Category Archives: rate shock

Most young adults on the individual market today will qualify for subsidies in 2014

by Adrianna McIntyre

The Kaiser Family Foundation has a new report out that examines how people currently in the individual market will be affected by the reforms taking effect in 2014. Premiums will change for  variety of reasons. You should read the whole issue brief, or Jon Cohn’s commentary here. As Kaiser acknowledges, premiums will go up for some people and down for others. They go a step further, though, and look at how many people in the current market will benefit from the premium tax subsidies.

About half (48%) of people now buying their own insurance would be eligible for a tax credit that would offset their premium. This does not include over one million adults buying individual insurance today who will be eligible for Medicaid starting in 2014 (i.e., they have family income up to 138% of the poverty level and are living in states that have decided to expand Medicaid under the ACA).

Now, that’s all adults, regardless of age. I was curious, how does that stack up against just young adults? I looked at these numbers a few months ago, but my analysis back then was limited to childless adults. Josh Fangmeier was kind enough recently to rereun the numbers for everyone, with or without kids (more related to that here). A predictable trend holds for those currently on the individual market: younger individuals tend to have lower incomes, so they’re going to benefit more than average from the exchange subsidies offered to those below 400% of the poverty line.

currentindivmkt2

Bottom line? Just over 70% of young adults that hold individual plans today could qualify for subsidies in 2014. Even if you chop off the kiddos under 26—who might not need an individual plan, since they can take advantage of extended dependent coverage—the proportion of subsidy-eligible 26- to 35-year olds is 65%, still well over the 48% attributed to the whole market.

There’s a caveat that opponents have been quick to point out in the past: in some states, young adults near 400% FPL may not receive subsidies. This isn’t a bug—the tax credits are issued to offset premiums that exceed an income-dependent threshold; in some states, premiums are actually coming in below expected rates, and below that threshold for young adults.

That’s not to say that some won’t still see an increase in their rates—many will, because insurers will be required to offer a minimum package of benefits. They’ll also be prohibited from price-discrimination against unhealthy beneficiaries. There is a valid debate that we can have about both of those provisions (it’s worth noting that two-thirds of Americans support guaranteed issue). But if you want to talk rate shock, make sure you also talk about the fact that young adults are more likely to receive subsidies than their older counterparts.

You can access a description of the methodology used to compile relevant Census data here, and a spreadsheet of the data itself here

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Adrianna is a graduate student in public policy & public health at the University of Michigan. Follow her on Twitter at @onceuponA, or subscribe to the blog. 

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How reasonable is the White House’s marketplace enrollment goal?

by Adrianna McIntyre

Last month, Josh Fangmeier and I looked at income and insurance status among young adults to analyze the possible  “rate shock” problem (see here and here if you missed them). We’ve expanded and refined the scope of our analysis to include adults with children and to allow us to more accurately account for the impact of state Medicaid expansion decisions. What can the data tell us about the White House’s goal to enroll 2.7 million young adults in state exchanges?

Figure1

The full post—with links to data and methods—is over at The Incidental Economist. Go read!

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Adrianna is a graduate student in public policy and public health at the University of Michigan. Follow her on Twitter at @onceuponA or subscribe to the blog.

Rate shock by numbers: methods and data

by Adrianna McIntyre and Josh Fangmeier 

A quick housekeeping update regarding our two posts analyzing the “rate shock” problem (see here and here if you missed them). 

Since Josh and I undertook an independent analysis of Census data to determine the distribution of income and insurance type across different age bands of childless adults, it’s only appropriate to be as transparent as possible about our data and methods. The data was attached at the bottom of the second post, but may have been overlooked in the footnotes. Additionally, we’ve finalized a more comprehensive description of the methods than offered in the blog post narratives. Both are available for viewing/download as Google docs.

For methods, see this PDF. For the resulting data, see this spreadsheet.

If you have any questions, leave them in the comments.

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Click here to subscribe, for the latest news in and around health policy. 

Adrianna is a graduate student in public policy and public health at the University of Michigan. Follow her on Twitter at @onceuponA.

