Is the Affordable Care Act Actually Affordable? For Millennials, Maybe Not

When the healthcare reform debate surfaced in 2008, Melissa Cornelius hoped single-payer healthcare would be seriously considered. But after following the deliberations and finding that the reformers “were just trying to work within a broken system,” Cornelius said she grew doubtful about the future legislation. Then, in 2011, a year after Obama signed the Affordable Care Act into law, Cornelius, 31, lost her health insurance coverage.

An experienced knitter, Cornelius works 32 hours a week at a small yarn store in San Francisco, where her boss can’t afford to pay for her health insurance. Thus in the fall, she is going back to school in hopes of obtaining a job that comes with more hours and benefits. Meanwhile, Cornelius will have to pay a penalty for not purchasing healthcare through the Affordable Care Act’s marketplace.

“It just doesn’t seem like I’ll be able to afford Obamacare,” says Cornelius, who makes $20,000 a year and owes more than $36,000 in student loans for her three years at the University of Berkeley.

More muck for millenials

With high unemployment, the increasing cost of tuition and expensive rent costs in cities, Cornelius’ case is quite common for many young adults ages 18 to 34 in the United States. It’s necessary, however, for this age group to purchase health insurance through the ACA marketplace in order to defray costs for others in the risk pool. Younger, healthier people help keep premiums low, especially for those older and sicker, because they ultimately need less care and therefore use fewer funds. Of the 7 million people the Congressional Budget Office estimates to be enrolled by March, the Obama administration hopes about 2.5 million are young adults.

But as the October enrollment date nears, the administration may see fewer young adults sign up than it hoped.

“I imagine young adults mostly won’t like it,” said Benjamin Day, the director of organizing for Healthcare Now!, a grassroots organization advocating for a single-payer healthcare system in the United States. “And not because they don’t want insurance or they need insurance … I think they are going to see it as a burden because it is just so expensive.”

Conservatives have been increasingly using this factor to generate disdain for Obamacare among young people. The conservative Heritage Foundation targeted young people in a Buzzfeed post — gifs and all — titled, “That One Time I Was Really, Really Excited About Obamacare.” Meanwhile, liberals are hoping to enlighten millennials and push them to purchase healthcare. After all, the Commonwealth Fund’s recent report found only 27 percent of 19- to 29-year-olds were aware of the marketplaces. But this push is often made without an analysis of young people’s burdens. One article by Brian Beutler on Salon even argued that young adults should purchase healthcare to disprove their selfish stereotype and help out the country. He wrote: “There’s a more selfless reason they should enroll — one they might not be aware of, but that will nevertheless put the proposition that millennials are shiftless, selfish people to the test: The system needs their participation, in order for it to succeed.”

But it’s perplexing to imply that young adults who don’t buy into the marketplace are selfish when they don't have the money to do so — mainly because of their country’s failure to address their needs. Only 5 percent of working adults ages 19 to 29 said they didn’t join their employer’s healthcare policy because they believed they didn’t need it, while 22 percent said the coverage was too expensive. (The rest of those surveyed already had health insurance through a parent or spouse.)

“Young people in general are one of the few social groups that are very economically disadvantaged and increasingly so in the past two decades,” Day said. “They have very low income and very high unemployment, which makes them a very vulnerable group trying to work with our healthcare system, which is really predicated on the workplace. So I don’t think the healthcare system is affordable for anyone really, except for the very wealthy.”

Is the Affordable Care Act affordable?

Now that the once mysterious costs of the Affordable Care Act are beginning to be unveiled, it’s time to analyze just how affordable the Act is. The Kaiser Family Foundation’s subsidy calculator is seemingly the best estimate of how much healthcare premiums will cost. Based on the calculator, Melissa Cornelius said she would have to pay a little more than $100 a month — a bill she can’t afford on top of everything else.

Obamacare was designed to provide tax subsidies to everyone making 133 to 399 percent of the federal poverty level — which is an abysmal $11,490 for a single person; $23,550 for a family of four. This means a single young adult making anywhere from $15,000 to $46,000 will be eligible to receive federal tax subsidies on their premiums.

