Expansion of Premium Tax Credits Would Help Make Health Insurance More Affordable
By Jane E. Sung , Olivia Dean, January 28, 2021 12:45 PM
Health care costs have long been a top concern for Americans. The Affordable Care Act (ACA) improved health care access and affordability by guaranteeing access to comprehensive health coverage, protecting people from being shut out of coverage based on their age or preexisting conditions, and providing financial assistance for those purchasing coverage on their own through Health Insurance Marketplaces, among other provisions. These reforms led to a 40 percent reduction in the uninsured rate for older adults ages 50 to 64 over the past decade.
But affordability of nongroup (individual) health insurance—coverage people can purchase on their own—remains a critical issue for older adults. Nearly 10 percent of all pre-Medicare adults ages 50 to 64 have nongroup coverage, representing a disproportionate 43 percent share of all adults in the market.
Many older adults face unaffordable health care costs.
Over 40 percent of all older adults in the nongroup market have coverage that can be considered “unaffordable” based on how much of their income goes toward premiums and out-of-pocket costs. This is particularly common among older adults with incomes right above the threshold for federal premium tax credits that reduce their health insurance premiums, and exacerbated by the fact that—unlike people who receive such premium subsidies—there is no limit on how much premiums can consume of their income.
While premiums that exceed 10 percent of income are typically considered unaffordable, a 64 year-old whose income is slightly too high to qualify for premium subsidies faces an average premium that is nearly 30 percent of their income. In fact, three-quarters (74 percent) of older nongroup enrollees not receiving subsidies face unaffordable coverage. At the same time, nearly one-fifth (18 percent) of older nongroup enrollees who receive subsidies still face unaffordable coverage, showing that current subsidies may not be enough.
Affordability issues hit 50- to 64- year-olds particularly hard in large part because older adults with nongroup health coverage pay higher rates than younger adults. Unlike group coverage, insurers can charge older adults up to three times as much as younger adults for the same coverage through a practice known as age rating. In 2018, unsubsidized older adults in the nongroup market paid premiums averaging $9,469, compared to $4,721 for unsubsidized younger adults. Unsurprisingly, as costs have risen, the share of unsubsidized older adults in the nongroup market has dropped steadily, from 66 percent in 2014 to 43 percent in 2018.
Unaffordable coverage may prompt older adults who are ineligible for premium subsidies to forgo coverage and remain uninsured, making the risk pool in the nongroup market less healthy over time and ultimately leading to even higher premiums for people of all ages. Notably, the uninsured rate among older adults without public or employer coverage is especially high among those with incomes around the premium subsidy threshold, indicating that this phenomenon may already be occurring.
More action is needed to help older adults pay for health insurance.
While improving health coverage affordability will require many approaches, policymakers can take an important step forward by expanding premium tax credit assistance for people who face unaffordable nongroup coverage. This includes both those with incomes above the current subsidy threshold who face unaffordable costs, as well as those who are currently eligible for subsidies but still face unaffordable coverage. The subsequent improvement in health care access and affordability would be particularly beneficial in the context of the COVID-19 pandemic, when many Americans are facing the prospect of losing their jobs, health coverage, and income.
The evidence is clear that unaffordable coverage has negative health implications and can lead people to decide to remain uninsured or delay or forgo health care. Making nongroup coverage more affordable for individuals in the market, including older adults, is critical to encouraging nongroup enrollment and ultimately in ensuring the significant coverage gains of the ACA are not lost.
Note: All older adult data referenced in this blog are from our previously released analysis.