As annual open enrollment proceeds for Affordable Care Act health plans, millions of Americans have signed up for low-cost coverage. But some people, like those who earn too much to qualify for financial help under the health care law, may find the cost of a plan daunting.
These people fall off the so-called subsidy cliff, the law’s cutoff for money-saving tax credits. For some middle-income earners, the cost of coverage can be a burden.
“It’s a group left out of the ACA,” said Cynthia Cox, director of the Kaiser Family Foundation’s Program on the ACA.
The decade-old law has expanded health insurance to about 20 million people — many of them poor — who lack affordable coverage through an employer, from whom the bulk of Americans younger than 65 still get health insurance. The law approved the sale of subsidized private health plans through government marketplaces and expanded Medicaid, the federal-state health plan for the poor, in most states.
Most people who shop on the government insurance marketplaces qualify for generous subsidies, in the form of tax credits, that drastically reduce the cost of coverage — in some cases to zero.
Still, gaps exist, including for people whose income even narrowly exceeds the threshold for subsidies set under the Affordable Care Act, commonly known as Obamacare.
Before the pandemic, about 2 million uninsured people were ineligible for subsidies because their income was too high, according to the Kaiser foundation’s research. In addition, an estimated 3 million people who bought coverage outside the government exchanges most likely wouldn’t qualify either, Cox said. (It’s not yet clear how those numbers might have shifted during the pandemic.)
For 2021 Obamacare plans bought through HealthCare.gov, the federal marketplace that serves most states, tax credits are available to people earning as much as four times the federal poverty rate, or $104,800 for a family of four. But making just a few hundred dollars over that limit may disqualify applicants from receiving tax credits because the cutoff is abrupt, rather than gradual as income rises.
According to the Kaiser foundation’s online calculator, the average subsidy for a family of two 40-year-old parents and two children with income at the eligibility threshold is $581 a month. That results in a monthly premium of $858 for a bench mark “silver” plan, or just under 10% of the family’s annual income. But a family earning $105,000, just $200 over the limit, is not eligible for help and would pay $1,439 per month, or about 16% of income, on average.
Premiums aren’t the only concern. Some Obamacare plans can have high deductibles; others don’t include dental coverage, so people must buy separate plans and pay extra premiums. Those factors can make health coverage “unsustainable” for middle-income families, especially those that are working in the gig economy or that otherwise don’t have employer coverage.
Proposals in Congress would eliminate the “cliff,” so that the amount of subsidy diminishes gradually as income rises over the poverty threshold. Some states that run their own marketplaces already offer subsidies to a broader group of residents. (California, for example, extends subsidies to those earning six times the poverty level.) President-elect Joe Biden has also proposed expanding the eligibility for subsidies nationally, among other updates.
That, however, would take an act of Congress, Cox said. The outlook depends on control of the Senate, which will most likely be determined by the two runoff elections in Georgia next month.
What steps can you take now?
For starters, don’t simply assume that you won’t qualify for subsidies, said Emily Gee, a health economist at the Center for American Progress, a policy think tank.
“Go to HealthCare.gov and verify that’s the case,” she said.
And keep in mind that the financial help is based on your income in 2021. So if you didn’t qualify this year but anticipate earning less next year, you might qualify.
People who don’t, in fact, qualify for subsidies should carefully consider if they can afford “bronze”-level Obamacare plans, which have lower monthly premiums but higher deductibles, said Cheryl Fish-Parcham, director of access initiatives at Families USA, a health care advocacy group.
It may also be worth shopping off-marketplace for “silver” plans, in particular, Fish-Parcham said; because of a policy quirk, the same silver plan might be cheaper in some states if bought directly from an insurer. Just be sure you are really getting the same plan, she advised: Find it first on the marketplace, then contact the insurer or a broker to compare pricing.
In general, it’s wise to be cautious when buying outside government marketplaces. The Government Accountability Office did a small study this summer using undercover agents who called 31 insurance salespeople. They found that while most brokers gave clear, honest information, two were confusing and eight were deceptive about the coverage in the plans they were selling.
Odd as it may sound, self-employed workers with income relatively close to the threshold might consider cutting back on work to stay within the limit, Fish-Parcham said. That involves crunching numbers to see if the trade-off makes sense; it might be worth it if your medical bills are likely to be high.
In a few states, self-employed people may be allowed to join group insurance plans for small businesses sold through brokers, according to a report from the Urban Institute.
In some cases, these small-business plans might provide cheaper coverage and larger provider networks than plans on the marketplace, said Sabrina Corlette, a research professor at the Center on Health Insurance Reforms at Georgetown University. The report cites examples in Texas, Utah and Iowa. Anthony Lopez, vice president, individual and family plans, at eHealth.com, a private insurance marketplace, said that in many states, individuals must have at least one employee to join a group plan, but a few may allow sole proprietors to join.
Next year, in particular, people receiving subsidies should carefully track their incomes, Cox said, because many workers might have swings in their pay as the economy rides out the pandemic. If someone’s income is higher than expected next year, that person may become ineligible for tax credits and have to repay the money when filing a tax return in 2022.
A less-than-ideal option is to consider a short-term health plan, which has cheaper monthly premiums but lacks important protections that ACA-compliant plans must offer. Short-term plans can deny coverage of preexisting conditions and may exclude care that is required under Obamacare plans — so you may not have coverage for care when you need it.
“They’re very scary creatures,” Fish-Parcham said.
For help understanding your options, you can contact the HealthCare.gov help line at 1-800-318-2596. Many states fund consumer assistance programs to help with health insurance questions. You can search by state online at CMS.gov.
Here are some questions and answers about Obamacare coverage:
Q: How can I tell if I am likely to qualify for financial help?
The Kaiser Family Foundation’s subsidy calculator lets you determine if you’re likely to qualify for premium tax credits by answering a few questions; you can easily enter different income amounts to see the impact on your estimated tax credit — if your pay rises or falls. HealthCare.gov’s “window shopping” tool lets you enter information about your family and receive an estimate of your tax credit; you’ll then see a menu of plans and the accompanying premiums, including the credit.
Q: What if marketplace coverage is too costly for me and I don’t qualify for Medicaid?
Some communities offer free or reduced-cost primary or preventive care, sometimes based on your income. You can search online at the federal Health Resources & Services Administration for community clinics in your area.
Q: When is the deadline for applying for 2021 coverage on government exchanges?
The deadline to buy coverage on HealthCare.gov is Dec. 15. (The coverage under those plans starts Jan. 1.) Some states, however, run their own marketplaces and have later deadlines.