Who Is Affected the Most by the ACA Subsidy Cliff? Older, Rural Americans, Report Says

A recent brief from the Kaiser Family Foundation finds that affording 2019 premiums for health insurance purchased through the exchanges set up by the Affordable Care Act (ACA) largely depends on age, where one lives, and how much money the individual makes.

Premiums for marketplace plans are mostly flat or even falling slightly on average in 2019, but the report said older adults with incomes just above the premium subsidy cutoff (400% of poverty), particularly in rural areas where premiums are highest, have the most severe affordability challenges.

Most enrollees who buy coverage through the exchanges receive premium tax credits to help them afford their monthly premiums. Subsidized enrollees are mostly shielded from premium increases because their subsidies rise along with premiums.

On the other hand, middle-income people with incomes above 400% of the federal poverty line (FPL), equal to $48,560 for an individual and $100,400 for a family of 4 this year, are not eligible for subsidies and may struggle to afford ACA-compliant plans.

Marketplace enrollment among subsidized enrollees rose from 8.7 million in 2015 to 9.2 million in 2018. However, premiums increased significantly, and the number of unsubsidized enrollees in ACA-compliant plans has fallen over this same period from 6.4 million to 3.9 million. Those with incomes over 400% of poverty have to bear the full cost of premium increases if they buy an ACA-compliant plan.

Kaiser analyzed 2019 premium data to show how affordable the lowest-cost marketplace plan is in each county, by age and income, with a focus on middle-class people whose incomes are too high to qualify for subsidies.

They only included premiums for plans that are available on the exchanges; bronze premiums for people who are not eligible for subsidies are generally similar whether an enrollee buys through the marketplace or not. Most unsubsidized enrollees who enroll in ACA-compliant plans do so outside of the exchanges

The analysis found a substantial drop in affordability between a $45,000 income and $50,000.

Why? A $45,000 income places someone at 371% of the poverty level and make them eligible for subsidies. However, add another $5000 in income, and the same person is now at 412% of the poverty level and no longer eligible for subsidies.

This is referred to as the “subsidy cliff” because subsidy eligibility ends sharply at 400% of poverty without a phase-out, even if premiums represent a substantial share of income for those above 400% of poverty.

In 21% of counties, a 40-year-old man making $50,000 would have to pay more than 10% of his income for the lowest-cost exchange plan.

However, because premiums are lower in urban areas than in rural areas, just 8% of enrollees are in a county where that would be the case.

In 25% of non-metropolitan counties (weighted by enrollment), a 40-year-old woman making $50,000 would spend more than 10% of her income on premiums for the cheapest plan available, compared with only 5% of people in metropolitan counties.

For older people living in counties with very high premiums, the subsidy cliff is drastic: in the 28 Nebraska counties with the highest premiums, a 60-year-old making $45,000 would pay nothing in monthly premiums, yet the same person making $50,000 would pay $1314 per month (32% of income) for the lowest-cost plan.

Several ideas have been put forth to address insurance affordability, ranging from the Trump administration’s actions to expand more loosely regulated short-term plans, creating state-based reinsurance programs, and other proposals, such as extending subsidies beyond 400% of poverty, and expanding eligibility for Medicaid or Medicare.

In January, CMS proposed allowing the use of ACA subsidies to buy plans that are not compliant with the ACA.