How Will State and Federal Actions Affect Individual Health Insurance Coverage for Middle-Income Americans?

The Affordable Care Act (ACA) has accomplished much that its drafters intended. There is considerable evidence of increased access to health care and reduced medical debt. But there is growing concern about affordability of health insurance coverage for middle-income working-age consumers — those whose household income exceeds 400 percent of the federal poverty level (about $100,000 for a family of four) — who do not have coverage through their work. This is virtually the only group of Americans who, when insured, do not receive some form of direct federal financial assistance or tax subsidies for health care coverage.

Trump Administration Actions Have Accelerated Individual Market Destabilization

It was hoped that the push of the ACA’s individual mandate and the pull of the premium tax credits would create large and stable markets for individual insurance. However, since its beginning several factors have weakened the individual market — and Trump administration policies and repeal threats from Congress have accelerated its destabilization.1

Actions such as the defunding of cost-sharing reduction payments and the 2019 repeal of the individual-mandate penalty make it difficult for insurers to offer stable and affordable rates. Steep premium increases are likely in much of the country, and while premium tax credits will expand to cover these increases for lower-income consumers, individuals not eligible for tax credits will have to cover the full increase themselves.

The administration’s response has been to propose lower-cost alternatives for young and healthy middle-income consumers, for example by expanding short-term coverage to last nearly a full year. Short-term coverage, intended to cover brief gaps in insurance, is not subject to any of the ACA’s requirements because it is not meant to serve as major medical coverage. If consumers are offered full-year “short-term” coverage, 4.3 million (likely healthier-than-average) consumers may flee the comprehensive insurance market, increasing premiums for those who remain.

Another administration proposal would allow small employer groups and individuals who are — or claim to be — “working owners” to enroll in association health plans.2 These plans would not be subject to many of the ACA’s individual and small-group market consumer protections. They also would attract lower-cost consumers, leaving those with higher risks behind to face higher premiums.

– Commonwealth Fund

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