The Commonwealth Fund defines underinsurance as
- out-of-pocket costs, excluding premiums, over the prior 12 months are equal to 10 percent or more of household income; or
- out-of-pocket costs, excluding premiums, are equal to 5 percent or more of household income if income is under 200 percent of the federal poverty level ($22,980 for an individual and $47,100 for a family of four); or
- deductible is 5 percent or more of household income.
This is not a massive problem for people who make under 200% of the Federal Poverty Line (FPL). In Medicaid Expansion states, even with waivers, total medical costs (premiums plus cost sharing) can be no more than 5% of declared income for people making less than 138% FPL. Individuals making under 150% qualify for Cost Sharing Reduction (CSR) subsidies that bump coverage up to 94% Actuarial Value (AV). That means a deductible under $500 or roughly 3% of income at 150% FPL. Individuals who make between 150.01% FPL and 199.99999% FPL receive CSR actuarial bump to 87% AV . This can be a $1,000 or $1,250 deductible or roughly 5% of family income.
It becomes a big problem at 200.1% FPL as the CSR subsidies scale down dramatically. An individual making 200.1% FPL gets a 3% AV bump. That could translate into a Silver plan with a$2,500 deductible and a $3,500 out of pocket maximum after co-insurance is applied. $2,500 is 12% of the individual’s income of 200% FPL or $23,500. Total exposure is 15% of individual annual income.
An individual making 250.01% FPL has a total exposure of $3,500 deductible and $6,200 out of pocket maximum. The deductible exposure is 12% of individual income and the out of pocket maximum exposure is over 20% of individual income. After people leave eligibility for CSR, their total exposure on Silver decreases as the deductible and out of pocket are constants while the numerator (income) increases.
This is a problem that will not be solved by systemic slow downs in the rate of growth of healthcare spending. That is a good goal from a system and macro-policy point of view, but even in favorable circumstances, a five year stretch where there is no net nominal health care spending growth so the same actuarial value in year 1 is achieved at the same deductible in year 5 and the Federal Poverty Level growing at 3.5% leads to significant underinsurance:
A $3,500 deductible with no other cost sharing is barely adequate insurance for families making between 200% and 300% FPL under the most favorable (and non-plausible) assumptions. $5000 deductibles are never adequate insurance for families making under 250% FPL and barely adequate insurance for families who make 400% FPL under the same optimistic assumptions. Going to more realistic assumptions (2.5% FPL growth, 3% nominal health care cost growth) the picture gets slightly worse.
What does this mean?
Bending the cost curve on a system wide basis is an important goal of the ACA. However, the level of subsidy and support to people who make between 200% and 400% of FPL is still too low. If there is a gain in cost control leading to reduced net social expenses, then some of that gain should be diverted to increasing affordability of good insurance instead of inadequate insurance that is the baseline level of coverage and protection embedded in the ACA.
And given that there is absolutely no political will to make these types of changes to increase subsidy at the federal level, these changes have to occur first at the state level as states request and implement Wyden or Section 1332 waivers. Blue states with an interest in activist and effective state health care policy can use system wide cost savings to fund part of the bump up in actuarial value of the coverage provided to the middle of the middle class.
ArchTeryx
This is the sort of calculation that affects my whole life, particularly my ability to hunt for and retain jobs.
I’m a Ph.D. in molecular virology but I also have an expensive, chronic and permanent health condition.
I basically have to swing for the fences job-wise, every time. If I live below 136% of FPL, I get Medicaid and my health care is paid for. If I get a full-salaried professional science job, I get decent income and probably a decent health plan.
But lower middle-class jobs? Few provide decent health insurance, and they pay just enough to knock me off Medicaid. That would propel me into negative income territory pretty much instantly, and thus, they are completely non-viable.
What the Right never tells folks is that a lot of the “welfare bums” are on it because they have no choice, and because the system has always been designed to make sure there’s little upward mobility. The ACA quite pointedly maintains that barrier to upward mobility, and I’m squarely in the middle of it.
I keep swinging for the fences, but until I hit a grand slam home run, I’ll be striking out every time.
But it keeps me alive and in the game.
Steeplejack
@Richard Mayhew:
Another excellent, informative post. Please realize that occasional paucity of comments doesn’t mean we aren’t reading and learning from your posts. Thanks for all your effort.
Chris
I apologize for OT’ing this so early, but this is the kind of thread where I’m likeliest to get a response to this, so –
Can anybody give me recommendations for health insurance plans that specifically cover Americans overseas (United Kingdom), preferably month to month? Either American plans that cover people overseas, or British plans (if I understand correctly, I could be covered by NHS, but only after I’d stayed in the country for a year or half a year, which still leaves that earlier stretch of time). The last time I did this kind of thing I got a fairly affordable month-to-month plan through my university, but I’m not a student anymore.
