Eliminating the very low premium costs charged to some Americans under the Affordable Care Act (ACA) could keep tens of thousands of people on insurance plans, according to a new study.
Matthew Fiedler, an economist at the Brookings Institute, estimates that 48,000 fewer Americans would abandon their ACA plans if adjustments were made to eliminate the very small premiums some pay (estimated at around $3 a month). Fiedler argues that while low-income enrollees can usually afford the few dollars involved, they will sometimes drop out of coverage because of the “cognitive costs and hassles,” that come with processing health insurance premiums.
In the weeds of the ACA – small obstacles cause enrollees to stumble
The paper touches on 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 programs, ACA premiums have been reduced to zero for enrollees with incomes at or below 150% of the Federal Poverty Level (FPL). However, this feature of ACA coverage will end if Congress does not act to expand current premium rates, which means small premium costs may accrue for many plan members.
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There are additional rules regarding the tax credit dollars enrollees are entitled to under different types of coverage, and these scenarios may require enrollees to pay relatively low premiums. The analysis also notes that the number of people with low premium costs could increase significantly if the “Medicaid coverage gap” is resolved. The Biden administration’s “Build Back Better” plan — which is still pending in Congress — would fill that gap.
Balancing costs and benefits
Fiedler’s article points to other research that shows that small premiums may discourage some people from signing up for an ACA plan. “There is clear empirical evidence that requiring enrollees to pay even small positive premiums significantly reduces insurance take-up,” the report said.
Fielder goes on to say there are clear benefits when small premiums are eliminated for low-income enrollees. In addition to reducing the hassle factor for enrollees, these benefits include better financial stability for those affected, better access to care, better health outcomes, and reduced unpaid care costs for healthcare providers. health.
“An important implication of this discussion is that, while increasing insurance coverage among affiliates who currently owe small positive premiums is desirable (in the sense that the benefits of covering these affiliates outweigh 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 insurers associated with collecting this type of premium. On the other hand, covering these premium costs would lead to increased government expenditure. The report says that these costs and benefits can be measured in a variety of ways, but because the amount covered is relatively small per enrollee, the overall increase in government spending would also be relatively small.
Fiedler continues, “Indeed, even if the tax cost of paying for coverage for these enrollees outweighs the direct benefits of that coverage, the elimination of small premiums could still be helpful in reducing hassle costs. Only if the tax cost of paying for such enrollees’ coverage significantly outweighs the benefits of that coverage would it likely be undesirable to relieve enrollees of these small premiums.