Health Plans Leave Middle Class With Few Options

A significant portion of American consumers make too much money for health insurance tax credits but can't afford standard health plans.

Health plan leaders and politicians have left a large swath of Americans with few choices when it comes to obtaining health insurance.

The enrollment period that ended Friday saw consumers in many states seeking individual coverage and facing limited choices, after insurers pulled out of their markets because of high-utilization costs that made policies unprofitable. The insurers left in some of those states offered only plans with high premiums and deductibles.

Consumers experienced the most difficult decision-making during the enrollment period since the Affordable Care Act was enacted, says a leading broker.

Insurers are pushing away many consumers as they find ways to work around the ACA's challenges to their profitability, says B. Ronnell Nolan, HIA, CHRS, president and CEO of Health Agents for America, which represents health insurance brokers who work with consumers seeking coverage both on and off the state exchanges.

Companies have become more involved with Medicare Advantage and Medicare supplemental policies, for example, as a way to remain profitable even though the group and individual markets have proven difficult in many states.

"The consumers are struggling to be able to pay for insurance," she says. "The companies enjoyed their cost-sharing subsidies to keep the payments rolling in every month, whether the consumer got anything out of that coverage or not.

"This year, those folks that were above 138% of poverty to about 250% of poverty got a better deal than they've gotten in the past, because they got a tax credit that more than makes up for the premium increase in a lot of cases," Nolan says. "Those folks who were above 400% of poverty had to make hard decisions whether they could afford some type of insurance or … going without and paying the penalty. The conversations with those folks were hard, sad, and depressing at times."

Plan options for helping with healthcare costs

Consumers above 400% of poverty felt the entire wrath of the premium and deductible hikes, she says. If they found the plans available on the exchanges untenable, they generally had to choose between three options: the Christian Ministries plan, short-term medical plans, or going without coverage. However, as Congress has debated the tax bills that include eliminating the individual mandate, it has made the option of forgoing coverage a bit easier for some.

The Christian Ministries plan is a form of cost-sharing and is ACA-compliant, so it protects consumers from incurring a penalty from the individual mandate. Short-term medical plans have gained favor recently because the Trump administration has taken steps to allow coverage for up to 364 days without having to reapply, but these plans are not ACA-compliant, and consumers would have to pay the penalty in addition to their premiums, unless Congress acts to remove the mandate and penalty.

But even if the penalty endures, short-term plans still may work out better for many consumers than paying the sky-high rates of traditional ACA-compliant plans, Nolan says.

Nolan and her colleagues have been advising consumers to assume that the penalty will remain. Even though the tax bills may eliminate the individual mandate, she notes that the Internal Revenue Service is currently sending hefty bills to employers for failing to provide group insurance. That signals that the IRS will enforce the individual mandate aggressively if Congress ends up not abolishing it, she says.

"[The IRS has] said they are not going to accept a tax return in 2018 for 2017 unless you check the box saying whether you had coverage, so the writing on the wall is that they are taking a hard line on this and planning to make good on that penalty," Nolan says. "Congress could change that by passing a tax bill that eliminates the penalty, but Americans are having to make important life choices right now based on what Congress may or may not do, and that is creating a lot of sleepless nights for people."