Premium and Cost
Cost-Sharing
Sharing Subsidies under
Health Reform: Implications for Coverage,
Costs and Affordability - Update
Costs,
Bowen Garrett (bgarrett@urban.org)
( g
@
g)
Lisa Clemans-Cope
Matthew Buettgens
2009 report: http://www.urban.org/url.cfm?ID=411992
Academy Health
Boston, MA, June 29, 2010
This research was funded by the Robert Wood Johnson Foundation
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Research Questions
• What are the coverage, cost, and affordability
implications of the premium and cost-sharing
subsidies in the Affordable Care Act (ACA)?
–B
Benefits
fit off providing
idi affordable
ff d bl options
ti
mustt be
b
balanced against costs to government
–G
Greater affordability
ff d bili iincreases compliance
li
with
i h the
h
individual mandate
– High compliance is needed for broad risk pools
• What if subsidies were further enhanced?
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Will Premium and Cost-Sharing
g Subsidies
be Adequate?
• Burdens for some families can be high
under ACA
– e.g., 20% or more
• States could enhance federal subsidies
with their own funds
• Fed or states could target further
subsidies to reduce financial burdens of
premiums and cost
cost-sharing
sharing for specific
groups
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Maax premium as %
% of inco
ome
Premium Subsidy Levels
9.5%
10.0%
9.5%
9.5%
8.05%
9.0%
8.0%
8.0%
6.3%
7.0%
6 0%
6.0%
5.0%
4.0%
4.0%
3.0%
3.0%
2.0%
1.0%
0.0%
100%
0.0%
150%
200%
250%
300%
350%
Income as a % of FPL
ACA
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Enhanced
400%
Acctuarial vvalues w
with subsidy
Cost-Sharing Subsidy Levels Result in
these Actuarial Values
100%
9 %
95%
90%
85%
80%
75%
70%
65%
100%
150%
200%
250%
300%
350%
Income as a % of FPL
ACA Law
ACA Law
Enhanced
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400%
Health Insurance Policy Simulation Model (HIPSM)
• Detailed microsimulation model of the health care
system
• Estimates the cost and coverage effects of proposed
h lth care policy
health
li options
ti
• Developed by researchers at the Urban Institute, a
nonprofit nonpartisan policy research organization
nonprofit,
• Predecessor model used to provide a roadmap for
the 2006 legislation in Massachusetts
• Recent work modeled reform options for New York,
national reform options, and gave technical
assistance to officials of the Obama administration
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HIPSM Simulates Coverage Decisions of
Employers, Families, and Individuals
• Uses CPS matched with several national data sets
• Simulates state Medicaid eligibility and enrollment
• Adjusts
Adj
for
f CPS Medicaid
M di id undercount
d
• “Synthetic” firms simulate the preferences of
employees
l
• Premiums for employer and non-group health
insurance risk pools are computed iteratively based
on medical expenses, administrative load, and
subsidies
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Behavioral Effects in HIPSM
• Utility-based
y
approach
pp
– Individuals choose the available option that provides them the
highest utility
– Firms offer based on preference of median worker
– The utility-based approach can better estimate effects of
reforms that are well outside historical experience
• Total utility = Specified utility + Latent utility (error term)
• Key to HIPSM’s mechanics are the imputed error terms
that:
– Ensure baseline coverage is optimal
– Yield premium elasticity and take-up rates consistent with
assumed targets
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In HIPSM,
HIPSM Dollar
Dollar-Valued
Valued Specified Utility for
Each Coverage Option Depends on
• Expected out-of-pocket health care
expenses
• Variance of out-of-pocket health care
expenses
• Value of health care consumed
• Out-of-pocket premiums
• Tax incentives
• Expected out-of-pocket expenses / income
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What is modeled here?
