “affordability” provisions from the ACA.
1Employer Health Benefits 2012 Summary Findings. (The Kaiser Family Foundation and Health Research & Educational Trust, 2012)