Affordable Care Act Marketplace Premium Growth Outpaced Income

An increasing share of middle class families faced barriers related to care costs on the Affordable Care Act marketplace from 2015 to 2019, a Health Affairs study found.

The researchers used American Community Survey data from 2015 to 2019, focusing on data from families with dependents. Families with incomes between 401 and 600 percent of the federal poverty level were considered middle class. The study focused on families that were enrolled in non-group health insurance plans or that were uninsured.

In order to calculate whether a health plan was affordable, the researchers calculated the health plan premium as a percentage of the family’s income. Importantly, the study period occurred before the American Rescue Plan Act established the 8.5 percent income threshold for premium subsidies.

The researchers compared financial burden on a scale of 8.5 percent, 10 percent and 20 percent. They also assessed deductibles and premiums together to account for deductibles as a share of out-of-pocket spending, and analyzed the twenty-fifth percentile plans.

The study found that premium growth outpaced income growth from 2015 to 2019. This result was unconnected to circumstantial or demographic factors such as age or family composition.

Metal plan and length of time were associated with differences in affordability. The lowest cost gold plan in 2019 consumed a median of 17.4 percent of a middle-class family’s income. In contrast, the lowest cost silver plan took up around 14.9 percent of a family’s income and the lowest cost bronze plan consumed approximately 11.3 percent of their income.

The financial burdens also grew over time. In 2015, the median cost for a low-cost bronze plan absorbed 7.7 percent of a middle-class family’s income. In contrast, by 2019 the same plan would cost a middle-class family 11.3 percent of its income. This growth in cost was evident across all metal tiers.

In addition to metal plan and length of time, the study found income contributed to the level of affordability. Families whose incomes placed them at the lower end of the middle income spectrum, typically around 401 to 500 percent fo the federal poverty level, were more likely to find Affordable Care Act coverage less affordable.

Incomes for middle-income families grew 3.5 percent during the study period, but premiums jumped 49.7 percent or up to 59.3 percent for the lowest cost plans.

Geographical placement also contributed to the affordability of Affordable Care Act plans for middle-income families. In 2019, living in a more rural or non-metropolitan area was associated with higher level of financial burden.

The financial burden related to age was not linear, but rather it fluctuated with each age group. 

In 2019, the youngest age group—individuals up to age 20—had a financial burden of 10.4 percent, the next age bracket—individuals ages 21 to 44—had a financial burden of 8.8 percent, individuals 45 to 54 had a financial burden of 13.3 percent, and those 55 and older had a burden of 18.9 percent.

However, when the researchers placed these findings in the context of the American Rescue Plan Act, they found that premium tax credits would have been higher for the middle class and that the financial burden would have been lower. The premium for the lowest cost silver plan would have dropped 44 percent in 2019 if the American Rescue Plan Act had been in place.

“By pegging tax credits to limit the cost of the second-lowest-cost silver plan to 8.5 percent of income, this extension will greatly reduce premium burdens for middle class families,” the researchers found.

“Subsidizing premiums for this group may expand their coverage, but should these credits expire in 2023 as intended, these middle-class families would again face the entire cost of premiums and less affordable coverage, adding to the challenges such families face.”

The American Rescue Plan Act aligns with the Biden administration’s intention to bolster the Affordable Care Act. Around the time that the bill was signed into law in March 2021, a Health Affairs study identified that middle-income enrollees faced high costs on the Affordable Care Act marketplace, even when they had access to subsidies. 

AHIP has urged Congress to make permanent the American Rescue Plan Act’s tax credits in order to provide financial relief for middle-income families through the Affordable Care Act marketplace in 2023.