Obamacare plans put big dent in customers' wallets

You might not be reduced to living on Ramen noodles if you buy Obamacare coverage — but your bank account certainly could feel a bit leaner.

A new study reveals that many Obamacare customers pay more than 10 percent of their incomes toward coverage. And the share of income eaten up can be much greater for some people, particularly if they use a lot of health services under their plan.

Martha Lucia sits with Rudy Figueroa, an insurance agent from Sunshine Life and Health Advisors, as she picks an insurance plan available in the third year of the Affordable Care Act at a store setup in the Mall of the Americas on Nov. 2, 2015, in Miami.
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Martha Lucia sits with Rudy Figueroa, an insurance agent from Sunshine Life and Health Advisors, as she picks an insurance plan available in the third year of the Affordable Care Act at a store setup in the Mall of the Americas on Nov. 2, 2015, in Miami.

One in 10 Obamacare customers who earn between just two and five times the federal poverty level will have coverage costs that exceed 21 percent of their incomes, an analysis by the Robert Wood Johnson Foundation and the Urban Institute found.

And the median Obamacare customer who earns in that range spends more than 10 percent of their income on monthly premiums and out-of-pocket health expenses, the analysis found.

"Many who have modest incomes have high financial burdens even with average medical expenses," the report said. "For those at the top of the [health] spending distribution, financial burdens are very high."

"You start to get hit pretty hard," said John Holahan, an Urban Institute fellow, and co-author of the report.

Strong sign-up activity

The study comes as Obama administration officials have touted relatively strong sign-up activity on the federal insurance exchange during the third open-enrollment season. Officials also have stressed the availability of financial assistance to help many consumers purchase coverage, and the value of having insurance to protect oneself from potentially crippling medical bills.

Still, the analysis also suggests that efforts to boost Obamacare enrollment dramatically above current levels is being hampered by the sticker shock that some would-be customers feel when they look at how much they would have to actually pay in plan premiums and deductibles relative to their incomes.

"I do think that it leads to less enrollment and certainly makes [the Affordable Care Act] less popular than it otherwise might be," said Holahan.

"You basically have an individual mandate that requires you to pay a significant amount of income between premiums and out-of-pocket costs," Holahan said. Those high costs, he said, "will make a lot of people think it isn't worth it."

Young sign ups double with Obamacare
Young sign ups double with Obamacare   

Some people feel they don't have a choice but to buy, despite the price.

"I love my family, and I'm not going to let them go without health insurance," said Kevin Broyles, a 63-year-old insurance broker from Knoxville, Tennessee.

Broyles, who had been paying $629 per month for coverage from a long-standing Blue Cross plan for himself, his wife and their three children, recently got an an "eye-opener" when Blue Cross canceled his plan because it was not compliant with ACA standards. He learned the lowest-priced "bronze" plan in his area would cost $1,161 per month, or $13,932 annually to cover himself, his wife, and their two teenage children who will remain on the family's plan.

"This is almost 14 percent of our pretax income," said Broyles. "If we could afford the [second least-expensive] 'silver plan' in our area, that would cost $1,568 per month, or $18,816 per year. That would be almost 19 percent of our pretax income."

After paying for his Obamacare plan, as well as his Social Security and Medicare withholding, "we then get to start paying income tax on the roughly 70 percent that remains. Then state and local taxes, and, finally, we can live on Ramen noodles after the mortgage, utilities and other living expenses. Is this a great system or what?" Broyles said.

Broyles' annual income is about $100,000, which means he earns too much to qualify for a federal tax credit to reduce his monthly premium payments. But even people who get those subsidies can feel sticker shock.

Tom Thomas, a 62-year-old retiree from Ohio, said he was "pretty damn upset" to learn that his current Obamacare plan costs, if he had re-enrolled for 2016, would have risen from $68 per month to $252 per month after his subsidy.

Even after he switched plans to a cheaper option, Thomas will be paying $179 per month after his subsidy in 2016. His annual cost, from just premiums alone, will be more than 8 percent of his annual income of $24,000.

"Ouch!" he said.

Insurers are sensitive to such concerns. The New York-based insurer Oscar, which was started up to take advantage of the Obamacare market, just introduced a "Help Me Choose My Plan" feature on its website. The feature asks consumers four questions about their use of specialists, chronic conditions, plans for medical procedures and prescription drug use, and then presents plan options.

Mario Schlosser, CEO and co-founder of Oscar, said the tool was designed to deal with the "difficult and often overwhelming task" of predicting the "variables of your future health needs."

Oscar wanted the tool to help consumers "minimize their out-of-pocket costs," Schlosser said. It also is part of its attempt to provide customers with "a simple, transparent experience" so they will continue choosing Oscar, he said.

Cost biggest barrier to insuring more

While Broyle, Thomas, and millions of other people are biting the bullet and buying coverage because they value having health insurance, cost remains the biggest reason why the remaining 10 million or so eligible uninsured people in the United States have not signed up yet.

A recent Kaiser Family Foundation survey found that 46 percent of uninsured adults said they had tried to get health coverage in the past year, but found it too expensive.

A Commonwealth Fund analysis this week found that for most Obamacare enrollees who do not get federal assistance in for out-of-pocket costs, the co-payments, co-insurance and deductibles they pay under their plans are considerably higher than employer-based plans.

Obamacare plans also "are far more likely than employer-based plans to require enrollees to meet deductibles before they receive coverage for prescription drugs," the report said.

Improving affordability

To counter such sentiment, the Obama administration had repeatedly noted that more than 80 percent of ACA customers qualify for financial aid to help pay for their monthly premiums, and that more than half get additional aid to offset out-of-pocket expenses.

And federal officials have pointed out that more than 7 in 10 returning customers this year will be able to buy a plan that would cost less than $75 per month in premiums.

The administration earlier this week revealed that HealthCare.gov, the federal insurance marketplace, through mid-December had seen 8.2 million people in 38 states select plans for 2016, a marked increase over the 6 million plan selections at the same time last year. That doesn't include sign-ups on state-run exchanges, where interest is likely to be just as high as on HealthCare.gov.

The surge of sign-ups could mean that federal officials will easily beat their target of having 10 million paying Obamacare customers as of the end of 2016.

"Millions of Americans will start 2016 with the quality and affordable health coverage they want and need to keep their families healthy and financially secure," Health and Human Services Secretary Sylvia Burwell said Tuesday.

But not even the biggest ACA booster expects enrollment will hit the 21 million predicted by the Congressional Budget Office for 2016.

The Urban Institute/Robert Wood Johnson Foundation report concludes by noting that making several changes to the ACA could "improve the affordability of marketplace coverage," and in turn boost enrollment.

One suggestion the report makes is to link the premium subsidies that most Obamacare customers get to the price of "gold" plans, instead of to the price of the less expensive "silver" plans. Obamacare plans are designated by metal tiers — platinum, gold, silver and bronze. Platinum plans cost the most in terms of premium, but cover the biggest share of health costs. The others cost less, but cover fewer health costs.

The report also suggests that low-income customers could get higher amounts of assistance paying their out-of-pocket costs.

A third suggestion is to put a cap on the percentage of income that people who earn more than four times the poverty level would have to pay for Obamacare plans.

"It's not a great deal of money" to fund those suggestions relative to other federal spending, Holahan said. But it would be difficult to get Congress to appropriate more spending on Obamacare given the current political climate, he said.