Rate shock by numbers, part deux: The data doesn’t spell glory or doom for the exchanges

by Adrianna McIntyre and Josh Fangmeier 

This continues our analysis of data related to the “rate shock” debate lately rocking the blogosphere. To see our initial post, click here

I know we have charts—and charts are supposed to be the answer to everything—but like I said yesterday, this is messy. Is there reason to be concerned about rate shock on the exchanges? Sure. Am I entertaining optimism anyway? You bet.

To clarify the rate shock question that matters, it’s this: will premium increases, even with subsidies, discourage enough young adults from buying insurance that the risk pool skews old and unhealthy, resulting in a cycle of rising rates?

The White House says that 2.7 million young and healthy Americans need to enroll in the first year to keep premiums affordable. 

I have no idea where the Administration pulled that figure from, but to understand whether it’s a reasonable goal, you have to develop an idea of what the exchange-eligible population will look like. Using the same data on childless young adults that we explained yesterday—go catch up if you missed it!—we defined “exchange-eligible” individuals as those above 138% FPL (the threshold for exchange eligibility in states that expand Medicaid) who either had non-group insurance or were uninsured. Mind you, we haven’t included data for young adults with kids, nor does this capture information about unaffordable or low-value employer-sponsored insurance, so these numbers don’t tell the whole story.

projeligible

In each bar, the lightest segment is 19-25 year olds, the medium covers 26-30, and the darkest captures 31-35. The vertical axis is number of individuals. In total, we calculate about 6.2 million “eligible” childless adults are under 35. Remember, income is the key variable when it comes to subsidies determining how affordable exchange plans are; they’re offered up to 400% of the poverty line, depending on how expensive a plan is. Almost 70% of our population of interest falls below 300% FPL. This seems to bode well for participation—except it’s not so straightforward. (Is anything in health policy, ever?)

Before you presume to prophesy the fate of Obamacare, try answering the following questions:

How many kids under 26 are going to stay on Mom and Dad’s plan? The last post touched on this superficially, but it’s hard to overstate the importance of extended dependent coverage. Right now, “eligible” 19-25 year olds are the largest cohort of childless young adults who would benefit from subsidies on the exchanges: fully 45% of them are between 138-200% FPL. But it’s probably more cost-effective for them to stay on their parents’ plan as a dependent.

A plan has to cover kids to be subject to the requirement—but plans aren’t mandated to cover kids—so some twenty-somethings won’t benefit and will find their own insurance on the exchange. Other young adults will tag along when their parents purchase a plan on the exchange (if they’d previously been uninsured or had nongroup coverage). But many will join their parents’ employer-sponsored plans, drawing young adults away from the exchanges. If we eliminated 19-25 year olds for the sake of argument—just pretend none enter the exchanges—the number of “eligible” childless young adults drops to about 4 million. That starts to make the Administration’s first-year goal look lofty, so the answer to this question is wildly important.

rateshocksmall

How many people under 30 are going to take advantage of catastrophic plans? There’s a quirk about catastrophic plans offered to the “young invincible” set: their risk pools are separate from the “metal” plans (bronze, silver, etc). This means that they don’t do anything to stabilize premium prices—in effect, we can’t count these individuals toward the 2.7M target. But not all is lost.

Because catastrophic plans aren’t subsidy eligible, at some incomes it’s actually cheaper to purchase more comprehensive coverage. For reference, the catastrophic plans on California’s exchange averaged out at $179/month. Using Kaiser’s calculator, I determined that a “Bronze” plan (at maximum out-of-pocket premium rates) is cheaper up to an income of about $31,000 (270% FPL). You’ll notice in the graphs at right that a majority of the eligible adults we looked at fall below 300% FPL. Good news for the exchanges? Could be.

How many people below 138% FPL will enter the exchanges? Let me clarify straight off that I think states foregoing Medicaid expansion are foolish (on a quantifiable financial level, if you don’t buy the normative argument). But it offers a backward silver lining for exchanges: there will be more people receiving subsidies to purchase private insurance, because the threshold goes down to 100% FPL. Josh and I didn’t tease apart the 100-138% FPL demographics, but judging by data we looked at yesterday—remember those red bars?—it seems likely that the income band would capture a fair number of young adults. Once states finalize Medicaid expansion decisions, this should actually be calculable.

