Middle-Income Enrollees Still Face High Costs with ACA Subsidies

March 03, 2021 - The Affordable Care Act subsidies for low-income and middle-income individuals reduced out-of-pocket healthcare spending and catastrophic spending for lower-income individuals, but healthcare costs remain a challenge for many enrollees in the middle-income bracket, a study published in Health Affairs emphasized.

The researchers used national survey data from the Medical Expenditure Panel Survey (MEPS) to observe healthcare spending over the course of the decade from 2008 through 2017 among Affordable Care Act enrollees with low, middle, and high incomes. They defined low-income as 139 percent to 250 percent of the federal poverty level, middle-income as 251 percent to 400 percent of the federal poverty level, and high-income as over 400 percent of the federal poverty level.

In the first four years that the marketplace subsidies were in place, out-of-pocket healthcare spending declined by 17.2 percent and enrollees were 29.6 percent less likely to face catastrophic expenditures, the study found.

“We did not, however, consistently observe similar improvements in financial protection for middle-income people eligible only for premium subsidies,” the researchers acknowledged.

“These findings contribute to ongoing policy debates about how best to address the financial burden of health care costs for patients and families and suggest that ACA Marketplace subsidies are achieving a primary objective: reducing the financial burden experienced by low-income people.”

For low-income enrollees, out-of-pocket healthcare spending dropped by $109 from $635 pre-implementation of the Affordable Care Act. Additionally, before the Affordable Care Act took effect, 8.1 percent of low-income individuals faced catastrophic expenditures. This statistic dropped by 2.4 percent after the Affordable Care Act’s implementation.

The researchers identified two reasons for the positive impact of subsidies on low-income individuals’ healthcare costs.

First, it may be the result of uninsured or underinsured individuals transitioning to the marketplace after the law went into effect.

Alternatively, the Affordable Care Act may have improved chronic disease management and preventive care access for low-income individuals. By accessing these services more regularly, enrollees would have a better chance of reducing healthcare spending on complex conditions.

The researchers noted the need for further analysis to determine the drivers behind the decreased financial burden for low-income enrollees.

Despite the reductions in costs, six percent of low-income individuals still faced catastrophic healthcare spending annually.

This could be due to a lack of awareness about their subsidy options, employer-sponsored health plans that do not protect employees from catastrophic costs, or high out-of-pocket healthcare spending caps that still exist on the Affordable Care Act market.

For middle-income enrollees, out-of-pocket healthcare spending dropped by only $38, down from $709 pre-implementation. Prior to the Affordable Care Act’s implementation, 4.0 percent of middle-income enrollees faced catastrophic expenditures, but this fell by 0.8 percent under the Affordable Care Act.

This minimal decline could point to the fact that the middle income bracket experienced lower coverage gains than the lower income bracket did. It could also indicate that less access to subsidies pushed middle-income individuals towards less comprehensive bronze-tier or high-deductible health plans.

Since the study started with the implementation of the Affordable Care Act, there was no control group to which they could compare their results, the researchers warned. Thus, the results solely reflect the impact of subsidies, not of the entire Affordable Care Act.

The outcomes also may not take into account changing low-income healthcare coverage options.

The study confirmed preceding research which has indicated that a decade after the implementation of the Affordable Care Act, healthcare coverage affordability remains a barrier to care for many individuals and families. Among the insured, 11.5 percent were unable to visit a physician due to out-of-pocket healthcare costs by the end of December 2017.

There are approximately 8.9 million Americans who do not take advantage of Affordable Care Act marketplace subsidies that are available to them, a Kaiser Family Foundation policy watch shared. However, depending on income and age, the subsidies may not be enough to offset deductibles and premium costs.

In light of these challenges, the Biden Administration recently announced that it supports expanding COBRA and Affordable Care Act premium subsidies and limiting Affordable Care Act premiums to 8.5 percent of enrollees’ incomes.