The Affordable Care Act of 2010 (ACA) brings sweeping
change to health insurance coverage in the United States, providing
security to millions of working age people who are currently
uninsured or underinsured or who may lose job-based health insurance in the
The law also has at its heart a recognition of the needs
of low- and moderate-income people who have been most affected by the nation’s
inability to enact comprehensive health reform until this year.
people in the U.S.
have health insurance through an employer, the chance of having employer-based
coverage declines dramatically with income. Nearly two-thirds (64.6 percent) of
the 45.7 million uninsured people under age 65 are living in households with
incomes of less than 200 percent of poverty, or about $44,100 for a family of
four (Exhibit 1). In addition, of the estimated 25 million adults under age 65
who have such high out of pocket costs relative to their income that they are
underinsured, more than half (55 percent) have incomes under 200 percent of
The Congressional Budget Office estimates that the
ACA will cover some 32 million uninsured people over the next ten years, or about
94 percent of legal residents. About 23 million people will still lack health
insurance, one third of whom will be undocumented residents who are not
eligible for coverage under the law.
As elements of the bill begin to be implemented, now
is a good time to map out which provisions in the ACA that will help low- and moderate-income
individuals and families gain access to affordable, comprehensive health
Beginning in 2014, the ACA expands eligibility for Medicaid for
all legal residents to 133 percent of the federal poverty level, about $14,404
for a single adult or $29,327 for a family of four. This is a substantial
change in the Medicaid program in its coverage of adults. Although several
states have expanded eligibility for parents of dependent children, in most
states income eligibility thresholds are well below the federal poverty level. And adults who do not have children are not
currently eligible for Medicaid regardless of income in most states.
Because almost half (46 percent) of people who are uninsured in
the U.S. live in households with incomes under 133 percent of poverty, this
provision will potentially have the greatest effect on increasing health
insurance of all the new law’s provisions (Exhibit 1)..The Congressional Budget
Office estimates that by 2019, enrollment in Medicaid will increase by 16
exchanges and subsidized coverage.
The Affordable Care Act provides for the
establishment of state or regional health insurance exchanges for individuals
and small employers. New insurance market regulations will govern health plans
sold both inside and outside the insurance exchanges, including the prohibition
of rating on the basis of health, limits on how much premiums can vary based on
age, no lifetime or annual limits on what a plan will pay, and no rescission of
coverage when someone becomes ill.
The exchanges will provide a new, regulated marketplace
in which people without access to employer-sponsored coverage that meets
certain affordability and coverage standards can purchase insurance. Qualified health plans sold through the
exchange and those sold in the individual and small group markets will be
required to provide a federally-determined essential benefit package. People purchasing coverage through the
exchanges will have a choice of the essential benefit package with four
different levels of cost sharing: plans that cover on average 60 percent of an
enrollee’s medical costs (bronze plan), 70 percent of medical costs (silver
plan), 80 percent of medical costs (gold plan), and 90 percent of medical costs
(platinum). Out-of-pocket costs are
limited to $5,950 for single policies and $11,900 for family policies.
Sliding-scale premium credits will be available to
people with incomes up to 400 percent of poverty who purchase health plans
through the exchanges. The credits will be tied to the silver plan and will cap
premium contributions for individuals and families to about 3 percent of income
at just over 133 percent of poverty ($14,404 for a single adult or $29,327 for
a family of four) and gradually increase to 9.5 percent at 300 percent to 400
percent of poverty ($43,320 for a single person and $88,200 for a family of
four) (Exhibit 1).
In addition, cost-sharing credits and lower annual
out-of-pocket limits will limit cost-sharing for low- and middle-income
individuals and families. Credits will
limit cost-sharing such that the costs covered by the silver plan (70 percent
of costs covered) will increase to 94 percent for those with incomes up to 150
percent of poverty, 87 percent up to 200 percent of poverty, and 73 percent up
to 250 percent of poverty (Exhibit 1). In addition, out-of-pocket expenses will be
capped for families earning between 100 percent and 400 percent of poverty from
$1,983 for individuals and $3,967 for families up to $3,967 for individuals and
$7,933 for families.
This subsidized private coverage available through the
exchanges has the potential to provide health insurance for up to 20 million
uninsured adults and children in households with incomes between 133 percent
and 400 percent of poverty, or 44 percent of uninsured people under age 65 (Exhibit
1).. About 29 percent of uninsured people, or 13.2 million, are in households
with incomes between 133 percent and 250 percent of poverty. People in this income range will benefit from
premium credits that will cap their premiums from 3 percent to less than 8
percent of their income. They will also
benefit from cost-sharing credits that would limit their out-of-pocket
expenditures. An additional 15 percent of uninsured people or 3.7 million have
incomes of between 250 percent to 400 percent of poverty and will be eligible
for premium credits that cap their contribution from 8 to 9.5 percent of their
There are about 5 million uninsured people with
incomes over 400 percent of poverty who would not be eligible for a premium
subsidy through the exchanges but who would benefit from the new market
regulations and standardized benefit packages with limits on cost-sharing. The CBO estimates that about 24 million
people will gain coverage through the exchanges, though not all previously
uninsured, and the majority will receive premium credits.
The essential benefit package, the new insurance
market regulations, out-of-pocket limits, and cost-sharing subsidies will also help
reduce the number of people who are underinsured. Such standards
and regulations will ensure that people have comprehensive health plans that
both encourage the use of timely, preventive services and protect against
catastrophic costs in the event of a serious accident or injury.
in 2014, all U.S.
citizens and legal residents will be required to maintain minimum essential
health insurance coverage through the individual insurance market or an
insurance exchange, a public program, or their employer or face a penalty. There are some exemptions: individuals who
cannot find a health plan that is less than 8 percent of their income net of
subsidies and employer contributions, people who have incomes below the
tax-filing threshold ($9,350 for an individual and $18,700 for a family), those
who have been without insurance for less than three months, and other
circumstances such as religious objections.
not exempt from the mandate, who cannot demonstrate on a tax form that they
have health insurance, will be required to pay a penalty equal to the greater
of $95 or 1 percent of taxable income in 2014, $325 or 2 percent of taxable
income in 2015, and $695 or 2.5 percent of taxable income in 2016, up to a cap
of the national average bronze plan premium. Families will pay a penalty of
half the amount for children up to a cap of $2,085 per family.
ability of low- and moderate-income families to either enroll in Medicaid or
purchase comprehensive, subsidized private insurance without the fear of being
charged a higher premium because of a pre-existing condition is a major
improvement from the current situation where few, if any, options for
affordable coverage exist in the absence of employer benefits. But critical to achieving near universal
coverage will be making the enrollment barrier free and seamless between different
sources of coverage, as well as ensuring both the affordability of premiums and
the quality of the benefit package over time.
Sara R. Collins,
Ph.D., is Vice President of Affordable Health Insurance at The Commonwealth