Expanding subsidies for the ACA marketplace: Yay or nay?
One health care idea floated by Joe Biden would expand ACA marketplace subsidies, which would expand access, but at what cost?
At Tuesday’s presidential debate, the two candidates briefly touched on the Affordable Care Act (ACA), which has expanded health care coverage to millions of Americans while putting new regulations in place for employers.
During the debate, Joe Biden’s proposal for an ACA “public option” was mentioned, with President Trump attacking it as socialized medicine. Regardless of the accuracy of this claim, both candidates neglected to discuss Biden’s overall proposals for expanding the ACA (also called Obamacare). That overall expansion could have a big impact on the affordability of ACA plans—the exact issue that Trump and other Republicans cite as the reason they oppose Obamacare.
Related: Presidential debate takeaways: Biden and Trump agree on role for private health insurance
The Biden proposal expands subsidies for those on the ACA marketplace—and includes provisions for those on employer-based plans to switch to more affordable ACA plans.
A new report by the Kaiser Family Foundation (KFF) explores Biden’s proposed expansion of ACA marketplace subsidies and finds it would lower the cost of coverage in the marketplace for nearly all potential enrollees—including those currently priced out of the market.
“While the former Vice President’s plan to create a public option has received substantial public attention, his companion proposal to expand ACA marketplace subsidies has been less discussed, even as it has the potential to affect the affordability of health insurance for many Americans,” KFF said of the analysis.
More access, lower costs
Although Obamacare expanded insurance coverage to an estimated 20 million Americans, many who were considered middle-class or upper-middle-class found the changes brought on by the ACA made their insurance premiums less affordable.
Premium subsidies put in place by the ACA were primarily available to lower-income Americans, resulting in a situation where those who made more money in some cases had to bear the full cost of premiums and out-of-pocket costs. For some Americans, this made health insurance very expensive, even unaffordable.
“Biden has proposed building on the ACA by increasing the amount of financial assistance and expanding subsidy eligibility beyond the current range of 100-400% of poverty for Marketplace purchasers,” the KFF report said. “In his plan, Biden would peg the benchmark for premium tax credits to the second-lowest-cost gold plan instead of the current silver benchmark, meaning premium subsidies would be higher and Marketplace purchasers could more easily afford a lower-deductible plan.”
The study said it is likely the Biden plan will lower the required contribution for subsidy-eligible individuals at all income levels.
This proposal would help many Americans, but likely would have the biggest impact on older Americans, the KFF study said. “Currently, the subsidy cliff is most extreme for older enrollees due to age rating: On average, a 60-year-old making just above the subsidy range pays 15% of their income for a bronze premium, but this payment would drop to around 1% of their income under Biden’s plan as the enrollee would become eligible for financial assistance,” the analysis said. “Premium subsidies would gradually taper off at higher incomes.”
A better deal for some workers
The Biden plan would also loosen restrictions for workers with employer-based coverage, making it easier for them to switch to the ACA marketplace. “Biden’s health care proposal would eliminate the ACA’s ‘firewall’ and ‘family glitch,’ which make workers and their family members ineligible for premium tax credits if any worker in the family is offered ‘affordable’ health insurance through their employer,” the report said. It noted that these provisions in the ACA have made employer plans much more expensive for some Americans than the plans they could find on the ACA markets—but under the current rules, those workers are restricted to employer-based plans.
“Employer-based coverage is the largest source of insurance for non-elderly people in the U.S., and introducing the option to choose subsidized Marketplace coverage over an offer of job-based insurance could improve the affordability of coverage for many individuals and households, particularly those with lower-income workers who would otherwise qualify for substantial marketplace subsidies.”
The analysis estimates that 12.3 million Americans who currently have employer-based insurance could find less expensive ACA plans, under the Biden-proposed changes. Workers shifting to ACA marketplace plans might also have lower deductibles, depending on their current insurance and the ACA plans they choose.
Overall, the KFF report concludes, the Biden proposals would lower the cost of ACA marketplace coverage for nearly all potential enrollees. “Older, middle- and upper-middle-income people would see substantial savings under these proposals,” the report said. “An average 60-year-old making $50,000 (just above the current subsidy threshold) would see their Marketplace premiums decrease by 95% for a bronze plan and by 66% for a lower-deductible gold plan. Premiums would fall dramatically in West Virginia, Georgia, Wyoming, Missouri, South Dakota, and Nebraska, since unsubsidized Marketplace premiums are currently unaffordable in many rural parts of these states.”
But the savings to consumers would have a price tag, the report noted. With expanded subsidies and the public option, the reformed ACA would cost an additional $750 billion over 10 years. The Biden plan proposes to cover those costs by raising income taxes on high-income people and raising the capital gains tax.
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