The ACA has made coverage on the individual market more affordable for many Californians. Of the 2.2 million individual-market enrollees in California, about half are at income levels that allow them to receive ACA premium subsidies through Covered California. About 600,000 benefit from additional cost-sharing reductions to lower their out-of-pocket costs such as deductibles and copays. Despite the progress made under the ACA, affordability continues be a significant barrier to coverage on the individual market.
Many in the Individual Market Report Difficulty Affording Coverage.
A recent survey of Californians purchasing coverage through the individual market found that a significant portion report difficulty paying premiums (40%) and OOP costs (31%). Almost one in four (24%) report that they have delayed or avoided care due to cost (see figure below). People with lower incomes and those in fair or poor health are particularly likely to say that they delayed care or had trouble paying for care.
Despite ACA, Individual Market Enrollees Generally Pay More and Get Less Than Those with ESI.
Because ESI is the most common form of coverage in California, it is often considered a benchmark for comparison with coverage from other sources. As described previously, consumers in the individual market face higher premiums and tend to have more OOP costs than those with ESI, mainly because they aren’t helped by an employer paying a large part of the cost of coverage. Despite gains under the ACA, ESI remains more affordable even when the comparison is limited to those who qualify for ACA subsidies.
Premiums: Subsidized Individual Market Versus ESI
On average, individual-market enrollees who receive ACA premium subsidies pay higher premiums, and a higher share of the total premium, than those with ESI. See figure below.
Out-of-Pocket Costs: Subsidized Individual Market Versus ESI
Individual-market enrollees who receive premium subsidies are much more likely to have a deductible than those who get insurance through their employer (see figure below). In most Covered California plans, doctor visits, emergency room care, lab tests, x-rays, and imaging are not subject to deductibles. However, over a quarter of subsidized Covered California enrollees had deductibles over $6,000 through bronze plans that allow three office visits at $75 but then impose a deductible on most services.
Individual-market enrollees who receive premium subsidies also tend to be enrolled in products with higher OOP maximums than those with ESI (see figure below). This means that they risk serious financial consequences if they have extraordinary medical needs.
Particularly for Those Not Eligible for ACA Tax Credits, Premium Affordability Depends on Where You Live and How Old You Are.
Average total premiums in California’s individual market vary considerably by region. Those who receive premium subsidies are somewhat protected from the higher premium costs in high-cost regions because the amount they pay is linked to a percentage of their income. (See The ACA & Affordability section for more detail.) However, the roughly one million individual-market enrollees who don’t qualify for tax credits must pay the full premium, making them much more vulnerable to premium differences related to region and age. The figure below shows the average premiums that unsubsidized Covered California enrollees paid in 2018. Those living in the most expensive region (Monterey Area) paid 70% more in premiums than those living in the cheapest region (Los Angeles, Northeast).
Compared to younger people, older people typically need more health care and thus are more expensive to insure. The ACA limited the amount that insurers can vary premiums based on age, but older consumers can still be charged premiums three times as high as their younger counterparts. Without subsidies, older individual-market consumers face high premiums.
Affordability Challenges Contribute to Declines in Coverage.
The factors that cause people to rely on the individual market in the first place, such as losing or changing jobs, or losing a spouse, lead to steady turnover (or “churn”) in enrollment in Covered California and in the individual market. Often people leave the individual market because they qualify for other coverage options, such as ESI or Medi-Cal. But concerns about costs — felt especially by Californians without subsidies — are a big reason people drop coverage. Californians in the individual market consider their monthly premium alongside other household spending priorities such as rent, food, and childcare. When premiums and OOP costs add up to a large share of your household’s income, you might decide that maintaining coverage is beyond your reach and choose to go uninsured.
|Sam, age 62, lives in Sacramento. Last year he earned $49,167, just over the 400% FPL threshold for premium subsidies under the ACA. Sam is a real estate agent and has always had to buy his own coverage. He is happy that he can’t lose his coverage just because he gets sick, but as he’s gotten older, his premiums have risen a lot. He bears the full cost of market premiums and could incur high out-of-pocket costs as well. Although he has chosen the lowest-cost bronze plan, its $794 monthly premium nevertheless consumes 19% ($9,527) of his yearly earnings. (To show how much Sam’s age matters, consider that his 24-year-old neighbor can buy the same unsubsidized bronze plan for a monthly premium of just $276.) The plan has a $6,300 deductible, and while Sam doesn’t have a lot of health problems now, at his age he worries that a serious health episode could arise anytime.
An alternative option for Sam, a gold plan with a monthly premium of $1,154 (28% of income) would require lower OOP cost sharing; for example, the plan has no deductible. But even so, in the unlikely event that Sam requires several hospitalizations, regular outpatient care, and many expensive prescriptions, Sam could end up devoting up to 43% ($21,000) of his income to premiums and cost of care. Sam can choose lower premiums with higher cost sharing, or higher premiums with less exposure to initial out-of-pocket costs. None of his options feel affordable.