Health Insurance

More than 2 million people missing out on Obamacare health-insurance subsidies

An agent from Sunshine Life and Health Advisors offers insight to potential enrollees in Miami about the plans available last year under the Affordable Care Act.
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That's a lot of people leaving money on the table.

About 2.5 million people now buying health insurance are missing out on getting financial aid to reduce their monthly premiums because they are buying individual plans outside of the government-run Obamacare marketplaces, a new report revealed Tuesday.

Those people would be eligible for those subsidies, in the form of federal tax credits, because they have low or moderate incomes. But they aren't receiving that aid since it is available only when coverage is purchased on either the federal Obamacare exchange,, or a state-run marketplace.

Of the 2.5 million person group, a subset of 1.1 million people could also be getting financial help paying for their out-of-pocket health costs — because their incomes are on the lower side — but aren't since they are enrolled in so-called off-exchange plans, the report from the U.S. Department of Health and Human Services found.

And six states — California, Texas, Florida, North Carolina, Illinois and Pennsylvania — each have more than 100,000 residents who could be getting premium subsidies if they were enrolled in exchange-sold plans, as opposed to off-exchange plans, the report found.

The HHS analysis, which comes less than a month before open-enrollment in Obamacare plans for 2017 begins Nov. 1, sheds new light on that off-exchange market for individual plans. Individual plans are those sold by private insurers to people who do not get health coverage through an employer.

The report quantifies the number of people who will be fully exposed to the often hefty premium price hikes that a number of insurers have requested for their plans for next year. People who get tax credits to reduce their Obamacare premiums are largely insulated from such price increases.

The Commonwealth Fund has found that more than half of adults who lack health insurance don't know they can get subsidies on Obamacare exchanges. However, some subsidy-eligible people may be buying outside of the exchanges for other reasons.

HHS Secretary Sylvia Burwell, noted that "more than 9 million Americans already receive financial assistance" through the Obamacare exchanges, "but today's data show millions more Americans could benefit."

"We encourage everyone to check out their options on or their state marketplace and see if they qualify for financial assistance," Burwell said.

"Marketplace consumers who qualify for financial assistance usually have the option to buy coverage with a premium of less than $75 per month."

HHS researchers said Tuesday that before their report there were a wide range of estimates, from about 5 million to 9 million, for the number of people who purchase individual plans outside of the government-run exchanges.

Their own report estimates that 6.9 million currently buy individual health plans in the off-exchange market. That market includes plans purchased from privately run online health exchanges, through insurance brokers and directly from insurance companies.

All of those off-exchange customers have to pay the full monthly premium for their plans.

In contrast, about 11.1 million people are enrolled in Obamacare plans, with 9.4 million of them getting premium subsidies. The subsidies are available to people with household incomes between 100 percent and 400 percent of the federal poverty level, or between $24,300 to $97,200 for a family of four.

People with household incomes between 100 percent and 250 percent of poverty also can get subsidies that cut the amount they pay in deductibles, co-pays and co-insurance for health services and medication.

Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, said the HHS report is important for several reasons.

"It highlights the importance of expanded outreach so people know what financial help is available to them and how to get it," Levitt said. "This is an incredibly complicated and confusing law, and there's an awful lot of noise surrounding it. So, it's no wonder people are somewhat befuddled."

"The premium subsidies cushion the effect of premium increases," Levitt noted. "The more people who are eligible for subsidies, the greater the cushioning effect. With most enrollees in the individual insurance market eligible for premium subsidies, the risk of a dreaded 'death spiral' is quite low."

A death spiral occurs when too many unhealthy people are enrolled in an insurance pool compared to the number of healthy people, costing more in health costs than the premiums that are paid in, which in turn causes insurers to hike premiums more, driving away those with good health.

Levitt said HHS' estimate of the number of off-exchange customers "sounds a tad low to me based on filings to state insurance commissioners, but it's certainly in the right ballpark."

"There are millions of people out there who could be getting financial help but aren't," Levitt said. "That includes people who are currently uninsured as well as those buying their own insurance outside the marketplaces and paying full freight."

He added that, "The number of people currently insured and eligible for subsidies they're not getting is sure to grow as premiums rise in 2017."

The HHS report also found that 1.9 million people in the off-exchange market have incomes of below 138 percent of the poverty level, which is the maximum income allowed for Medicaid enrollees under the Affordable Care Act.

Some of those people could, as of now, enroll in Medicaid programs run by their states, since their states did expand eligibility for that program to nearly all poor adults.

Others can't get Medicaid because of their immigration status.

However, a portion of the group lives in states that did not expand Medicaid to most poor adults under the ACA as allowed, and also earn less than 100 percent of the poverty level, which is the minimum income level for Obamacare financial aid. People in that "coverage gap" are ineligible for Medicaid under their state's stricter income guidelines, and also earn too little to qualify for Obamacare subsidies to buy health insurance on the exchanges.

That perverse situation — where wealthier people get Obamacare assistance and many poor people don't — is the result of a 2012 Supreme Court decision that barred the federal government from imposing Medicaid expansion on the states. So far, 31 states and the District of Columbia have expanded Medicaid under the ACA.