It’s funny, really: the ACA is good at making insurance affordable for young adults—and the exchanges will suffer because of it.  Here we have a classic case of the law of unintended consequences. Medicaid is the least burdensome from a cost-sharing perspective, and the program’s expansion will extend coverage to millions of uninsured childless adults below near/below the poverty line. The under-26 provision will keep many young adults on their parents’ employer-sponsored insurance. The catastrophic plans will be a sensible financial decision for some in the under-30 set, but do nothing to stabilize the broader market. Each of these policies is fantastic for young adults, but they also keep them out of the exchanges’ risk pools And it’s not easy to predict how people will take advantage of them, making the “rate shock” question a tough nut to crack.

I don’t pretend that I can predict the behavior of 6.2 million people based on some internet-generated 2013 premiums. Between yesterday and today, the numbers tell us quite emphatically that lots of young adults—most childless individuals under 35—are poised to benefit from the Affordable Care Act. What they don’t reveal so easily is how many will find themselves on the exchanges in 2014.

That matters. How much? We should continue having this discussion—but it would be irresponsible to keep talking without considering the data.

Footnotes

1. There are other mechanisms to help manage the risk pools on the exchanges: reinsurance, risk adjustment, and risk corridors, together known as the “three R’s”, in the jargon. More info on those here.

2. Speaking of the data, here it is (Google doc). For the methods, see this PDF (also Google doc). 

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Click here to subscribe, for the latest news in and around health policy. 

Adrianna is a graduate student in public policy and public health at the University of Michigan. Follow her on Twitter at @onceuponA.

Rate shock by numbers: Medicaid eligibility and dependent coverage shake up the debate

by Adrianna McIntyre and Josh Fangmeier 

UPDATE: For our follow-up, click here. We incorporate the distribution of the currently uninsured to project the profile of “exchange-eligible” young invincibles in 2014.

There’s a reason that the rate shock debate has continued festering for over a week, in spite of the internet’s fleeting attention span: it’s messy. For a few days, people were actually arguing over different iterations of “rate shock.” Not to worry, we’ve come to agreement on how to frame the debate: how will rate changes on the individual insurance market affect “bros”? You know what’s been conspicuously absent from this conversation, though? Data. Looking at real, hard numbers—not hypothetical scenarios about hypothetical people, bros or otherwise—is revealing.

I asked Josh Fangmeier, a health policy analyst, if it was possible to crunch numbers comparing income and insurance status across age groups. It turns out that publicly available Census data are very good for these kinds of questions, and Josh is very good at crunching numbers [1]. Using the the most recent information available, from 2011, we looked at two questions: first, how will health reform affect young adults currently in the individual market? Second—and this is trickier—what does the composition of 19-35-year olds mean for the viability of state insurance exchanges? Will Obamacare’s system of sticks and carrots be enough to attract the “critical mass” of young adults required to keep premiums affordable?

That’s a lot to tackle. This post deconstructs the present individual market. Tomorrow, we’ll look at implications for the projected population of exchange-eligible young adults, which also includes those who are currently uninsured.

If you look at people already in the individual insurance market, income and age distributions matter. We restricted our scope to childless adults between the ages of 19 and 35, because that’s the focus of the young invincibles/“bro” narrative. When I first put the numbers into a graph, I only looked at those with incomes above 138% of the federal poverty line, which is the threshold for Medicaid eligibility in states opting to expand.

Current Individual Insurance Market, 138% FPL+

The horizontal axis compares incomes by age group, and the vertical axis shows the number of people in each category. You’ll notice some unsurprising trends: first, as age increases, the number of childless adults in the individual market decreases—ostensibly because they start having kids. Lots of childless low-income beneficiaries are under 26, meaning they now have the opportunity to stay on Mom and Dad’s plan (whether that’s through an employer or a state exchange). And, as age increases, so does income.

