How Much Financial Assistance Are People Receiving Under the Affordable Care Act?

 

The Affordable Care Act (ACA) provides premium subsidies to low and middle income people who buy insurance on their own through new health insurance marketplaces (also known as exchanges). Subsidies generally are available to people with incomes ranging from one to four times the poverty level ($11,490 to $45,960 for a single person and $23,550 to $94,200 for a family of four). Depending on their income, people are expected to pay 2% to 9.5% of their income towards the premium for the second-lowest-cost silver plan in their area, and the federal government covers the remainder of the cost through a tax credit. People choosing more expensive plans pay the entire additional cost, while those choosing less expensive plans get the savings.  Tax credits are provided on an advance basis to people based on estimated annual income and then reconciled after-the-fact based on actual income through their tax returns.Through the end of February, 4.2 million people had applied for and selected a plan through the marketplaces. As expected, the vast majority of enrollees (83%) have qualified for premium subsidies, since people who are not eligible for premium subsidies can buy comparable coverage with similar consumer protections outside of the marketplaces.  We estimate that about 21% of those eligible for premium subsidies have applied for assistance, with significant variation across states.Using the age and tax credit eligibility of enrollees reported by the federal government, along with the marketplace premiums within each state, we estimate that 3.5 million people have qualified for a total of about $10.0 billion in annual premium subsidies, or an average of about $2,890 per person.  Total and average subsidies vary significantly by state depending on the share of eligible people who have signed up, the age distribution of enrollees, and the level of premiums in the state.  We also estimate that had all states been able to enroll people at the rate of the five most successful states, an additional 3.1 million people would have qualified for premium subsidies, with an additional $8.6 billion in subsidies being provided.

Premium Subsidies by State

The table below shows estimates for each state of the total number of people who have selected a marketplace plan as of March 1, 2014, the percentage of enrollees who have qualified for assistance, the number of subsidized enrollees, subsidized enrollees as a percentage of those eligible, the average subsidy per enrollee, and total premium subsidies in the state. Estimates are based on enrollment as of March 1, 2014 as reported by the federal government, and do not account for the fact that some people have selected a plan but have not paid the first month’s premium.

Nationwide, an estimated 83% of marketplace enrollees qualify for subsidies, ranging from 13% in the District of Columbia and 35% in Hawaii to 92% in Wyoming and 93% in Mississippi. (Members of Congress and some of their staff obtain coverage through the DC exchange and are not eligible for subsidies, which is why the percentage there is so much lower than in the rest of the country.)

The take-up rate of subsidies – that is, the percentage of those eligible who have actually enrolled – is 21% in the U.S. as a whole and ranges from 10% or less in a number of states to 32% or more in Washington, Connecticut, California, Rhode Island, and Vermont. In general, states that are running their own exchanges have higher take-up rates, though some have low take-up due to widely-reported difficulties with their enrollment systems.

Among those qualifying for subsidies, we estimate that the average subsidy is $2,890 per person, ranging from a low of $1,350 in the District of Columbia and $1,780 in Utah to a high of $4,370 in Mississippi and $4,980 in Wyoming. These amounts are highly related to the premium levels in areas within each state. Tax credits are calculated by subtracting the amount each person is expected to pay based on a percentage of their income (which does not vary by state) from the premium for the second-lowest-cost silver plan in their area. Where premiums are low, tax credits will tend to be low as well, though the subsidized individuals themselves will pay the same as people with equivalent income who live in areas with higher premiums. Similarly, average subsidies will tend to be higher in states with older enrollees since they face higher premiums.

Based on enrollment as of March 1, 2014, estimated annual subsidies total $10.0 billion nationwide. Over half of that amount is going to people in five states (California, Florida, North Carolina, Texas, and New York), related both to the size of the states and the take-up rate of subsidized enrollees.

Discussion

A significant amount of financial assistance is already flowing to individuals through the ACA. The amount varies significantly by state based primarily on the total number of people eligible for subsidies, the take-up rate among those eligible, and the premium levels within the state.

Some of the states that are running their own exchanges have had a more successful rollout since open enrollment began in October, and these states also have been able to devote greater resources to outreach and consumer assistance through grants received from the federal government. In the five states with the highest take-up of subsidy eligibles, 39% of those eligible have already enrolled (compared to 21% in the U.S. as a whole). If all states were enrolling people at the rate of the five most successful, an additional 3.1 million people would have qualified, with an additional $8.6 billion in subsidies being provided.

Open enrollment goes until the end of March, and a last-minute surge in signups could boost premium subsidies significantly.  The challenge going forward is to identify the strategies and practices used in states with higher enrollment and effectively implement them in states with lower enrollment. Enrolling most of the eligible population will likely involve more and improved methods of outreach and education and take several years to accomplish.