Kaiser Study: Subsidies Sharply Limit Out-of-Pocket Costs for Low-Income Families in Silver ACA Plans

Low-income persons and families receiving subsidies for health coverage under the Affordable Care Act (ACA) have sharply lower out-of-pocket costs than those who do not qualify for the subsides, according to a new report from the Kaiser Family Foundation (KFF).

The study, prepared to show what is at stake in King v. Burwell, explains that cost-sharing subsidies are different from premium tax credits and play a substantial role in holding down costs, especially for those earning 150% of the federal poverty level or less. Consumers who rely on cost-sharing subsidies would be at risk, the study asserts, if the US Supreme Court rules that subsidies in the 37 states using the federal marketplace are no longer allowed. The subsidies are also available in states with their own insurance exchanges, but these consumers would not be affected by the case.

Under the ACA, insurers are required to offer consumers with lower incomes versions of the standard silver plan with lower levels of cost sharing. Those with incomes less than or equal to 150% of the federal poverty level (FPL) can enroll in a plan with a 94% actuarial value; those with 150% to 200% of the FPL can enroll in a plan with 87% actuarial value; those with incomes 200% to 250% of the FPL can enroll in a plan with 73% actuarial value. Higher actuarial value mean there is less cost-sharing. A standard silver plan an actuarial value of 70%, which means the plan covers 70% of the anticipated cost of care and the consumer pays 30%.

The KFF study that due to cost-sharing subsidies, out-of-pocket costs in silver plans vary widely depending on income. For example, the average annual medical and drug deductible in a silver plan ranged from $2556 for someone in a standard plan to $2077 for someone in the 200% to 250% FPL range, to $737 in the 150% to 200% FPL range, to just $229 for those in the 150% FPL or under. Copayments for office visits showed a similar pattern, with the price points at $28, $23, $17, and $14.

The greatest difference was for annual out-of-pocket limits: For standard silver plans, KFF found the average limit was $5826. For those in the 200% to 250% FPL range, the limit was $4624; for $150% to 200% FPL it was $1692, and for 150% FPL and under it was $881.

Plaintiffs who brought King v. Burwell assert that the plain language of the ACA does not permit consumers who live in states without their own exchange from receiving financial subsidies. However, those who defend the current practice, which was upheld in an IRS ruling, say this was the intent of Congress. Numerous friend-of-the-court briefs filed by advocacy groups that supported the ACA say that its intent to grant subsidies to all eligible consumers was clear; otherwise, the groups, say, they would not have supported the law.

The Supreme Court will hear oral arguments in King v. Burwell next month.

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