Keeping up with the cost of health care is a race that, more and more, Diane Rice believes she’s losing.
“I’m a cancer patient, I already missed an appointment with my oncologist. I work at three colleges and can’t get insurance at any of them. I’m 61 ... I live alone and I don’t have any money,” said Rice, a part-time professor who lives in Doylestown. “So, yeah, I’m worried.”
Rice is about to lose even more ground.
She is among the 8.9 million people who buy health insurance through the Affordable Care Act marketplace and receive an income-based tax credit to offset the cost of the premium. For Rice, the credit has made it possible to buy insurance.
But in 2020, a new rule for the ACA marketplace will reduce tax credits for 7.3 million people — a majority of those who receive them — resulting in higher premiums, analysts estimate. And 70,000 more people are expected to be pushed out of the marketplace when they are unable to afford the higher premiums, by the government’s own estimate. Some may opt for cheaper short-term plans with less coverage, but most are expected to be uninsured.
The policy change will also increase the amount that insurers can require members to spend on their own care before the plan takes over paying in full. In 2020, the so-called out-of-pocket maximum for most insurance plans — including those acquired from employers — will increase by $200 to $8,150 for an individual. The limit for a family will rise $400, to $16,300.
President Donald Trump, who long has vowed to eliminate the ACA but hasn’t won backing from Congress, does have authority over the Centers for Medicare and Medicaid Services (CMS), the agency that operates the program. Critics say the change is just a back-door way to weaken the signature legislation of the Obama administration.
CMS described the policy as a “technical adjustment,” but a few hundred dollars more in out-of-pocket costs could be a significant shift for people who are already spread thin by rising health-care costs, rationing medication, skipping doctor’s appointments, and even dropping their coverage.
“Even a small increase really jeopardizes people’s ability to get the health care they need,” said Antoinette Kraus, director of Pennsylvania Health Action Network, which helps people enroll in coverage. “We’re concerned this rule will put health care out of reach for more people.”
Tax credit cut will affect ACA premiums
In Pennsylvania, premiums for individual health plans dropped an average of 2.3 percent in 2019, but many people in the Philadelphia area saw their costs go up as tax credits declined along with premiums.
Rice’s tax credit dropped about $200 dollars, to $735 this year, even as her projected income fell $4,000. With a smaller tax credit, Rice could no longer afford her old plan. She switched to a plan that has a premium of just $4 a month, but that requires her to pay the first $6,700 in health-care costs out-of-pocket before the plan pays in full.
Rice doesn’t have that kind of money, so she’s been putting off doctor’s appointments and trying to self-treat any medical issues that arise.
She worries about how she’ll afford even this lesser plan if her tax credit shrinks again.
“We’ll see. I’m trying the best I can to find ways to save money, cut corners, just to put something aside,” she said.
In the new rules for the ACA marketplace that the Centers for Medicare and Medicaid Services released earlier this month, the government said it plans to change a key formula that affects the size of ACA marketplace tax credits.
The so-called premium adjustment percent determines what portion of their income people who qualify for financial help should be required to spend on health insurance. People who earn less pay a smaller portion of the premium than higher earners. Tax credits make up the difference, with the lowest earners receiving the largest tax credits.
To date, the government has based its formula on premiums data from employer-based insurance plans because they were more stable than individual plans, especially in the ACA marketplaces’ nascent years.
Now that the ACA marketplaces are more stable, individual premium data should also be included in the formula, CMS said.
The end result is that people who shop through the ACA marketplace and receive subsidies will be required to pay a greater portion of the premium price and their tax credits will be smaller.
The government expects to spend $980 million less on tax credits in 2020.
The effect on individuals and families will depend on their income level. An individual who earns $40,000 a year would pay an extra $102, while a family of four with annual income of $80,000 would pay an additional $204, according to an analysis by the Center on Budget and Policy Priorities.
“It’s a modest change, but it will feel meaningful to people buying insurance on the marketplaces, many of whom have very little discretionary income,” said Larry Levitt, a senior vice president for health reform at the Kaiser Family Foundation. “The biggest concern right now about the ACA is how affordable the coverage is and this will make it less affordable.”
Employer-sponsored plans also affected
Pennsylvania boasts a historically low uninsured rate of 5.5 percent, since the ACA expanded residents’ access to private insurance and Medicaid, the government insurance plan for the poor.
But data for 2018 hint that the number of people who are uninsured may be rising again, as Republicans continue to chip away at key aspects of the law.
Republicans essentially eliminated the penalty for not buying insurance for 2019, though some states, including New Jersey, have established their own mandates. At the same time, Trump has loosened restrictions on cheap plans with thin benefits that are increasingly being marketed as full health insurance and recently renewed his call for the law to be thrown out entirely.
About 15.5 percent of working-age adults were uninsured in 2018, up from a low of 12.7 percent in 2016, according to a survey by the Commonwealth Fund.
Five percent of survey respondents said they planned to drop coverage in 2019, when the penalty for being uninsured was eliminated.
Meanwhile employer-sponsored health insurance is also getting more expensive, with premium increases outpacing inflation and pay raises.
The CMS policy change will add to workers’ expenses, said Katie Keith, a part-time researcher with Georgetown University’s Center for Health Insurance Reforms.
Under the ACA, plans are required to establish an out-of-pocket maximum. This ceiling protects people from catastrophic health-care costs that can arise from a long-term illness, cancer treatment, an extreme accident.
Even without an unexpected accident or illness, people who must take routine medications such as insulin can easily meet their plan’s out-of-pocket maximum in a year.
The ceiling rises annually, but because of this policy change, it’s expected to increase more than it would have in 2020, to $8,150 an individual and $16,300 for a family.
“It’s not uncommon for people to be hitting that max. A lot of people won’t need $8,000 of health care, but for folks who do, it’s a huge financial protection,” Keith said.