Eliminating small premiums could bolster ACA enrollment, study finds

Eliminating the very small premium costs charged to some Americans under the Affordable Care Act (ACA) could keep tens of thousands on the insurance plans, a new study has found.

Matthew Fiedler, an economist with the Brookings Institute, estimates that 48,000 fewer Americans would drop their ACA plans if adjustments were made to eliminate the very small premiums that some pay (estimated at around $3 per month). Fiedler argues that even though the lower-income enrollees usually can afford the few dollars involved, they sometimes will drop coverage due to “cognitive and hassle costs,” that come with dealing with health insurance premiums.

In the weeds of the ACA—small obstacles trip up enrollees

The paper gets into some relatively overlooked details of ACA coverage that could nonetheless make a big difference in coverage for many Americans, especially in states that rely on the federal Healthcare.gov marketplace.

In recent years, as part of COVID relief packages, ACA premiums were reduced to zero for enrollees with incomes at or below 150 percent of the federal poverty level (FPL). However, that feature of ACA coverage will end if Congress does not act to extend the current premium rates, meaning that small premium costs may return for many plan members.

Read more: Adjusting subsidies for younger ACA enrollees could lower costs for all

There are additional rules about tax credit dollars that enrollees qualify for under different types of coverage, and those scenarios can result in enrollees having to pay relatively small amounts of premiums. The analysis also notes that the number of people with small premium costs could rise significantly if the “Medicaid coverage gap” is addressed. The Biden Administration’s “Build Back Better” plan — which is still being considered by Congress — would close this loophole.

Balancing the costs and benefits

The Fiedler paper points to other research that shows small premiums can discourage some people from enrolling in an ACA plan. “There is clear empirical evidence that requiring enrollees to pay even small positive premiums meaningfully reduces insurance enrollment,” the report says.

Fielder goes on to say there are clear benefits shown when small premiums are eliminated for lower-income enrollees. In addition to reducing the hassle factor for enrollees, these benefits include better financial stability for those affected, improved access to care, better health outcomes, and reduced uncompensated care costs for health care providers.

“An important implication of this discussion is that, if increasing insurance coverage among enrollees who currently owe small positive premiums is desirable (in the sense that the benefits of covering these enrollees outweighs the fiscal cost of subsidizing their coverage), then eliminating these small premiums will also be desirable,” Fiedler writes.

In addition, there are administrative costs for insurance carriers associated with collecting this type of premiums. On the other hand, covering these premium costs would result in higher spending by the government. The report said that these costs and benefits can be measured in a variety of ways, but since the amount being covered is relatively small per enrollee, the overall increase in government spending would be relatively small as well.

Fiedler continues, “Indeed, even if the fiscal cost of paying for these enrollees’ coverage outweighed the direct benefits of that coverage, eliminating small premiums might still be worthwhile to reduce hassle costs. Only if the fiscal cost of paying for these enrollees’ coverage meaningfully outweighed the benefits of that coverage would relieving enrollees of these small premiums likely be undesirable.”