When Health Insurance Prices Rose Last Year, Around a Million Americans Dropped Coverage
Posted July 3, 2018 9:01 a.m. EDT
Last year, as insurance prices rose by an average of just over 20 percent around the country, people who qualified for subsidies through the health care law hung onto their insurance. But the increases appear to have been too much to bear for many customers who earned too much to qualify for financial help.
According to a new government report, about a million people appear to have been priced out of the market for health insurance last year.
The report is the first comprehensive look by the Department of Health and Human Services at people who buy their own insurance but don’t qualify for federal subsidies under the health care law. Individuals who earn more than around $48,000 have to pay full price for their health plans; that group has faced a second round of big premium increases in 2018 and is looking at a third round of them in some parts of the country next year. The report does not provide enough information to be sure precisely how much of the difference is a result of increased prices. For complicated reasons, some people who paid full price in 2016 became eligible for subsidies in 2017, making a simple comparison of before and after numbers a little misleading.
The Trump administration also reduced advertising for the insurance sign-up period and made it harder for people to sign up for insurance later in the year, two factors that could have also depressed insurance enrollment. It is also possible that some who stopped buying their own insurance did so because they got a new job with health care benefits.
But it is reasonable to think that most of the attrition can be attributed to the spike in prices, as the Trump administration concludes.
The Affordable Care Act of 2010 set up a system where people could buy insurance on online marketplaces. People below the income threshold could qualify for subsidies if insurance in their area became too costly. People above the income threshold could buy insurance in the marketplace, or they could buy a different set of plans directly from an insurance company or through a broker.
The Obama administration frequently published information about enrollment in the official marketplaces, where more than 80 percent of customers qualified for subsidies each year. But researchers had been relying on informal estimates from the insurance industry about enrollment from those who bought coverage directly. The new report provides more official numbers on those who bought insurance themselves. It shows that sign-ups among people who did not use a subsidy fell by 1.3 million people between 2016 and 2017, the most recent year with full data.
An earlier government estimate suggested that about 300,000 people who did not qualify for help paying their premiums in 2016 would qualify in 2017. If that calculation proved true, enrollment among people without subsidies actually fell by around a million people.
“When premiums rise a lot, a lot more people become eligible for subsidies,” said Matthew Fiedler, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy, who was an economic adviser in the Obama administration.
In a news release, the Trump administration emphasized rising prices as an explanation for the dip in enrollment among higher-earning customers.
“These reports show that the high-price plans on the individual market are unaffordable and forcing unsubsidized middle-class consumers to drop coverage,” Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said in a written statement.
But the administration has taken actions that are likely to raise prices still higher for comprehensive health insurance, making the markets even less stable. Besides slashing its budget for Affordable Care Act advertising and enrollment assistance last year, the administration eliminated payments to insurance companies meant to help offset the cost of covering their lowest-income customers.
It has enacted additional policies, going into effect by next year, that could weaken the health care law markets. In January, people who fail to obtain health insurance will no longer need to pay a fine. The administration recently released a rule allowing more self-employed Americans to buy so-called association health plans, which are not subject to as many rules as health care law plans.
Another rule, to let individuals buy “short-term limited duration” insurance, which can include fewer benefits and can reject people with a history of illness, is expected to be made final soon. The administration has described the coming insurance options as a lifeline for middle-class customers slammed by price increases in the health care law markets.
But they will be useful only for people who are healthy enough to qualify for the new plans. Taken together, the new plans and the repeal of the fine will tend to draw healthier customers out of the markets, raising prices for those who remain. According to the Congressional Budget Office, the combined policies will raise insurance prices by more than 10 percent.
Lower-income customers, those who qualify for subsidies, won’t feel the pinch. But the group measured in the new report — the middle-class consumers who pay full freight for increasingly expensive insurance — will be subject to the premium increases. If their health history locks them out of the markets for association or short-term plans, Trump administration policies are likely to leave them with insurance options that are even less affordable.