Subsidies make health coverage available to most families

Under the Patient Protection and Affordable Care Act (PPACA), the establishment of health care exchanges to enable individuals to purchase health insurance on the open market is proceeding as scheduled.

A report from The Commonwealth Fund indicates that 90% of American families living above the federal poverty level will be able to afford health insurance under the PPACA, and that new subsidies available through health insurance exchanges established under the law will make premiums affordable for most families.

But high out-of-pocket costs will likely mean some families will still be unable to afford health-related expenses.

The report, “Will The Affordable Care Act Make Health Insurance Affordable?,” by researchers from the Massachusetts Institute of Technology, assessed how much room people have in their budget, after paying for other necessities, to pay for health care needs.

They used consumer spending data to analyze family budgets across income levels, and compared them to the costs of purchasing health insurance through the health insurance exchanges scheduled to begin in 2014, and typical out-of-pocket health care spending.

The results show that an overwhelming majority of households have room in their budgets for the necessities, health insurance premiums and moderate levels of out-of-pocket costs established by the PPACA. For example, households between 100% and 150% of the poverty level (up to $33,525 for a family of four) spend 75% of resources on necessities—including child care, food, housing, taxes and transportation—leaving most families in that income range able to afford some health-related expenses.

However, affordability remains a concern for some families with high out-of-pocket spending, suggesting that this is the major risk to insurance affordability. Fewer than 10% of families above the federal poverty level do not have the resources to pay for premiums and typical out-of-pocket costs, even with the subsidies provided by the health reform law. For example, 10.8% to 17.5% of families with incomes between 100% and 200% of poverty, and about a quarter of families earning between 200% and 300% of poverty, who have high out-of-pocket costs could not afford all their necessities plus health-related costs. Families with incomes over 500% of poverty, or $111,750 for a family of four, have room in their budgets for health care, even with high out-of-pocket costs.

The researchers concluded that the bill’s premium subsidies appear sufficient for the vast majority of households to allow them to afford their necessary consumption. But the out-of-pocket cost protections, in the form of the cost-sharing subsidies that the government provides to low-income groups or the out-of-pocket limits facing those above three times the poverty level, leave some groups more vulnerable.

Carrie Burns is an editor at Insurance Networking News, a SourceMedia publication.