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Problems

[edit]

Though supporters employed in the policy field have hailed the ACA as successful, they have also pointed out imperfections, and have proposed changes.[1] In 2019, economist Paul Krugman, a supporter of the ACA, wrote "The Affordable Care Act was an imperfect and incomplete reform. The political compromises needed to get it through Congress created a complex system in which too many people fall through the holes. It was also underfunded, which is why deductibles are often uncomfortably high. And the law has faced sabotage both from G.O.P.-controlled state governments and, since 2017, the Trump administration."[2]

Subsidy Cliff at 400% FPL

[edit]

The subsidies for an ACA plan purchased on an exchange stop at 400% of the Federal Poverty Level (FPL). This results in a sharp "discontinuity of treatment" at 400% FPL, which is sometimes called the "subsidy cliff".[3] People above the subsidy cliff can experience a sharp rise in premiums, making the premiums unaffordable.[4][5]

After-subsidy premiums for the second lowest cost silver plan (SCLSP) just below the cliff are 9.86% of Modified Adjusted Gross Income (MAGI) in 2019.[6] However, upon crossing the cliff, the cost of the plan may rise sharply.

Silver plan numbers example: For example, in Cook County, IL zip 60617, in 2019, one gets from Healthcare.gov[7] a SCLSP rate of $21,266 for a married couple 63 years of age. If the couple's income is 401% of the FPL,[8] just above the cliff, that works out to $84, 731. If the couple chooses the SCLSP, it will cost them 25.1% of their Modified Adjusted Gross Income. If their MAGI was 399% of the FPL (i.e. not over the cliff) at $84,308, the SCLSP would only have costed them 9.86% of their MAGI, or $8,312. The jump in cost at the discontinuity is $12,954. (It should be noted that, for the example, an older couple, at the high end of the through-64 ACA age range, was chosen. The couple would face higher premiums than younger couples. The age was chosen to illustrate the case where the unsubsidized-premium cost issue is more severe—older people.)

Bronze plan alternative numbers example: In the case of certain states and certain insurers, for people above 250% of FPL, who don't get cost-sharing reductions (CSRs), plans besides silver may provide better value. (This is because when payment by the Federal Government of cost-sharing reduction compensation payments to insurers was stopped by the Trump administration, certain states either ordered insurers, or allowed insurers optionally, to assess actuarial costs for the cost-sharing reductions that they had to pay for silver plan enrollees with FPLs below 250% FPL, to silver-plan-premiums only.[9][10]) So, we provide also the Bronze plan numbers here for the same couple.

The second lowest cost bronze plan for the example couple above was $18,513. At income levels of 399% of FPL and 401% of FPL, the net cost of the second lowest bronze plan would be $5,559 a year and $18,513 respectively. The jump in cost at the discontinuity point is $12,954, but the percent of MAGI that these represent are 6.6% and 21.9%, respectively. Thus, the second lowest cost bronze plan, though it has an out-of-pocket maximum about $2000 higher than the second lowest cost silver plan, may be slightly better value, but, above the subsidy cliff, at 21.9% of MAGI, it may still be considered unaffordable. Note that for the gold plans, all gold plans were more expensive than the second lowest cost silver plan, and so those would have all cost more than 25.1% of MAGI for the over-the-cliff case.

Affect of loss of Penalty for Not Carrying Coverage on Affordability over the subsidy cliff: Since the penalty for not carrying coverage was designed to reduce adverse selection from people not picking up coverage unless they were sick or more likely to get sick, the removal of the penalty starting in 2019[11] (in states that did not add their own penalty) may increase adverse selection, that is, the likelihood of the people with insurance being sicker than the average in the population, and this may increase premiums for policies. Since people over the cliff get no subsidy, they would be the most affected. (People under the cliff point of 400% FPL have a post-subsidy premium bounded currently at at most 9.86% of FPL, so they are less affected.)

Sometimes-Unaffordable Out-of-Pocket Maximums

[edit]

Under the ACA, health plans must have out-of-pocket maximums, but these can be quite high.[4][5][1] For 2019, the highest legally permitted out-of-pocket maximum is $7,900 for an individual plan and $15,800 for a family plan,[12][13] though the maximums allowed are somewhat lower for people eligible for cost-sharing reductions on the exchange.[14] (People eligible for cost-sharing reductions are those eligible for a subsidized on-exchange plan who further have MAGIs between 100% and 250% of the Federal Poverty Level.)

Policies may have lower out-of-pocket maximums than the legal maximum, and they tend to be lower for the more expensive higher grades of plans, like the Platinum and Gold, but they don't have to be.[13]

Example, sliver plan: reusing from the subsidy cliff example of Cook County, IL zip 60617, for a married couple aged 63, with an income around 400% FPL, in 2019, one gets from Healthcare.gov[7] for the second lowest cost silver plan an individual out-of-pocket maximum per family member of $7,050 with $14,100 allowed total for the couple. Since the income is about $84,500, the out-of-pocket maximum works out to about 17% of MAG Income. So the couple has to allow that they may need to pay the out of pocket max, in addition to the premium, which for them in the subsidy cliff calculation, was 25.1% of MAG income if they were just a bit over the subsidy cliff. So we have total medical expenses potentially at 42% of MAGI in that case, and still about 27% of MAG income even if they were under the subsidy cliff.