According to the Commonwealth Fund’s new report, “Covering Young Adults Under the Affordable Care Act,” 80 percent of the estimated 15.7 million young adults who were uninsured at some point last year will be eligible for these tax subsidies, which are paid for upfront. The subsidies are calculated based on a percentage of one’s income. For example, those making 133 percent of the federal poverty line (or about $15,000) are capped at contributing only 3 percent of their income, for a total of about $40 per month for healthcare. Yet, those making 200 percent of the federal poverty level (or about $23,000) are capped at 6.3 percent, meaning $121 per month — 250 percent (or about $29,000) pay about $200 a month, and 300 percent (or about 35,000) pay $273 per month.

Sara Collins, vice president of the Commonwealth Fund and co-author of the report, said these premiums are much cheaper than what has been offered in the individual market and with much more benefits. Christina Postolowski, senior policy analyst for Young Invincibles, a non-profit organization focused on empowering young adults, feels similarly. As someone who has looked into buying health insurance on her own, she says the ACA makes premiums much more affordable.

Postolowski is working with Young Invincibles to educate young adults about Obamacare and encourage them to participate. She said:

I would look at it as an investment in your health, in your financial security. I mean, I’m also a young person who has shopped for insurance on the individual market before, and those are all things that I’ve thought about. [Also] you’re going to be getting a lot more value for your money now. There are cheap plans on the individual market now that don’t cover anything. And I think the increased value of the coverage is going to be something that folks care about.

This increased value includes free preventative care, maternity care, mental healthcare and a bunch of other “essential health benefits” that will be offered through these healthcare plans.

Catastrophic co-payments?

But if the premiums seem affordable, the co-pays must also be considered. According to Web MD, the Act’s Silver plan, which is what most subsidy and cost calculations are based on, will have a 30 percent co-pay.

“Good health insurance is actually associated with better health because people get better care,” said Steffie Woolhandler, co-founder and board member of Physicians for a National Health Program (PNHP). “But holding an insurance policy that you can’t afford to use because of co-payments or deductibles, is not going to have much affect on your health.”

Tax subsidies may also be applied to a cheaper Bronze plan, though it will have a 40 percent co-pay. The premiums for the Gold and Platinum plans are more expensive, but come with cheaper co-pays. For those who simply want to be protected from high medical costs, resulting from accident, injury or unexpected illness, the catastrophic health plan will offer a low premium. However, all costs on this plan must be paid out-of-pocket, up to several thousand dollars, and tax subsidies cannot be applied to this plan’s premium. To be eligible for a catastrophic plan, individuals must be under age 30 or unable to find coverage that costs less than 8 percent of their income. 

Cornelius said this is another reason why she wouldn’t purchase health insurance via the Act. She said, “It would end up putting me in a position where I would be paying for something that I can’t afford to use.”

However, according to Tasha Bradley of the Department of Health and Human Services, there is a program designed to help people with low incomes make their co-payments. She wrote in an email:

To qualify for cost-sharing reductions, consumers must have a household income that is less than or equal to 250 percent of the FPL (e.g. $27,925 for one person and $57,625 for a family of 4 in 2012), and enroll in a certain plan that meets the defined benefit criteria in the marketplace. Cost-sharing reductions only apply to essential health benefits such as emergency services, hospitalization, prescription drugs, preventive and wellness services, and maternity and newborn care.

According to the department’s website, these out-of-pocket savings only apply to those who purchase the Silver plan.

Red-state blues

Under the Affordable Care Act, those making less than 133 percent of the federal poverty line were supposed to be covered through Medicaid expansion. But after the Supreme Court’s 2012 ruling that allowed Medicaid expansion to be optional for states, millions of Americans with the lowest incomes, many of whom are young adults, will be left uninsured. As many as 25 mainly conservative states may not participate in Medicaid expansion next year, despite it being nearly completely funded by the federal government. While those making between 100 to 133 percent of the poverty line may still qualify for tax subsidies, no provision was ever put in place for those making less than 100 percent of the poverty line because of the assumed Medicaid expansion.

The Commonwealth Fund survey found that 28 percent of young adults who were uninsured all or some of 2013 belong to families with incomes less than 100 percent of the federal poverty line.

Schools cheating on healthcare?

