Overlooked by ACA: Many people paying full price for insurance ‘getting slammed’

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Paul Melquist of St. Paul, Minn., has a message for the people who wrote the Affordable Care Act: "Quit wrecking my health care."

Teri Goodrich, of Raleigh, N.C., has the same complaint. "We're getting slammed. We didn't budget for this," she said.

Millions of people have gained health insurance because of the federal health law. Millions more have seen their existing coverage improved.

But one small slice of the population — including Melquist and Goodrich — are unquestionably worse off. They are healthy people who buy their own coverage but earn too much to qualify for help paying their premiums. And the premium hikes that are being announced as enrollment looms for next year — in some states, increases topping 50 percent — will make their situations more miserable.

Exactly how big is this group? According to Mark Farrah Associates, a health care analysis firm, as of 2017 there were 17.6 million people in the individual market, 5.4 million of whom bought policies outside the health exchanges, where premium help is not available. Combine that with the percentage of people who bought insurance on the exchanges but earned too much (more than four times the federal poverty level, or about $48,000 for an individual) to get premium subsidies, and the estimate is 7.5 million, or 43 percent of the total individual market purchasers, according to insurance industry consultant Robert Laszewski.

And who are these people?

"They're early retirees," said Laszewski. "They're people working part time who have substantial outside income. They're people who are self-employed of any age, people who are small employers."

Melquist is one of those early retirees. He and his wife are both 59. He worked in the defense industry and retired at the end of 2016.

He said he always planned to retire at age 55, but ended up working longer in part because he knew health insurance costs were rising. When he did retire and sought to purchase coverage for himself and his wife, "I was shocked to find out how bad it actually was."

For a bronze-level plan with a health savings account, Melquist said, "we pay $15,000 a year" in premiums "and the first $6,550 [for health care expenses] for each of us comes out of our pocket. So basically you could be looking at $30,000 out-of-pocket before anything gets covered."

Insurance is important, Melquist said, particularly if a catastrophic health issue were to hit either of them. In the meantime, he can still pay the bills. But he's frustrated. "I'm not eating dog food, but I'm also not able to do stuff for my grandchildren," he said, like help with college costs. "It's not that my life is falling apart, but the [Affordable Care Act] has ruined a lot of things I'd like to have done."

The good news, if there is any, for Melquist is that premiums in Minnesota are going up by only small amounts for 2018, and in some cases going down, due to a reinsurance program passed by the state legislature that will help cover the costs for some of the state's sickest patients in the individual market. That helps keep premiums from spiking even more.

But that won't be the case in Raleigh, where Goodrich and her husband, John Kistle, work as private consultants in the energy industry.

Goodrich, 59, and Kistle, 57, bought insurance through the ACA exchange in their state for three years. When premiums reached $1,600 per month with deductibles of $7,500 each, however, "it was just unbelievable. We decided just not to get insurance," Goodrich said.

Eventually, they bought short-term plans that cover only catastrophic illness or injury. That insurance is not considered adequate under the ACA, so the couple could be liable for a tax penalty as well.

Goodrich, who volunteers to help people with their taxes in her spare time, said she has run the numbers and thinks that insurance is so expensive where she lives that the couple will be exempt from the penalty. That's because the cheapest insurance would cost the couple more than 8.16 percent of their income. Under the health law's provisions, the penalty does not apply above that because insurance is considered unaffordable.

"We try to be good citizens and do the right thing," she said. "Next year, we're trying to figure out how to make less than $64,000 so we can get subsidies." That amount is equal to 400 percent of the federal poverty line for two people, the cutoff for premium assistance because Congress assumed those who earned more could afford to buy affordable coverage.

Sabrina Corlette, a research professor at Georgetown University who specializes in health insurance, agreed that this is a population "that faced big hikes" in premiums when the health law took effect.

But, she said, in many cases people in the individual market were previously paying artificially low premiums. Some of those old policies had substandard coverage. For others, however, the higher prices are the result of one of the fundamental changes enacted by the health law. "These are folks who were benefiting from a system that was affordable solely because insurers were able to keep sick people out," Corlette said, adding that they are now being asked "to pay more of the true cost of health care."

This is a population that is also more likely to vote Republican, said Laszewski, "which is one of the grand ironies now."

Republicans in Congress and President Donald Trump have not been able to "repeal and replace" the health law. But some of their efforts are undermining it — primarily the administration's threat to stop paying billions of dollars to insurers in subsidies help some lower-income people pay their out-of-pocket costs. The uncertainty surrounding those subsidies has led insurers to boost premiums next year by an estimated 20 percent. Those who get premium help from the government won't have to pay more. But those who are paying the full freight will.

Also driving up premiums for next year, said Corlette, are the administration's threats not to enforce the individual requirement for insurance and its decision to cancel most advertising and outreach for the year's open-enrollment period that begins Nov. 1. Both of those provisions bring more healthy people into the insurance pool to help spread costs.

"One could argue that the 2014 premium increases were painful, but it was about getting us to a system that was more fundamentally fair and just," Corlette said. "Now, it's completely unnecessary price increases for unsubsidized folks that could so easily be avoided by a rational political system."