Example, bronze plan: switching to second lowest cost bronze plan: The out-of-pocket maximum is $15,800, or 19% of MAG Income. Above the subsidy cliff, since premiums were 22% of MAGI, total annual medical expenses could be 41% of MAGI. (1% less than silver.)

In the examples above, it should be noted that we have presented premiums and out-of-pocket maximums. A third medical expense category borne by the insured may exist, out-of-network charges.[15] (These are not unique to ACA insurance. They are an issue with many categories of health insurance coverage in the U.S. insurance system.)

Family Glitch

[edit]

One requirement to get a subsidized on exchange health insurance plan, is to not have access to affordable employer coverage through any family member's employer, with affordable defined to be no more than 9.86% MAGI for just the employee's coverage). This may leave a family with no option for affordable coverage. That is, the employer coverage for the whole family, could be, say, 25% of MAGI, making it unaffordable. This issue is called the family glitch.[16][17][1]

Estate Recovery under 138% FPL

[edit]

For Medicaid (including the ACA's expanded Medicaid), in a number of states, all medical expenses paid out, for people 55 or over while they received the Medicaid or Expanded Medicaid, are subject to Medicaid estate recovery.[18][19][20] (States are required by Federal law to recover all long-term-care-related expenses[21] from estates, but also have the option of recovering costs of all other Medicaid services for people 55 and older.[18][19][20][21]) In the view of some, in states that do estate recovery beyond long-term-care-related expenses, people 55 and over with Medicaid coverage don't have health insurance, but rather have a loan until they die.[22][23][24][25])

People eligible for Medicaid are not eligible for any subsidy on a major medical plan on the health insurance exchanges[6] Since a large proportion of those people have Modified Adjusted Gross Incomes (MAGI) of no more than 138% of the Federal Poverty Level (FPL), many will be forced to rely on the Medicaid they are eligible for, with the estate recovery.

The issue of the negative interaction of the ACA with Medicaid estate recovery was noticed in many places starting from the time of ACA passage.[26][27][28][29][30][31][32][33][34][35][36][37][38][1] Criticisms centered on the need to ultimately pay back ACA coverage benefits by the recipient's estate, as well as the unequal treatment of people below 138% of the FPL, who are subject to the recovery, and those just above, who receive very-low-cost, highly subsidized insurance, which is not subject to the recovery.[30][32][35][38]

In apparent reaction to the issue, In February 2014 (two months after the main ACA provisions went into effect), the Obama administration's Center for Medicare and Medicaid Services (CMS) issued a letter requesting states not recover Medicaid expenses other than long-term-care-related expenses for a group that was essentially the Medicaid expansion population, and stating “CMS intends to thoroughly explore options and to use any available authorities" to prevent such recovery.[39][26]

Some states that have expanded Medicaid amended laws and regulations since the passage of the ACA to stop or limit the recovery as it relates to ordinary medical insurance expenses (that is, non-long-term-care-related expenses), or else did not do non-long-term-care-related recovery in the first place.,[40][41][42][43][44][45][46][47][48][49][50][51][52]

Other states that have expanded Medicaid still have regulations indicating they will recover non-long-term-care-related medical expenses. Among these states are NJ, MA, IA, NV, NH, ND, OH, RI, IN, ID, UT, MD, and the District of Columbia, as well.[53][54][55][56][57][58][59][60][61][62][63][64][65][66][67][68][69][70]

An attempt to amend Federal laws to stop non-long-term-care-related Medicaid estate recovery was made in 2018, but the bill has been abandoned.[71]

Coordination of Medicaids with On-Exchange Plans

[edit]

Medicaid and expanded Medicaid eligibility is determined either by state Medicaid agencies,[72][73] or by a state or Federal exchange.[74]

Enrollment in on-exchange plans, and determination of subsidies, is generally done by a state exchange, or the Federal one, if the state has no exchange.[75]

Eligibility for subsidized on-exchange plans is based on annual estimated Modified Adjusted Gross Income (MAGI) and Federal Poverty Level cutpoints that are fixed throughout the calendar year.[6]

Historically, Medicaid agencies have tended to use monthly income,[76] and further, and may update FPL cutpoints mid year.[77]

If state Medicaid agencies and the exchanges are not adept at coordinating both eligibility and continuity of coverage between on-exchange-plans, there can be numerous discontinuity of coverage issues, as well as issues with frequent churning between Medicaid / expanded Medicaid and on-exchange plans.

It is, for example, possible that, for people with incomes that are not constant throughout the year, they can be eligible for neither Medicaid, expanded Medicaid, or a subsidized on-exchange plan in certain months. They can also be churned between Medicaid plans and subsidized on-exchange plans as often as every month.[76][78][79] Further, if the agencies responsible do not coordinate effectively, there can be coverage gaps, if one kind of coverage is stopped before the other starts. There can also be abrupt switches of coverage class, which can void in-network hospitalizations and surgeons and approved procedures.

The issue of the importance and delicacy of coordination between agencies on these matters was brought out early after the approval of the ACA.[80][81][82] Indeed, a 2015 GAO report found problems in continuity of coverage in synching state Medicaid eligibility with the Federal exchange's on-exchange plans, in states that used the Federal exchange.[83]

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