Richard, I don’t expect you to necessarily know this, especially in re British plans. But I thought these threads would be where I’d find the highest proportion of readers who do know these things. (May repeat it in an open thread later…)
beltane
My husband and I fall into the underinsured category. The employee portion of the HMO plan we had been on rose 20%, and is now unaffordable unless we want to stop eating and heating our house. The PPO’s out-of-pocket costs are around 8% of our income. Though we are in a Medicaid expansion state, this is an employer-sponsored plan so we are out of luck. Thank goodness the children are on the state plan or I’d be living in constant stress.
MomSense
The Republicans are not interested in governing for the common good. They will try to sabotage as many aspects of the PPACA as possible to prove that ObamaCare is flawed. I’m hearing from people who lost their Medicaid coverage that it is because of ObamaCare based on the notices they received from the state DHHS. Not only did the Republicans in Maine refuse Medicaid expansion they also lowered the income requirements and cut a lot of low income people off existing Medicaid. It’s appalling.
April
My husband and I are now underinsured since hub’s boss changed the deducts and coinsurince. Now deductible for one is 10% of income, with coinsurince that goes to 12%. It looks like both of us will need to make use of insurance this year so we can look forward to getting help with costs once we surpass 24% of our income. That 24% will come due probably before we even make it. How can they call this insurance? It feels more like a illness tax. I suppose we should be thankful we have insurance, but it still hits the wallet very very hard.
beltane
@April: “Health Care Land” is like another country, one where costs are much, much higher than anything else experienced in the lives of average Americans. The disparity is incredible, almost like going from a village in the rural third-world to a high-end neighborhood of Zurich.
Matt McIrvin
@ArchTeryx: It infuriates me that people continue to design social welfare programs whose means-testing has abrupt income cutoffs, even though this is obviously the wrong thing to do. All I can figure is that it’s the only politically possible outcome.
The ACA is obviously better than nothing but it’s got this flaw all over. Even discounting the absurd effects of the Medicaid hole where if you live in the wrong state, making too little money destroys your benefit.
beltane
It is also a bit bizarre that health plans include covered screenings for diseases that are very, very expensive to treat. If someone intended to design a system that was as psychologically abusive as possible, they could not do better than what we have now.
Chris
@Matt McIrvin:
The ACA is obviously better than nothing but it’s got this flaw all over. Even discounting the absurd effects of the Medicaid hole where if you live in the wrong state, making too little money destroys your benefit.
The really depressing thing to me is that the ACA was the first major step forward in American health insurance since Medicare and Medicaid were enacted… nearly fifty years previously. The ACA badly needs to be built upon, but the thought that it could easily take a similar decades-long stretch before we’re in a position to do that (all the while the problems we’re looking at now will continue to increase) is something I’m dreading. The fact that the right isn’t in the rising, ascendant position that it was in in the late sixties gives me hope that it won’t be that bad, but still…
Richard Mayhew
@beltane: Bullshit, we could design a far more abusive and psychologically traumatizing system…I know the product designers and some of them are professional assholes
On a more honest note, you’re right, it is a painful system
@Chris: I would say CHIP would count as a medium size healthcare win, but you’re general point remains. But in order for major progressive change to occur in the short windows of probable opportunity, we have to have done all of the homework and the wonkery ahead of time. That is where I’m going with my work ahead, a little voice among hopefully hundreds of wonks building a shared working model of what next looks like.
beltane
@Richard Mayhew: OK, I guess we should be grateful that the professional assholes are still kept on a leash to a degree.
Still, I have avoided recommended screenings because even a minor followup on a ambiguous result would cause severe financial damage. My family history is good and I take care of myself. That is the best I can do with the resources I have.
Curt
Never mind deductibles, I’m struggling with my monthly premiums!! The first year, somehow my tax credit covered the whole premium of a SILVER plan. This last year, despite no changes in health or income, my credit didn’t even cover a bronze plan, and I got a new monthly bill of $30. If that doesn’t sound like much, at $18,000/year, ANY added expense hurts in tangible ways. For 2016, again with no changes in health or income, my credit is staying the same, but Humana is hiking the rate of my current plan so it would now cost me $100 after-credit, which I flatly cannot afford. Are they trying to price themselves out of the bronze market or something? Even if I go for the cheapest bronze plan, I’ll still be paying more per month after my credit. I don’t understand how the credits are calculated, or why they aren’t responsive to rate increases like this, but beyond a certain point, calling this “affordable” is a sick joke!
