New health law frustrates many in middle class

Ginger Chapman and her husband, Doug, are sitting on the health care cliff.

The cheapest insurance plan they can find through the new federal marketplace in New Hampshire will cost their family of four about $1,000 a month, 12 percent of their annual income of around $100,000 and more than they have ever paid before.

Even more striking, for the Chapmans, is this fact: If they made just a few thousand dollars less a year — below $94,200 — their costs would be cut in half, because a family like theirs could qualify for federal subsidies.

The Chapmans acknowledge that they are better off than many people, but they represent a little-understood reality of the Affordable Care Act. While the act clearly benefits those at the low end of the income scale — and rich people can continue to afford even the most generous plans — people like the Chapmans are caught in the uncomfortable middle: not poor enough for help, but not rich enough to be indifferent to cost.

"We are just right over that line," said Ms. Chapman, who is 54 and does administrative work for a small wealth management firm. Because their plan is being canceled, she is looking for new coverage for her family, which includes Mr. Chapman, 55, a retired fireman who works on a friend's farm, and her two sons. "That's an insane amount of money," she said of their new premium. "How are you supposed to pay that?"

An analysis by The New York Times shows the cost of premiums for people who just miss qualifying for subsidies varies widely across the country and rises rapidly for people in their 50s and 60s. In some places, prices can quickly approach 20 percent of a person's income.

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Experts consider health insurance unaffordable once it exceeds 10 percent of annual income. By that measure, a 50-year-old making $50,000 a year, or just above the qualifying limit for assistance, would find the cheapest available plan to be unaffordable in more than 170 counties around the country, ranging from Anchorage to Jackson, Miss.

A 60-year-old living in Polk County, in northwestern Wisconsin, and earning $50,000 a year, for example, would have to spend more than 19 percent of his income, or $9,801 annually, to buy one of the cheapest plans available there. A person earning $45,000 would qualify for subsidies and would pay about 5 percent of his income, or $2,228, for an inexpensive plan.

In Oklahoma City, a 60-year-old earning $50,000 could buy one of the cheapest plans for about 6.6 percent of his income, or about $3,279 a year with no subsidy. If he earned $45,000, with the benefit of a subsidy, he would spend about $2,425.

While the number of people who just miss qualifying for subsidies is unclear, many of them have made their frustration known, helping fuel criticism of the law in recent weeks. Like the Chapmans, hundreds of thousands of people have received notices that their existing plans are being canceled and that they must now pay more for new coverage.

In an effort to address that frustration, the Obama administration announced on Thursday that it would permit people whose plans had been canceled to buy bare-bones catastrophic plans, which are less expensive but offer minimal coverage. Those plans have always been available to people under 30 and to those who can prove that the least expensive plan in their area is not affordable. But the announcement does not address the concerns of those who would like to buy better coverage, yet find premiums in their area too expensive.

David Oscar, an insurance broker in New Jersey, another high-cost state, said many of his clients had been disappointed to learn that the premiums were much more expensive than they had expected.

"They're frustrated," he said. "Everybody was thinking that Obamacare was going to come in with more affordable rates. Well, they're not more affordable."

Many of the biggest provisions of the Affordable Care Act are aimed squarely at the poorest of Americans. Under the law, states have the option of expanding Medicaid to a larger pool of people with the lowest incomes. To those earning more, the law provides subsidies to people earning up to four times the federal poverty level, or $45,960 for an individual and $62,040 for a couple.

Ninety percent of the country's uninsured population have incomes that fall below that level, according to one recent analysis. As a result, the subsidies "are well targeted for people who are uninsured or underinsured," said Sara R. Collins, an executive with the Commonwealth Fund, a private foundation that finances health policy research. "That is really where the firepower of the law is focused."

Federal assistance is based on the cost of premiums for the second-cheapest silver, or midlevel, plan in a person's geographic area and are set so the amount the person must pay for coverage does not exceed a certain percentage of income, ranging from 2 to 9.5 percent.

Even before the announcement on Thursday giving people with canceled plans the option of buying catastrophic coverage, the law permitted people to select such plans if the price of premiums in their area exceeded 8 percent of their income. The catastrophic plans are often less expensive and include three doctor visits and free preventive care, but require someone to pay almost all of the medical bills up to a certain amount, which is usually several thousand dollars.

That is the option that the Chapmans say they are likely to choose when their current insurance plan, which costs $665 a month, expires in September. Anthem is the only insurer offering plans in the marketplace in New Hampshire, and prices there are higher than in many other parts of the country.

Some experts dismissed the varying effects of the income cutoff, saying the law's main elements benefit most of those who could not previously buy insurance.

"I think that job one was to make sure that the people who clearly have the greatest difficulty affording premiums receive the greatest help," said Ron Pollack, the founding executive director of Families USA, a consumer advocacy group that favored the law.

To avoid creating such steep cliffs, federal officials would have had to spend more money on the subsidies, said Larry Levitt, an executive with the Kaiser Family Foundation, a nonprofit research group that is closely following the health care law. Subsidies would have been higher, and could have been more gradually phased out, he said. The design "was largely driven by budgetary decisions," Mr. Levitt said.

The subsidy cutoff can seem especially arbitrary to people whose incomes vary from year to year, even if they stand to benefit from the law.

Christian Johnsen, a bakery owner who lives with his wife and two children in Big Sky, Mont., and has an income of about $88,000, will probably be eligible for subsidies next year. As a result, the family could buy a midlevel insurance plan for about $697 a month.

But if the bakery does better next year, the family could be asked to pay a lot more. Without any subsidy, the same plan would cost $822.

Mr. Johnsen, who is 47, said he would like to buy insurance for his family. They have gone without it for the last two years, paying out of pocket on rare visits to the doctor. But he said it is hard to justify those prices to prevent an unforeseen catastrophe when so many real-world expenses demand his attention first.

"I know absolutely that I'm going to need a new car in two years, but I don't know that I'm going to have a catastrophic accident," he said. "That's the kind of debate that happens in our house."