Health insurance plans offered through Covered California, California’s Affordable Care Act (ACA) Marketplace, charge enrollees a monthly premium. Lower-income enrollees may qualify for a premium tax credit (PTC) to subsidize a plan’s premium costs and decrease the amount the enrollee pays each month.
As of January 2017, there is no change to the ACA and PTCs are available to those who qualify. However, the US Congress is considering legislation to significantly alter the ACA, including the possible elimination of PTCs. This installment of the ACA Spotlight illustrates what the increases in enrollees’ premium costs would be for Covered California plans if PTCs were eliminated based on the 2017 premiums.
For example in Alameda County, for a 27 year old earning $17,820 annually and enrolled in the second-lowest cost silver plan, he or she could see the monthly premium cost go up to $340 per month without a PTC, a 467% increase from the $60 per month the enrollee would pay with a PTC. This would increase the enrollee’s share of annual income paid toward premium costs from 4% to 23%, nearly a quarter of his or her annual earnings. To see the effects on premium costs for other counties, ages, and income levels, use the drop-down menus at the top.
The Affordable Care Act (ACA) established health insurance Marketplaces, either through State-based Marketplaces or the Federally-facilitated Marketplace available via HealthCare.gov, for uninsured consumers to purchase and enroll in Qualified Health Plans (QHPs) (referred to here as “plans”). California opted to establish a State-based Marketplace, called Covered California.
As with most health insurance options, plans offered through the Marketplaces charge enrollees a monthly premium. Lower-income enrollees may qualify for a premium tax credit (PTC) to subsidize a plan’s premium costs and lower the amount the enrollee pays each month. PTCs are designed to ensure that insurance options are available to enrollees at or below 9.69% of their household income, a threshold adjusted yearly by the Internal Revenue Service (IRS). PTCs are available to qualified individuals and families with incomes between 100% and 400% of the federal poverty level ($20,160 to $80,640 for a family of three in California). The amount of the PTC is calculated based on the enrollee’s FPL and the premium cost of the second lowest-cost silver plan (also known as the benchmark plan) in the enrollee’s area.
As of January 2017, there is no change to the ACA and PTCs are available to those who qualify. However, the US Congress is considering legislation to significantly alter the ACA, including the possible elimination of PTCs. This installment of the ACA Spotlight examines what enrollees’ premium costs would be for Covered California plans without PTCs based on the 2017 premiums. This is done by comparing 2017 Covered California benchmark plan premium costs for enrollees of three different ages (27, 40, and 60 years old) and at three different FPLs (150%, 250%, and 350%).
Depending on the details of a possible ACA repeal that eliminates PTCs and subsequent market reactions and health reforms, actual costs for consumers may differ from results shown here. For example, the elimination of PTCs would not likely go into effect in 2017. Moreover, repeal of the ACA would likely result in changes to individual health insurance offerings and premiums for consumers that cannot be anticipated here. Another possibility is that states with State-based Marketplaces make legislative, administrative, and/or budgetary changes to maintain certain features of the ACA.
The infographics in this ACA Spotlight compare the difference in enrollees’ premium costs with and without premium tax credits for a 2017 Covered California benchmark plan. Spotlight users can see three types of data related to the benchmark (second-lowest cost silver) plan:
- Gross increase in monthly premium costs without a premium tax credit. Under the ACA, the monthly premium cost to the enrollee equals the total premium minus any PTC available to the enrollee. Therefore, if the PTC is eliminated, the increase in monthly premium cost is equal to the PTC.
- Percent increase in monthly premium costs without a premium tax credit. This amount equals the total monthly premium divided by the net monthly premium cost (total monthly premium minus PTC).
- Share of annual household income paid to premiums without a premium tax credit. This amount equals a year’s worth of monthly premiums divided by the annual household income for the selected scenario (see below).
Premiums depend on the age of the enrollee and PTCs depend on the household income of the enrollee. Spotlight users can choose to see a display of each of the above types of data for any of the following age and federal poverty level (annual household income) scenarios:
- 27 year old at 150% of FPL ($17,820)
- 27 year old at 250% of FPL ($29,700)
- 27 year old at 350% of FPL ($41,580)
- 40 year old at 150% of FPL ($17,820)
- 40 year old at 250% of FPL ($29,700)
- 40 year old at 350% of FPL ($41,580)
- 60 year old at 150% of FPL ($17,820)
- 60 year old at 250% of FPL ($29,700)
- 60 year old at 350% of FPL ($41,580)
These scenarios are based on 2016 FPLs for the 48 contiguous states and D.C., which includes California.
This ACA Spotlight provides calculations for Covered California plans for coverage year 2017. To determine the difference for select consumers’ premium costs with and without a PTC, the MAGI Cloud platform makes calculations using Covered California’s 2017 plan data and the age and annual household income/FPL parameters the user selects. For all counties except Los Angeles County, the selected plan is the second-lowest cost silver/benchmark plan available in the health insurance rating area in which the county is located. Los Angeles County is split into two health insurance rating areas, so two separate calculations are provided to represent its two rating areas. Since plan offerings can vary throughout a rating area (for example, a plan may be offered in part of a rating area, but not throughout the entire rating area), personalized results based on exact location may vary from those illustrated in this ACA Spotlight.
Social Interest Solutions (SIS) produced the data and infographics using the MAGI Cloud platform. The MAGI Cloud platform includes a comprehensive rules engine that can generate ACA eligibility results across all states and across the full spectrum of health insurance options, including Medicaid, the Children’s Health Insurance Program (CHIP), and QHPs with and without premium tax credits and cost-sharing reduction subsidies. Learn more about the MAGI Cloud platform.
Data used in this Spotlight are available upon request to firstname.lastname@example.org.
- California Healthline
Congressional Budget Office
- Budgetary Effects of H.R. 3762, the Restoring Americans’ Healthcare Freedom Reconciliation Act, as Passed by the Senate on December 3, 2015
- Health Access California
- Kaiser Family Foundation
- Robert Wood Johnson Foundation
- State of California Department of Finance
- UC Berkeley Labor Center
- UCLA Center for Health Policy Research
- Urban Institute