• The major
j coverage
g p
provisions of the Affordable Care
Act
– Medicaid expansion to 133% FPL
– Premium rating rules
– ESI and nongroup exchanges
– Premium and cost-sharing subsidies
– Small group tax credits
– Employer assessments
– Individual mandate
• As if fully implemented in 2010; single year estimates
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Nu
umber of Nonelderlyy
Estimated Reduction in Uninsured Due to
ACA
60m
50.0
50m
40
40m
30m
20m
21.1
10m
0m
Remaining uninsured
g
(in millions)
All figures preliminary
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Baseline
ACA
Effects of ACA on Health Insurance
Coverage
300m
Nu
umber of N
Nonelderly
250m
200m
150m
50.0
21.1
8.7
Uninsured
87
8.7
60.4
Other (incl Medicare)
43.1
14 8
14.8
Medicaid/Public
41 6
41.6
12.4
100m
151.3
50m
123.6
Exchange
Nongroup (Excl
g )
Exchange)
Employer (Excl
Exchange)
All fi
figures preliminary
li i
0m
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Baseline
ACA
Effects of ACA on Health Care Spending
$120b
$100b
$ Billions
$80b
$
$60b
Aggregate Change in Spending $53.8 Billion $
$11.7
$8.6
Household
$34.5
Employer
Uncompensated Care
$40b
$20b
$0b
$50.2
‐$14.3
‐$20b
‐$40b
Exchange Subsidies
g
Medicaid/Public
‐$36.9
ACA
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Other Net Govt
All figures preliminary
Enhanced Subsidies Would Further
R d
Reduce
N
Number
b off U
Uninsured,
i
d M
Modestly
d tl
Nu
umber o
of Nonelderly
60m
50.0
Baseline
50m
40m
30m
20m
21 1
21.1
19.7
ACA
10
10m
0m
Remaining uninsured
(in millions)
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All figures preliminary
Enhanced
Subsidies
N
Number of None
elderly
Enhanced Subsidies Would Increase Nongroup
Enrollment in Exchange
45m
40m
35m
30m
25m
20m
0m
15m
10m
5
5m
0m
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41.6m
42.7m
15.2
16.6
26.4
26.1
ACA
C
Enhanced
h
d
Subsidies
All figures preliminary
Exchange
g
Nongroup
Exchange
Employer
Enhanced Subsidies Would Raise Overall Costs
Somewhat
$120b
Aggregate Change in Spending
$53.8 $55.8 Medicaid/Public
$100b
$80b
$50.9
$50.2
Employer
$ Billlions
$60b
$5.0
$8.6
$40b
$34.5
$45.1
$11.7
‐$14.3
$14 3
$8.6
‐$14.4
$14 4
Exchange Subsidies
Exchange Subsidies
‐$36.9
‐$39.4
Household
Other Net Gvt
$20b
$0b
Uncompensated
Care
‐$20b
‐$40b
‐$60b
ACA
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Enhanced Subsidies
All figures preliminary
He
ealth Care Costs a
as Percent of Inccome
Median Health Care Cost Burdens for
Nongroup Exchange Coverage
30%
25%
ACA
20%
14.1%13.8%
15%
10.3%
10%
10.9%11.1%
300– 399%
FPL
400– 499% 500% FPL or
FPL
more
6.8%
6.3%
5%
11.1%
9.7%
2.8%
0%
133– 199%
FPL
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200– 299%
FPL
All figures preliminary
Enhanced
Subsidies
He
ealth Carre Costs a
as a Perccent of In
ncome
90th Percentile Health Care Cost Burdens for
g p Exchange
g Coverage
g
Nongroup
30%
24.3% 24.0%
25%
10%
20.6% 20.5%
19.2%
20%
15%
ACA
22.4%
21.3%
14.9%
Enhanced
Subsidies
14.4%
8.0%
5%
0%
133– 199%
FPL
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200– 299%
FPL
300– 399%
FPL
400– 499%
FPL
All figures preliminary
500% FPL or
more
Summary
y and Discussion
• Premium and cost-sharing subsidies under ACA will
make coverage affordable for millions
• Health care cost burdens will remain high for many,
esp middle income families with
esp.
ith high medical need
• Enhanced premium subsidies would
– Raise coverage a modest amount (1.4m) relative to subsidy
cost ($10.6b)
– Substantially
S b t ti ll reduce
d
fifinancial
i lb
burdens
d
off ttargeted
t d groups
• Affordability likely to drive public support for reforms
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Extra Slides
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The Nongroup
g p Exchange:
g Median Health
Care Costs
$25 000
$25,000
$20,000
ACA
$15,000
13,618 13,598
9,272 9,281
$10,000
6,117
$5 000
$5,000
5,375
3 675
3,675
1,325
2,497
575
$0
133– 199%
FPL
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200– 299%
FPL
300– 399%
FPL
400– 499% 500% FPL or
FPL
more
Enhanced
Subsidies
The Nongroup
g p Exchange:
g 90th Percentile
of Health Care Costs
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