Income Distribution and the ACA
Aspects of the Health Care Outlook by Income Class
The Affordable Care Act (ACA) aims to make health care more accessible by expanding Medicaid coverage and subsidizing insurance premiums. These benefits are targeted towards low-income Americans who may have the most difficulty affording adequate coverage. Households that earn between 100 and 400 percent of the federal poverty level (FPL) are eligible for premium subsidies in the individual market, and individuals that earn less than 138 percent of FPL are eligible for Medicaid in all states that chose to accept federal funding for expanding the program. In this report, the Center for Health and Economy (H&E) examines the ten-year outlook of health care for two groups of the under-65 population: “low-income” Americas, earning less than 400 percent of FPL, as well as “high-income” Americans, earning higher than 400 percent of FPL, who are not eligible for financial support through the ACA.
Note on the Implementation of the Affordable Care Act
The predictions detailed in this report are sensitive to the implementation of the Affordable Care Act. H&E does not make projections about the success of the Health Insurance Marketplace rollout and the rate at which members of the individual market will shift into the state-based exchanges. The model currently employed by H&E assumes perfect implementation and full enrollment of eligible, individual market consumers in the state-based exchanges in 2014. Given the complications and obstacles in the first few months of enrollment, this assumption is not likely to be valid until 2015 or later. H&E will revise the projection methods for the Under-65 health insurance market after the first open enrollment period is complete.
Key Findings:
- The uninsured rate among low-income Americans under 65 is projected to fall from 22 percent to 15 percent in 2014 and from 15 percent to 11 percent for high-income Americans under 65.
- Premium spending for low-income Silver plan enrollees is projected to fall by 47 percent for single coverage and 76 percent for family coverage—accounting for subsidies—compared with the premiums for similar plans sold in 2013. The total cost of Silver plans offered to low-income Americans—without offsetting subsidies—is projected to increase by 21 percent for single coverage and 8 percent for families. Silver plan premiums for high-income Americans are expected to steadily rise throughout the analysis period.
- With a Medical Productivity Index (MPI) of 3.2, medical productivity is estimated to be highest among high-income enrollees in the individual market. The aggregate MPI of high-income Americans is projected to be 17 – 23 percent higher than that of low-income Americans throughout the analysis period.
- Over the next decade, patient access is projected to decline by 11 percent for low-income Americans and 3 percent for high-income Americans.
Insurance Coverage
| Table 1: Under-65 Health Insurance Coverage, by Category and Income (millions) | |||||||||||
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
||
| Less than 400 Percent of FPL | Non-Elderly Population |
221 |
223 |
225 |
227 |
230 |
232 |
234 |
237 |
239 |
241 |
| Total Insured |
171 |
193 |
195 |
196 |
197 |
198 |
198 |
199 |
199 |
200 |
|
| Employer Sponsored |
107 |
111 |
111 |
111 |
111 |
111 |
111 |
111 |
111 |
111 |
|
| Individual |
27 |
37 |
38 |
39 |
38 |
38 |
37 |
37 |
36 |
36 |
|
| Medicaid |
35 |
42 |
43 |
44 |
44 |
45 |
46 |
47 |
47 |
48 |
|
| Other Public |
2 |
2 |
2 |
3 |
3 |
4 |
4 |
4 |
5 |
6 |
|
| Uninsured |
49 |
30 |
30 |
31 |
33 |
34 |
36 |
38 |
39 |
41 |
|
| More than 400 Percent of FPL | Non-Elderly Population |
58 |
58 |
59 |
59 |
60 |
61 |
61 |
62 |
62 |
63 |
| Total Insured |
49 |
52 |
53 |
53 |
53 |
53 |
53 |
53 |
53 |
53 |
|
| Employer Sponsored |
38 |
40 |
39 |
38 |
38 |
38 |
38 |
39 |
39 |
39 |
|
| Individual |
11 |
12 |
14 |
15 |
15 |
15 |
14 |
14 |
14 |
14 |
|
| Other Public |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
|
| Uninsured |
9 |
6 |
6 |
6 |
7 |
8 |
8 |
9 |
10 |
10 |
|
| *Estimates are less than 1 million | |||||||||||
H&E estimates for non-elderly insurance coverage over the next ten years are shown in Table 1. In 2013, the uninsured rate for low-income individuals is estimated to be 22 percent, slightly higher than the national uninsured rate of 21 percent. The uninsured rate for high-income individuals is estimated to be only 15 percent. High-income individuals receive insurance coverage primarily through employer sponsored insurance; in 2013, 78 percent of insured, high-income individuals are estimated to have been covered by employer sponsored insurance. In contrast, only 63 percent of insured, low-income individuals receive their coverage through their employer. The individual market is estimated to have insured 15 percent of insured, low-income individuals and 22 percent of insured, high-income individuals. Medicaid and other government insurance programs are estimated to have covered 22 percent of insured, low-income individuals, whereas H&E estimates for high-income individuals insured by government health programs are less than 1 million.
