Obamacare Enrollment Split: Subsidies vs. No Subsidies

Two reports released in the past week demonstrate a potential bifurcation in state insurance exchanges: The insurance marketplaces appear to be attracting a disproportionate share of low-income individuals who qualify for generous federal subsidies, while middle- and higher-income filers have generally eschewed the exchanges.

On Wednesday, the consulting firm Avalere Health released an analysis of exchange enrollment. As of the end of the 2015 open-enrollment season, Avalere found the exchanges had enrolled 76% of eligible individuals with incomes between 100% and 150% of the federal poverty level—between $24,250 and $36,375 for a family of four. But for all income categories above 150% of poverty, exchanges have enrolled fewer than half of eligible individuals—and those percentages decline further as income rises. For instance, only 16% of individuals with incomes between three and four times poverty have enrolled in exchanges, and among those with incomes above four times poverty—who aren’t eligible for insurance subsidies—only 2% signed up.

The Avalere results closely mirror other data analyzed by the Government Accountability Office in a study released last Monday. GAO noted that three prior surveys covering 2014 enrollment—from Gallup, the Commonwealth Fund, and the Urban Institute—found statistically insignificant differences in the uninsured rate among those with incomes above four times poverty, a group that doesn’t qualify for the new insurance subsidies.

The GAO report provided one possible reason for the lack of enrollment among individuals not eligible for federal insurance subsidies. In 2014, premiums remained unaffordable—costing more than 8% of income—across much of the country for a 60-year-old making five times poverty. These individuals earned too much to qualify for subsidies, but too little to afford the insurance premiums for exchange policies. The GAO data confirm my July analysis, in which I wrote: “Those who do not qualify for federal subsidies appear to find exchange coverage anything but affordable.”

Other findings echo the strong link between subsidies and coverage. The Commonwealth Fund’s study last summer noted that among those with incomes between 250% and 399% of poverty, the uninsured rate had not changed appreciably. These individuals don’t qualify for the additional federal assistance with cost-sharing—deductibles, co-payments, and co-insurance—provided to those with incomes below 250% of the federal poverty level. Prior studies have demonstrated that some of these individuals won’t qualify for premium subsidies at all, based on their age, income, and premium levels in their state.

The overall picture presented is one of a bifurcated, or even trifurcated, system of health insurance. Individuals who qualify for very rich insurance subsidies or Medicaid have signed up for coverage, while those who qualify for small or no subsidies have not. It raises two obvious questions: Whether and how the exchanges can succeed long-term with an enrollment profile heavily weighted towards subsidy-eligible individuals—and whether an insurance market segregated by income was what Obamacare’s creators originally had in mind.

This post was originally published at the Wall Street Journal Think Tank blog.