Kaiser Health NewsThis article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.


  1. Daelon Duluc Daelon Duluc United States says:

    There's another, larger group, like me, that has similar problems.

    We are the people who get insurance through our companies which are also high-deductible and high-cost.

    My company does subsidize our health insurance, but, you know, it's funny, I still end up paying nearly 500 a month and still have a $6,800 a year deductible for both me and my spouse.  We don't have the option to even shop around on the exchanges, since, there is nothing for 1000 (okay, it's only $489 per period 2x per month, and that's for the cheapest plan) a month or less and no subsidies and no choice other than to go without.

    I'm sorry, but, I simply can't afford that and still be able to pay our ultra high rents, our bills, keep ourselves fed and try to sock something away for savings.

    The same is true across my company.  We have less than a 1/3rd of our folks that actually purchase the insurance, and they're the highly paid executives or the folks with a major bread-winner spouse.

    It's just sad.

  2. Gary Price Gary Price United States says:

    And now we are suddenly hearing the truth. People who have worked all their lives, been responsible, and believe in paying their own way are being raped by Obamacare. Do the Democrats care? Not one little bit. But all the corrupt Media wants to sensationalize is the ones that are on Welfare.

  3. Marvin Lake Marvin Lake United States says:

    This Act forced upon us by Democrats who didn't even read it, (according to Nancy Pelosi when she said, "We have to pass it before we know what's in it...") should have been dubbed the Unaffordable Care Act. Not only have premiums and deductibles skyrocketed, but various taxes and tax considerations have increased significantly.  

    In addition the mandate that everyone MUST have health insurance under the ACT has put unwarranted pressure on the lower income citizens.  If you can't afford the insurance, but do not qualify for a government subsidy or a waiver, the penalty for not carrying the insurance has risen by over tremendously between the initial penalty in 2014 of 1% of an individual's Adjusted Gross Income (per IRS filings) or $95, whichever is greater, to the current penalty level of 2.5% of AGI or $695.

    Another increase that is sometimes forgotten, or ignored, penalizes income tax filers who itemize expenses and deductions.  Regarding medical expenses for those individuals, or joint return filers, where previous to the Act, only expenses exceeding 7.5% of AGI were deductible.  Now those medical expenses must exceed 10% of AGI to qualify.  Some would call that a hidden tax.  There are many tax increases affecting different parts of the population, but the bottom line is people may not realize it, but amidst all the controversy about how Obamacare was rolled out, there is a bevy of taxes lurking the the Affordable Care Act to bite many of Americans in the behind and destroy the best laid household budgets for too many of us.

  4. Robert Thompson Robert Thompson United States says:

    This article highlights the high costs for early retirees, but does not explain why many people are in that situation involuntarily.  To do that, you need to understand the negative impacts with employer provided insurance.  Or perhaps I should say government funded health insurance since employers get a tax deduction for most of the cost.  I was an IT consultant to the insurance industry for many years, and I have seen some of these impacts
    It is important to realize that Obamacare (and any other plan that deals with non-employer funded insurance) is fighting an uphill battle.  The employer plans cover the vast majority of young, healthy individuals.  Many of the remaining people cannot work because they are ill or disabled.  By allowing the employer provided plans to cherry pick the best risks, the remaining pool is much more expensive. Obamacare deals with this by providing some government funding for the poorest people.  So, we have government tax credits funding insurance for working people, and government subsidies funding insurance for poorer people.  This leaves non working middle class people to pay very high premiums with no assistance.  This often means that the cost is unavoidable.
    There is one obvious question that is not discussed.  Why would someone leave a job that provided insurance if they could not afford the insurance on there own.
    This gets into another major problem with employer provided healthcare cost.  Many people do not realize that the cost your employer pays is based on the health of the employees.  A company that employees young health individuals will be offered a lower premium than a company that has older less healthy employees.   With a large company, the risks are spread across a large number of people,so the impact is less.  However, for a smaller company, the health of each employee can impact the cost and availability.
    For instance,  a friend of mine started her own company.  It did very well and grew to about 40 people.  Then, my friend developed brain cancer which was very expensive to treat.  At the end of the year, the insurance company refused to renew the policy for the entire company.  No other insurers would touch it.  She would up selling the company to Microsoft, and declaring bankruptcy.  Fortunately, she was able to get a job at another company with a much bigger pool of employees.
    This example highlights an extreme example, but the impact of health on the cost of employer provided insurance is much more insidious.  Most people have heard that there is age discrimination because older people are at the peak of there earnings.  What they do not realize is that having too many older worker can drive up insurance cost for all of the employees.  This provides a strong incentive for companies to get rid of older employees who tend to have higher medical costs.  
    The vast majority of people that I know who have retired early did not plan to retire early.  Like many, I had planned to work until I reached 70.  Instead, I was laid off at 63.  Others I know were offered early retirement packages, but it was clear that if they did not take it, they would probably be fired.  It is very difficult to find a new job for the same reasons.

    This is only one of the problems with employer provided healthcare. The US will never have good affordable health care until we stop having employers purchasing the health coverage for their employees.

The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of News Medical.
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