Health and Science

Low-income people loved Obamacare, but the rest of us...

A health-care specialist helps people select insurance plans in Pasadena, Calif.
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The carrots worked pretty well for Obamacare this year. The stick? Not so much.

People with higher incomes in 2015 were much less likely to enroll in Obamacare plans than lower-income earners—even when they were offered financial assistance to help pay for their health plans, according to an analysis released Wednesday.

And the differences in uptake of Obamacare were dramatic between income groups, with a sharp falloff as people's annual earnings increased and the amount of subsidies available decreased, the analysis by the Avalere Health consultancy found.

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Those pronounced drops were particularly striking because they occurred even between groups who are eligible for the most generous kind of Obamacare private plan assistance.

Participation of eligible individuals enrolled in exchange plans, by income (poverty level)

A whopping 76 percent of Obamacare-eligible individuals who earned between $11,770 and $17,655 annually actually signed up for a plan this year on the federally run insurance exchange, which serves 37 states, Avalere found. That income group represents the low end for qualifying for Obamacare subsidies, and as a rule those people would receive the largest amount of financial aid.

But there were steep declines in the next two income groups, even though those people receive not only help paying their monthly premiums, but as with the lower earners remain eligible for financial assistance to cover out-of-pocket medical expenses.

Just 41 percent of eligible people earning between 151 and 200 percent of the federal poverty level bought plans. And just 30 percent of eligible people in the next income group, earning up to 250 percent of the poverty level, bought such a plan.

Only 16 percent of eligible people who earned between $35,427 and $47,080—the high-end Obamacare subsidy recipients—bought a plan.

And when the subsidies weren't available, because a person earned more than $47,080, the participation was far lower.

Just 2 percent of eligible people above that income enrolled in a plan, the Avalere analysis found.

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"Virtually all of the people signing up for this are people who receive subsidies from the federal government," said Avalere Health CEO Dan Mendelson.

"A lot of the higher-income people are not participating in this," he said. "The exchanges are primarily a low-income benefit. ... The people signing up for these benefits are the ones that are heavily subsidized."

Mendelson said the findings are significant, because "it shows sort of a lukewarm embrace" of Obamacare among the people its meant to benefit.

The findings also suggest that the penalties for not having health coverage are less of an incentive for people buy Obamacare than the subsidies are.

The Affordable Care Act requires nearly all Americans to have some form of health coverage or be subject to a tax penalty.

In 2015, that penalty is the higher of $325 per individual or 2 percent of taxable household income.

The ACA also offers people who earn between 100 and 400 percent of the poverty level tax credits to help pay the premiums for plans they buy from a government-run Obamacare exchange. And people who earn between 100 and 250 percent of the poverty level can also qualify for financial aid to help pay their out-of-pocket medical costs.

Because of the value of premium and cost-sharing subsidies to low-income Obamacare customers, "In many cases, this is free insurance," said Mendelson.

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The value of the premium subsidies tends to decrease the closer someone earns to 400 percent of the poverty level.

Mendelson said the low levels of participation seen among higher-income earners is due to "a lot of reasons."

In addition to lower subsidies, those people also may feel more comfortable facing a financial risk that could be mitigated if they had insurance, Mendelson said. "They probably don't have as much fear of going uninsured."

And, "undoubtedly, some of it is political and some of it is ideological" opposition to Obamacare, he said.

But, Mendelson added, "if just 2 percent of people over 400 percent of poverty are signing up, that's more than political."

Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, a health policy research organization, said at least a portion of the sharp differences in participation seen by Avalere may be explained by the fact that some higher-income earners bought ACA-compliant individual insurance plans outside

But, Levitt said: "These results follow basic economic theory. ... The bigger a subsidy you give someone to buy health insurance, the more likely they are to sign up."

He added, "This may be one of the reasons that we've seen big enrollment numbers in some states that have not expanded Medicaid."

In those states, people who earn between 100 and 138 percent of poverty are eligible for Obamacare plan subsidies, whereas in states that expanded Medicaid they likely would enroll in that program.

Levitt said that "uninsured people with modest incomes may be a harder sell, since the subsidies they receive are small."

But he noted that "in the years ahead, as the penalties under the individual mandate ramp up, the stick to get people to buy coverage will grow stronger."

Next year, the Obamacare penalty for not having health coverage increases to the higher of $695 per adult or 2.5 percent of household income. In future years, the flat dollar amount will be indexed to the inflation rate.

Mendelson echoed Levitt, saying that he believes the future growth of Obamacare enrollment will come from higher-income groups "when the penalties grow."