Two years into the Affordable Care Act (ACA), Californians who bought health insurance on the individual market spent $2,500 less on health care compared to 2013, the year before the ACA was fully implemented, according to data from the US Census Bureau's Current Population Survey (CPS). This decline was likely driven primarily by the premium tax credits and cost-sharing reductions provided through the ACA's health insurance marketplaces. This progress toward making health care more affordable is at risk as federal lawmakers debate repealing or radically changing the ACA.
Californians' Spending Decline Beats National Trends
In 2013, Californians with individual coverage spent, on average, $7,300 out of pocket on health care (defined as spending on health insurance premiums, copays, deductibles, coinsurance for services and prescription drugs). That amount fell to $4,900 in 2014, the first year the ACA health insurance marketplaces (called Covered California in California) were open for business. In 2015 average spending for those covered through the individual market continued declining to $4,800 for a total drop of $2,500 over the two-year period.
Nationally, the amount spent on health care by consumers with individual coverage dropped from $6,800 in 2013 to $5,500 in 2015, a $1,300 decline.
Similarly, the percentage of consumers with individual coverage reporting "high-burden spending" (defined as spending more than 10% of total income on health care) fell nationally, with California seeing a steeper decline, from 42.9% in 2013 to 33.8% in 2015. Nationally, it dropped from 44.7% to 38.8% during the same period.
For more information on national trends in high-burden spending, read this new analysis of the CPS data by the State Health Access Data Assistance Center (SHADAC). There was a small but statistically significant decline in the overall US rate of high-burden spending, with improvements also among those on Medicare and those earning less than 400% of the federal poverty level (about $47,000 a year for a single person). The brief also highlights which states saw statistically significant changes in high-burden spending among various coverage types and income levels.
ACA Subsidies Caused Most of the Spending Declines
Spending by those with individual coverage was likely driven down primarily by the premium tax credits and cost-sharing reductions available to eligible low-income consumers through the ACA's health insurance marketplaces.
In 2015, 2.3 million Californians had individual health coverage — and 53% of them purchased it through Covered California. Nearly 90% of Covered California enrollees, about 1.2 million people, in 2015 received premium tax credits to bring down the cost of premiums (worth, on average, $445 a month per household). About half of Covered California enrollees, or approximately 645,000 people, were in plans with additional cost-sharing reductions (worth, on average, $125 a month per household) to defray the cost of deductibles and copays.
Californians with Individual Coverage Have a Lot Riding on ACA Debate
Lawmakers in Congress continue to debate whether and how to dismantle the ACA, and the reduced financial burden experienced by many consumers hangs in the balance. For example, provisions in the American Health Care Act (AHCA) under discussion earlier this year would have reduced financial assistance to poorer and older consumers, and it is still unclear whether the Trump Administration will end the marketplace cost-sharing reductions that reduce out-of-pocket costs for low-income consumers. Elimination of these would potentially have profound impacts on both the affordability and availability of marketplace coverage.
The financial consequences for consumers with individual coverage are huge — and Californians are among those with the most to lose.