(ETA I don’t have an expensive phone plan I could downgrade to make room for insurance, just a prepaid I buy minutes for as needed. I also don’t have a car or any of those associated expenses. I can’t live without internet, but have the cheapest plan comcast offers.)
Richard Mayhew
@Curt: are u able to change plans?
Matt McIrvin
@Chris:
You’re sure it isn’t? Sure feels to me like it is. The demographics pony is still on back-order.
Mnemosyne (tablet)
@Curt:
What Richard said, but I would also file a complaint with HHS and with whatever department in your state does oversight of health insurance. Humana could be playing games and gambling that they won’t get caught because people will chalk any increases to “Obamacare sucks!” and not realize they can complain.
Curt
@Richard Mayhew: Yes, but I’ll be switching insurers and it’s still going to cost me more, just not as much more as if I stay with Humana on my current plan.
Mnemosyne (tablet)
@Chris:
I don’t know any specifics, but I would call your local UK consulate or check their website and see if they have any recommendations. In theory, they should know which plans are valid in the UK so you would have someplace to start.
Curt
@Mnemosyne (tablet): I didn’t realize I could complain. Really, I can?!? I live in Georgia, so not really optimistic about a state-level oversight department, but I’ll look into it. What would a “successful” complaint look like? Humana maintaining my current premium?
Richard Mayhew
@Curt:
My bet is the following is happening:
a) The baseline 2nd Silver subsidy plan changed and perhaps dropped in relative price to the 1st Silver plan.
b) Humana jacked up the rates on the plan that you currently have (the rates had to be approved by the state, and if they had a sick population, the rate increase was probably justified).
c) If Human discontinued the particular plan that you were on, they could map you to a “comparable plan”
c1) this is a spot where mischief could be made as mapping allows for significant switching of plan details and pricing within the same metal band. This is probably protestable where the result is an apology and assistance in switching you to another Humana product at a lower price/benefit design within the same metal band.
d) how credits are calculated: The credit is based on the 2nd least expensive Silver plan. The subsidy is based on the gap between the expected personal contribution (a function of family income in regards to federal poverty level (@ 18G, that is about 150/155% FPL (see if you can legally reduce your income to under 150% FPL for better cost sharing (lower deductible), the expected contribution is 4% of income. From there the subsidy fills the gap between 4% of your income and the price of the 2nd Silver plan. That subsidy can be used to pay the first chunk of the premium cost on the cheapest Silver or a Bronze which lowers your monthly premium.
e) The subsidy value keeps most of the risk of premium increases on the federal government BUT if the spread between 1st and 2nd Silver decreases year over year faster than the spread between Bronze and Silver, the 1st silver looks more expensive.
Curt
Yeah, Humana is raising the monthly premium on this plan from 221 to 288, which is a 30% hike! Are rate increases of that magnitude normal?
Richard Mayhew
@Curt: Unusual but not unheard of, especially in a new market segment where there is no claims history to figure out what “typical” expense patterns look like. They either guessed low or figured that they would lose money in year 1 to build membership or a bit of both.
Curt
@Richard Mayhew: Thanks for explaining. Have you ever heard of Ambetter from Peach State Health Plan? It looks like I’ll be going with them. Their cheapest bronze plan is the closest to what I’m paying now, and they actually have two or three silvers with lower premiums than Humana’s cheapest bronze.
Richard Mayhew
@Curt: I don’t know much about Ambetter. I had a post recently on their Illinois plan (https://balloon-juice.com/2015/10/30/not-substantially-different-to-spam-the-exchanges/) so if their Georgia plan looks anything like their Illinois strategy, be very very very careful about making sure their network is adequate for your needs.
Shakti
My deductible is $5000 in network, out network is 10,000. For that to be 5% of my income I’d have to make $100k. I don’t live in a Medicaid expansion state. Nobody offers insurance, so it’s this open market shit. I’m not eligible for tax rebates either. My premium is $150/month. As it is, premiums are about 10% of my income. This is literally the cheapest plan I can find. Fuck the A part of the ACA forever. I only go to the doctor under duress and coercion. So if you see some Victorian era consumptives hacking up a lung, know it’s because they’re not taking non existent sick leave to go to the doctor to get antibiotics they can’t afford, ‘Merica.
Mnemosyne (iPhone)
@Curt:
Yes, you can. You can start with the marketplace appeals page on Healthcare.gov, but you can also search the site and see if there’s a page that fits better. Even Georgia should have some kind of consumer protection department, so I would start there.