After the implementation of the ACA in 2014, the uninsured rate for low-income individuals is expected to fall to 13 percent. Nearly half of the estimated gain in insured, low-income individuals is through increased enrollment in a more affordable individual market. Roughly a third of newly insured, low-income individuals are expected to be covered by Medicaid. And 18 percent of newly insured, low-income individuals are predicted to gain coverage through their employer. The high-income population is predicted to see a more modest reduction in the uninsured rate, down to 11 percent from 15 percent. Roughly two-thirds of the estimated gain in insured, high-income individuals is a result of increased coverage through employer sponsored insurance, and the rest is a result of increased enrollment in the individual market.
Beyond 2014, uninsured rates in both income groups are projected to rise over the ten year analysis period. The percentage of uninsured, high-income individuals is projected to rise more quickly, increasing to 16 percent by 2022, due to increasing premium prices unmitigated by federal cost-sharing or premium subsidies. The uninsured rate of low-income individuals is expected to rise to 17 percent by 2022. The estimated increases in uninsured persons in both income groups over the next ten years is largely due to decreasing enrollment in the individual market in response to rising premiums.
Insurance Premiums
| Table 2: Average Silver Plan Premiums, by Family Status and Income | ||||||||||||
|
|
|
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
| Less than 400 Percent of FPL | Subsidized Premium |
Single |
|
2,460 |
2,520 |
2,650 |
2,860 |
3,090 |
3,360 |
3,660 |
3,980 |
4,330 |
|
Family |
|
3,440 |
3,630 |
3,940 |
4,380 |
4,860 |
5,410 |
6,010 |
6,660 |
7,380 |
||
| Total Premium |
Single |
4,610 |
5,560 |
5,740 |
6,020 |
6,390 |
6,780 |
7,210 |
7,650 |
8,130 |
8,630 |
|
|
Family |
14,280 |
15,460 |
16,160 |
17,020 |
18,070 |
19,180 |
20,360 |
21,600 |
22,930 |
24,330 |
||
| More than 400 Percent of FPL | Subsidized Premium |
Single* |
|
5,600 |
5,330 |
5,370 |
5,760 |
6,170 |
6,610 |
7,080 |
7,570 |
8,100 |
|
Family |
|
15,280 |
15,420 |
16,010 |
17,050 |
18,150 |
19,330 |
20,570 |
21,900 |
23,300 |
||
| Total Premium |
Single* |
5,650 |
5,600 |
5,330 |
5,370 |
5,760 |
6,170 |
6,610 |
7,080 |
7,570 |
8,100 |
|
|
Family |
15,080 |
15,280 |
15,420 |
16,010 |
17,050 |
18,150 |
19,330 |
20,570 |
21,900 |
23,300 |
||
| *Estimated enrollment in these plans is very low; these estimates are associated with high degrees of uncertainty. | ||||||||||||
Table 2 displays H&E estimates for the average annual cost of a Silver plan in the individual market. In 2013, before federal subsidies were available, the average estimated annual cost for a Silver plan was roughly $1,000 less for low-income individuals than for high-income individuals. This disparity is a result of two primary factors: youth and price sensitivity. The low-income population is younger than the high-income population—and thus charged lower premiums, on average—and those low-income individuals who are older and would be charged higher premiums opt for more affordable coverage or choose not to purchase insurance. Once subsidies become available in 2014, the projected average total premium cost of Silver plans purchased by low-income and high-income individuals is more similar. The subsidies and cost-sharing benefits remove much of the incentive to purchase cheaper insurance. For the low-income population, the total estimated cost of Silver plans increases by 21 percent for single coverage and 8 percent for family coverage, exceeding the cost of Silver plans purchased by high-income individuals. (The total cost increase is largely a result of cost-sharing benefits that allow low-income individuals and families to purchase more comprehensive coverage with higher total costs for the same subsidized price.) Over the ten-year analysis period, the total cost of Silver plans purchased by low-income individuals is also projected to grow more quickly than that of Silver plans purchased by high-income individuals. Cost-sharing and premium subsidies mute the effects of rising premium prices, making low-income enrollees for which those subsidies are available less price-sensitive.
