This week’s Paragon pic highlights the effect of the increased subsidies from the American Rescue Plan Act by income levels for the year 2021. The figure shows the total premium, broken into the enrollee’s out of pocket premiums, underlying subsidies from the Affordable Care Act, and the enhanced subsidies. Premiums did not change much from 2021 through 2024, so this chart is figure closely illustrates the situation in 2024.
The enhanced subsidies provided only modest monthly savings for people with incomes less than 400 percent of the federal poverty level (FPL)—about the equivalent of dinner for a family of three or four people at a fast-food restaurant.
Daniel Cruz and Greg Fann use this figure in a recent Paragon Prognosis to illustrate the problems with an Oliver Wyman analysis of the coverage effects of removing the subsidies. From their analysis:
The most significant impact of the enhanced subsidies expiring will be felt by enrollees earning over 400% of the FPL, who make up only 700,000 of the over 9 million new enrollees. Among those, it’s estimated that only 100,000 to 200,000 people have an HCC condition. For the 7 million low-income Americans now enrolled in the ACA individual market, it is highly unlikely that they will go uninsured over a $30 to $45 increase in monthly premiums—especially when free ACA coverage will still be available in many areas. It’s even less probable that individuals with chronic conditions will drop their coverage for such a nominal increase.
What impact can we expect? Based on our experience as actuaries managing various rate changes and observing consumer behavior, a reasonable estimate is that a $10 increase in premiums could lead to a 1% to 3% reduction in enrollment, primarily among healthy, price-sensitive individuals. Therefore, policymakers should not be surprised if the expiration of enhanced subsidies has a minimal effect, resulting in an overall enrollment decrease of 1 to 3 million, with around 100,000 to 300,000 individuals with chronic conditions losing coverage.
