Fifty-Six Percent of the Uninsured Could Pay $100 or Less per Month for Coverage in 2014. Methodology

09/01/2013

This analysis is based on information about household composition and income taken from the 2011 American Community Survey (ACS) Public Use Microdata Sample.  To calculate the premium tax credit, the Affordable Care Act specifies that a family with a particular income will pay a fixed amount for the second lowest-cost silver plan available in the Marketplace in their state.  This fixed amount is the same in every state except Alaska and Hawaii, without regard to age or the actual premiums in the Marketplace. For example, the law specifies that an individual earning 150% of the Federal Poverty Level (FPL), or $17,235 per year, will pay 4 percent of their income ($57) for the second lowest-cost plan.  Their tax credit will cover the difference between $57 and the cost of the second lowest-cost silver plan available to them.  Consequently, it is not necessary to know the actual second lowest-cost silver premium to determine how many people will pay $100 or less per person per month for a silver plan.  This brief, therefore, is not about rates for particular states or for the Federally-facilitated Marketplace.  The only use of published rate information was to calculate the average difference between bronze and silver premiums in order to estimate the number of Americans who may pay $100 or less for a bronze plan after the tax credit.

Using the 2011 American Community Survey, we estimated the number and percent of nonelderly U.S. citizens and legal residents (called “eligible uninsured Americans” in this brief) whose family income and number of uninsured members of the household may qualify them for tax credits that would enable them to purchase coverage for $100 or less per person (after applying their tax credits) on the Marketplace. For the purpose of this exercise, we defined "family" to be a "health insurance unit" (HIU), which includes adults, their spouses, and their dependent children (ages 0-18, plus full time students under 23), using ASPE analysis of the ACS data.

We defined the family income thresholds by finding the percent of the FPL at which the maximum payment for a second lowest-cost silver plan would be less than or equal to $100 per person, taking into account both the total family size and the number of uninsured nonelderly adults in the family (see Table 1). We assumed that all uninsured children (age 18 and under) in families with incomes less than 250 percent of the FPL would be eligible for Medicaid or CHIP, and would therefore pay at most a nominal premium.

In addition, although the amount of the advanced premium tax credit is related to the cost of the second lowest-cost silver premium, recipients also have the option to apply their credit to bronze plans, which are less expensive than silver.7 To estimate the number of people who would have the option of bronze coverage for $100 or less, we compared the weighted average of the second lowest-cost silver premium in the 17 states with publicly available information to the weighted average lowest-cost bronze premium in those same states. These weighted averages were constructed based on expected enrollment in the Marketplaces by age.8 As of August 9, 2013, the weighted average second lowest-cost silver premium in the 17 states with publicly available premium data was $341, and the weighted average lowest-bronze premium was $257. Using these amounts, we estimate that the weighted-average difference between the lowest bronze and second lowest-cost silver premium is $84. Therefore, in order for an individual to pay $100 or less for a bronze plan, the maximum monthly payment for the second lowest-cost silver would need to be $184, which corresponds to 244% of the FPL for a single individual. To find the analogous threshold for a family with two uninsured adults, we calculated the percentage of the FPL that corresponds with a maximum monthly payment of $368 for each relevant family size.

The number of individuals eligible for the Marketplaces is calculated as the number of individuals who have family incomes above 138 percent of the FPL in Medicaid expansion states, or above 100 percent of the FPL in non-expansion states.9 The number of individuals eligible to receive a tax credit that would reduce their premium to $100 or less per person in the Marketplace is calculated based on a combination of family size and the number of uninsured adults in the household. For example, for a family of three with one uninsured adult, the FPL threshold is based on paying a maximum of $100 for the second lowest-cost silver plan. For a family of three with two uninsured adults, the FPL threshold is based on paying a maximum of $200 for the second lowest-cost silver plan. As noted above, uninsured children below 250% of the FPL are assumed to be eligible for Medicaid or CHIP and are therefore not included in the number of uninsured family members used to calculate the maximum premium payment needed to ensure that the family pays $100 or less per person per month. The income thresholds used for each combination of family size and number of uninsured adults are shown in Table 1.

Table 1: Maximum Health Insurance Unit Income as a Percent of the Federal Poverty Level for Marketplace Coverage Costing $100 per Person per Month or Less
HIU Size Income as % of FPL for Silver Plan Income as % of FPL for Bronze Plan
1 Nonelderly Adult Uninsured in HIU 2+ Nonelderly Adults Uninsured in HIU 1 Nonelderly Adult Uninsured in HIU 2+ Nonelderly Adults Uninsured in HIU
1 185% N/A 244% N/A
2 165% 220% 212% 300%
3 151% 198% 191% 265%
4+ 142% 183% 177% 241%

In states likely to expand Medicaid, we estimate the number of individuals who may obtain Medicaid coverage as the number of eligible uninsured with a family income at or below 138 percent of the FPL. We assume that uninsured children under 250 percent of the FPL may be eligible for Medicaid or CHIP in all states.

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