Despite a higher average total cost for Silver plans, low-income individuals are projected to spend much less on premiums after taking into account cost-sharing and premium subsidies: $2,460 and $3,440 for low-income single and family coverage compared to $5,600 and $15,280 for high-income single and family coverage in 2014. In comparison to 2013, this reflects a 47 percent drop in the price of single coverage under a Silver Plan for low-income Americans and a 76 percent drop in the price of family coverage.
Medical Productivity and Provider Access
| Table 3: Medical Productivity Index, by Category and Income | |||||||||||
|
|
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
| Less than 400 Percent of FPL | Individual |
2.9 |
2.8 |
2.9 |
2.9 |
3.0 |
3.0 |
3.0 |
3.1 |
3.1 |
3.1 |
| Employer Sponsored |
2.2 |
2.2 |
2.3 |
2.3 |
2.3 |
2.3 |
2.3 |
2.4 |
2.4 |
2.4 |
|
| Medicaid |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
1.5 |
|
| Total Insured |
2.2 |
2.2 |
2.2 |
2.2 |
2.2 |
2.2 |
2.2 |
2.2 |
2.3 |
2.3 |
|
| More than 400 Percent of FPL | Individual |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
3.2 |
| Employer Sponsored |
2.4 |
2.4 |
2.5 |
2.5 |
2.6 |
2.6 |
2.6 |
2.6 |
2.7 |
2.7 |
|
| Total Insured |
2.5 |
2.6 |
2.6 |
2.7 |
2.7 |
2.7 |
2.7 |
2.7 |
2.8 |
2.8 |
|
H&E is able to measure the medical productivity of the health insurance market using the Medical Productivity Index (MPI), designed by economists to describe the relative incentive for providers to give efficient care to plan beneficiaries. Table 3 shows that the MPI for high-income individuals is projected to be higher than that of low-income individuals in both the employer sponsored market and the individual market. Cost-sharing and premium subsidies lead low-income individuals to enroll in more comprehensive insurance plans with lower associated medical productivity. The aggregate MPI is projected to be 17 percent higher for high-income individuals than for low-income individuals in 2013, and 22 percent higher in 2022. The large spread in aggregate MPI is also influenced by the Medicaid population among low-income individuals, which is associated with low medical productivity.
| Table 4: Provider Access Index, by Category and Income | |||||||||||
|
|
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
| Less than 400 Percent of FPL | Individual |
3.3 |
3.1 |
3.0 |
2.8 |
2.7 |
2.6 |
2.6 |
2.5 |
2.4 |
2.4 |
| Employer Sponsored |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
|
| Medicaid |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
1.0 |
|
| Total Insured |
3.1 |
3.0 |
3.0 |
3.0 |
2.9 |
2.9 |
2.9 |
2.8 |
2.8 |
2.8 |
|
| More than 400 Percent of FPL | Individual |
2.3 |
2.1 |
2.1 |
2.0 |
2.0 |
2.1 |
2.1 |
2.1 |
2.1 |
2.1 |
| Employer Sponsored |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
3.8 |
|
| Total Insured |
3.6 |
3.5 |
3.5 |
3.5 |
3.5 |
3.5 |
3.5 |
3.5 |
3.5 |
3.5 |
|
Similar to productivity and cost control, provider choice is an important aspect of national health reform, and H&E predicts the ten-year outlook using the Provider Access Index (PAI). Table 4 shows that the PAI for high-income and low-income individuals in the employer sponsored insurance market is equal and constant throughout the analysis period. Low-income individuals have a higher PAI in the individual market, reflected their ability to purchase more generous coverage through premium subsidies and cost-sharing benefits. However, the aggregate PAI is higher for high-income individuals, primarily because of minimal enrollment in Medicaid or other government health programs. The PAI for low-income individuals falls throughout the analysis period, as increasing health insurance premiums lead individuals to choose less costly plans with narrow networks. Over the next decade, the PAI is projected to fall by 11 percent for low-income Americans and by 3 percent for high-income Americans.