Our Big Picture
this week looks at how subsidies reduce the price of insurance for lower-income people who will shop on the Health Insurance Marketplace
(again, that’s only people who do NOT get health insurance from an employer or a public program like Medicare
We looked at a 30-year-old individual, a 60-year-old married couple, and a family of four with 40-year-old parents and two kids. Rates vary by region and we looked at Central Arkansas. The subsidies are based on income and family size and are benchmarked to the second-cheapest Silver plan available.
The subsidies are a big deal.
As you can see, you can’t just look at the sticker price — many will pay much less, and in some cases won’t have to pay a premium at all. Around 87 percent of Marketplace-eligible adults will be eligible for subsidies (95 percent
if we include the “private option” folks, who won't pay any premium at all). Around half of those
currently buying their own private insurance (and 70 percent
of young adults currently buying their own insurance) will be eligible.
How the subsidies work
: Anna Strong over at Arkansas Advocates suggests looking at the subsidy (technically a premium tax credit, but it will automatically reduce your monthly bill) as a coupon, and that’s a helpful frame. While the subsidy is set to make the second cheapest Silver plan affordable, it can be used on any plan. We looked at the impact on the cheapest available Silver and cheapest available Bronze plans. Take the 30-year-old above. If she makes $22,980 (two times the poverty level), she gets a subsidy good for $151.25 per month. She could apply that to a Bronze plan that costs $205.49 and end up paying $54.24, or to a Silver plan costing $260.79 and end up paying $109.54. She could also apply it to a more expensive Gold plan; no matter what plan she buys, she gets the same-value "coupon" to apply to the sticker price.
Calculate your own subsidies:
Yesterday, the Kaiser Family Foundation updated their handy online calculator
to include zip codes and actual premium prices, so you can find out exactly what your subsidy would be if you’re eligible and shopping on the Marketplace. Kaiser shows what would happen if you applied your subsidy to the second-cheapest Silver plan, but remember, you can apply it to any other plan instead (here's a list of plans
). Subtract the subsidy from the plan premium, and you'll get the premium you have to pay. The Kaiser calculator will show your subsidy as a yearly number and the plans are listed with monthly premiums, so make sure to convert. (Once the marketplace is up and running online, all of this should be done automatically for you.)
Quirks of the law:
The way that the subsidies are structured, households with the same income will pay the same amount for the second-cheapest Silver plan. But again, consumers can use the subsidy on a different plan. Older people have much higher pre-subsidy premiums than younger people, so they have much higher subsidies to make up the difference. They can then use those very large subsidies on a cheaper Bronze plan, and end up with very low premiums. That means that a subsidized 60-year old will end up paying less for a Bronze plan than a subsidized 25-year-old with the same household income. The same idea works in reverse: if a subsidized 60-year-old and a subsidized 25-year-old want to use their subsidy on a better plan
, the older person ends up paying more for Gold.
The other thing to note is that the slope of the sliding scale is much steeper for households with higher premiums (again, older people). Our 30-year-old individual at 300 percent of poverty is only saving about $20 compared to someone too affluent to qualify for subsidies. But our 60-year-old couple at 300 percent is saving more than $900 per month
compared to households above the line. Older people make up a relatively small proportion of the population shopping on the marketplace, but they may face some funky incentives near the subsidy line.
Kids and families:
Families figure out their premiums by figuring out a premium for each individual in the household. You can also mix and match plans within your family. Maybe Mrs. Smith is perfectly healthy and wants a Bronze plan whereas Mr. Smith has health issues and uses a lot of medical services, so he goes with a Gold plan. Only the three oldest children count, though — any kids after that are covered at no additional cost (we like to call this the Duggar rule
). Also remember that below 200 percent of the poverty line, kids qualify for ARKids. Note that in our family of four above, below 200 FPL, the family pays only for plans for the parents, since the kids can be covered by ARKids.