In comments to a post yesterday, the issue came up as to which Massachusetts workers of firms offering insurance have access to the state’s health insurance exchange with subsidies (Commonwealth Care). A related question is how that may differ from workers’ access to subsidized, exchange coverage under the ACA. I’m going to focus on the affordability thresholds only, though there are other requirements.
Under the ACA, workers at firms that offer insurance can purchase coverage on the exchange if their employee contributions (out-of-pocket premiums) are greater than 9.5% of income. A recently released proposed rule decrees that the relevant premium here is for individual coverage.
Meanwhile, here in Massachusetts, workers at firms that offer insurance can purchase subsidized coverage on the state’s exchange if the employer covers less than 33 percent of the cost for an individual insurance plan and the worker has income below 300% of the federal poverty level (FPL). This, by the way, was $34,032 for a non-elderly individual in 2010. (We’ll need that number later.)
This is frustratingly apples and oranges, so let’s try our best to make some meaningful comparison between the two sets of eligibility rules.
Focus on Massachusetts first. How much are individual premiums in the state? From a recent Kaiser study on state variation in health insurance premiums, the average individual coverage premium in 2010 in Massachusetts was $5,244. This is not an ideal estimate because it includes kids and is for individual market coverage, not employer-based. From a state report, the median, not mean, 2010 employer-based individual premium was $5,748, annually. I’m going to go with this number, though a mean would be higher. (Anybody have a mean?)
So, if an employer covers at least 33% of $5,758 then an employee in Massachusetts is not eligible for exchange coverage. That means that if the employee share is at least 67% of this figure, or $3,858, she does have exchange access (provided her income is below $34,032 or three times FPL). Putting these together, for an individual with an income exactly 300% of FPL, if her employee share of premium is greater than 11.3% of income, she has exchange access. If it is lower, she does not. For a worker with a lower income, this percentage threshold is even higher. For example, workers with incomes 200% of FPL, or $22,688, share of premium must be 17.0% of income or higher to grant exchange access.
Obviously, 11.3% and 17.0% are higher than 9.5%, the threshold for exchange access under the ACA. Hence, Massachusetts offers more restricted access to subsidized, exchange coverage for workers whose firms offer coverage than will be available under the ACA. Consequently, all else being equal, one should expect more people to exit employer-sponsored coverage under the ACA than in Massachusetts.
With the right data and some work, one ought to be able to calculate how important a 9.5% threshold is compared to an 11.3% or 17% one. Some have likened the Massachusetts (implied) thresholds to huge firewalls preventing a massive exedous from employer-sponsored coverage. Are they? How many people would qualify for exchanges under the ACA relative to Massachusetts-like rules? How much in taxpayer funds would be saved if the ACA were modified to be more like the Massachusetts law? I’d like to see those calculations, though I admit they are hard to do. Without them, it is not so clear to me how important the exchange eligibility differences between the Massachusetts law and the ACA are.
NOTE: After my first draft of the above I found a small error that required me to tweak many numbers. I may have missed a few, but I assure you the change was minor and had no bearing on the overall conclusion. I mention this to explain any small inconsistencies you may find. Still, if you find one, tell me and I’ll fix it.