In Part I, I showed that the administration’s new estimate of next year’s exchange enrollment is only about half of what prominent groups projected in 2010, and I discussed evidence that exchange plans are not attracting many young, healthy people. This piece shows that the groups also projected far too many unsubsidized enrollees and discusses reasons to be skeptical that the individual mandate will lead as many people to purchase coverage as assumed.
People Generally Signing Up Only If They Receive Subsidies
The Affordable Care Act (ACA) made two types of financial assistance available for the purchase of exchange plans. Tax credits reduce the share of premium for many people who earn between 100% and 400% of the federal poverty level (FPL), amounts equal to $11,770 and $47,080 for a single person. The credits gradually phase out as income increases; in general, a $1,000 increase in income reduces the credit by about $150.
Generous cost-sharing subsidies are available to people who earn between 100% and 200% of the FPL who select a silver plan – a plan that pays about 70% of expected health care expenditures. These subsidies reduce people’s out-of-pocket payments. The cost-sharing subsidy amount drops in cliffs, so silver plan coverage is much more attractive for people earning just below 200% of the FPL than for people earning just above 200% of the FPL.
Thus far, only people who receive large subsidies generally find ACA plans worth their cost. In March, the administration released information from the 37 states using HealthCare.gov, showing that nearly 70% of exchange enrollees had income below 200% of the FPL and just 2% of enrollees had income above 400% of the FPL. In September, HHS released information showing that 84% of the 9.9 million people enrolled in exchange plans throughout the country as of June 30 were receiving advance premium tax credits.
Projections Significantly Overestimated Unsubsidized Enrollment
The organizations that made ACA predictions – the Congressional Budget Office, the Centers for Medicare and Medicaid Services, the RAND Corporation, and the Urban Institute – significantly erred in projecting who would enroll. CBO’s March 2015 estimate expected twice as many unsubsidized exchange enrollees this year as enrolled. In 2010, RAND projected that 46% of enrollees would be unsubsidized when the law was fully implemented.
Urban’s projections provide perhaps the clearest perspective on how the models overestimated higher income exchange enrollees. Urban produced detailed enrollment projections by income grouping in December 2010 for the whole country and in January 2015 for the 34 states with federal exchanges. (Three states use HealthCare.gov but are considered state exchanges.)