But do people with even lower incomes shop for private insurance? As it happens, that answer is overwhelmingly “yes”.

Turns out income distribution is really, really important—especially when you consider the Medicaid expansion. This graph uses the exact same data as the one above, except I introduced enrollment numbers for people on the nongroup market in the poorest subset of the population. Check out the size of those red bars:

Current Individual Market (19-35) - All Incomes

Almost two-thirds (63.4%) of childless young adults who had individual insurance in 2011 had incomes that would qualify for Medicaid in 2014. Medicaid offers generous coverage with little cost sharing [2]. So, when people say that the Medicaid expansion is a BFD for this demographic, it’s not an exaggeration. That’s been largely lost in this debate.

Medicaid EligibilityOf course, not all bros will benefit equally from the Medicaid expansion, because only 22 states and DC have committed to it so far. For the chart at right, we used this map from Avalere to identify expansion and nonexpansion states, lumping the “leaning” states into their respective categories. Among childless  adults on the individual market, thirty percent of those under 35 could qualify for Medicaid but won’t, because their states opted out. And many of those individuals won’t receive assistance to buy insurance on the exchanges, because subsidies aren’t offered to most people expected to qualify for Medicaid. The exchanges weren’t designed for an optional  expansion. Premium rates go up for the young and healthy. No one disputes that this will happen, and the nation’s poorest childless adults aren’t insulated from costs. They will be exempt from the tax penalty, but that’s a sorry consolation prize.

A little over 70% of all 19-25 year olds are below 138% FPL, so it’s perhaps unsurprising that we observe a similar trend in the individual market. It’s difficult to predict how many of them will take advantage of the under-26 provision; we don’t have data about their parents’ income or insurance status [3]. Given those caveats, I understand if you wanted to ignore that age group. Eliminating them from the analysis entirely, we would still see over one-third of the individual market, ages 26-35, qualify for Medicaid in 2014 (yep, we have a pie chart for that, too).

This is mostly good news for young people having access to affordable, comprehensive health care. These data offer an untold side of the rate-shock story: a majority of childless young adults who currently buy insurance on the individual market might move out of that market. Over half will qualify for dependent coverage, because they’re under 26, or for Medicaid coverage, because they have incomes are below 138% FPL. Both options are almost certainly cheaper than the plans they currently hold. The ones who really lose out in this scheme aren’t affluent twenty-something bros who will face higher insurance rates, but the people who live near or below the poverty line in states that refuse to expand Medicaid. These folks will be priced out of the individual market because they don’t receive federal subsidies—and don’t have access to the law’s intended safety net.

That’s nice to know, but doesn’t tell us a whole lot about rate shock. The existing market actually tells us very little about the rate shock situation because the uninsured systematically outnumber those who already have individual insurance. We’ll be back tomorrow with a closer look at data that gets to the crux of that question: what does the landscape of the anticipated exchange population look like? Stay tuned.

Footnotes

1. Josh and I will be drawing up a PDF that explains the methodology he used in analyzing ACS data, including use of the SHADAC “health insurance unit” for determining income as %FPL and a discussion of potential limitations (e.g., the data is from 2011, limited to childless adults, and does not consider immigration status). Watch this space for a link once we’ve finalized it.

2. Critics of Medicaid might see coverage through the program as a subjectively undesirable outcome, but to my knowledge we have no information on the preferences of young adults between individual insurance and the public program. It’s pretty indisputable that Medicaid will cost less than private coverage—even a bare-bones catastrophic plan—while offering more covered services. Whatever the opposite of rate shock is, that’s what people who move from the individual market to Medicaid will experience on a financial level.

3. Quick note: this data was collected in 2011, which means that young adults were already eligible for extended dependent coverage (that provision went into effect in September 2010). However, it’s possible that individuals weren’t aware of the option or had parents who were uninsured, on Medicaid (if they had younger dependent children), or have private insurance that doesn’t cover dependents (the extension only applies to plans that do).

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Click here to subscribe, for the latest news in and around health policy. 

Adrianna is a graduate student in public policy and public health at the University of Michigan. Follow her on Twitter at @onceuponA.