An Obamacare loophole in student health plans at colleges will also affect young adults’ healthcare coverage. The Act makes it illegal in 2015, after a year delay, for insurance companies to put lifetime or annual caps on healthcare coverage. Colleges that purchase a group policy from a health insurance company will, in turn, adhere to these rules.

But colleges that don’t work with an insurance company, but are instead “self-funded” won’t have to follow these rules. Self-funded colleges take on the financial risks themselves and have more control over their policies. There are an estimated 30 universities covering 300,000 students across the country with self-funded systems. 

Benjamin Day of Healthcare Now! said that's something his organization is keeping an eye on. He said, “A lot of people expect that because of that loophole, colleges and universities are going to start switching over to self-insured status so they don’t have to face the regulations.”

Robbed by mandates?

According to the Department of Health and Human Services, a number of people are excused from paying the penalty for not purchasing healthcare. This includes those who are determined to have a very low income, and those who would have been eligible for Medicaid if their state expanded it.

But for young adults who don’t fall within these categories, Steffie Woolhandler of PNHP said she thinks the individual mandate’s hefty fee will ultimately get many young adults to purchase health insurance. For 2014, the penalty is $95 or 1 percent of a person’s income — whichever is higher. By 2016, the penalty shoots up to $695 or 2.5 percent of a person’s income.

Cornelius said she will pay the penalty for the first year, while she goes back to school in hopes of getting employed somewhere that offers health insurance before the penalty spikes.

Lots to learn

In some ways, Obamacare was designed to help young adults. For one, the provision that allows young adults under the age of 26 to stay on their parents’ health insurance has helped approximately 3.1 million young adults gain coverage.

However, as Day said, “It’s sort of a privilege-based privilege.” Basically, it only helped those whose parents are fortunate enough to have a family plan.

It is yet to be seen, however, if the tax subsidies, co-payments and other costs end up being truly affordable. Collins of the Commonwealth Fund said that premiums in New York State are 50 percent lower than anticipated. She said, “The earlier indications are, on average, the premiums are coming in at least below what was projected.”

She also pointed out that in Massachusetts, whose healthcare system the Affordable Care Act is mirrored on, uninsured young adults decreased from 21 percent to 8 percent in the law’s first year. 

But Woolhandler, who has practiced in Massachusetts, said that though more people are insured, it doesn’t mean they are actually receiving the care they need. Instead, she said, there are still major flaws in the system when it comes to affordability.

“What’s happened in Massachusetts is the cost of healthcare is extremely high, the number of uninsured has fallen, it’s fallen by about half, which is what it’s predicted nationally,” she said. “But the cost of care is very high, the safety net providers — the public hospitals, the clinics — are still seeing huge numbers of patients that cannot afford care. And the problem isn’t solved.”

Woolhandler says the United States needs to keep moving forward from Obamacare to a single-payer healthcare system in order to solve the healthcare crisis.

She said:

Health care is still way too expensive. And we’re going to have 30 million uninsured people, most of whom would have been uninsured even if the red-state governors weren’t so stubborn about Medicaid. So the Obamacare itself has a faulty design. It doesn’t cover everyone. It’s real expensive. And the only real alternative to affordably cover everyone is going to be single-payer.

While polls often show that the majority of Americans support single-payer healthcare, it has yet to be taken seriously in Congress and was silenced during the healthcare debate. (Though Senate Majority Leader Harry Reid recently said he believes Obamacare is a step toward single-payer.) Instead of driving people to the marketplace, single-payer healthcare covers the nation’s population through general taxes based on the percentage of people’s incomes. The main reason it costs less than other systems is because it eliminates administrative costs.

Countries using a single payer healthcare system pay about one-half to one-third as much as we do. Day said that’s why Healthcare Now!’s focus isn’t so much to win people over to single-payer as to continue growing the majority support. “It’s more a matter of getting our political system to actually be responsive to patients as opposed to the healthcare industry,” he said.

Day continued:

The Affordable Care Act is really sort of a misnamed bill. It does nothing about health costs. And that was intentional. They wanted to make sure the healthcare industry supported the bill. So the cost crisis is so extraordinary that I think it is going to make single-payer more of an urgent issue.

Woolhandler also said that with their money in politics, the healthcare industries have a stranglehold over the political process.

She said, “The big problem with it is the insurance and pharmaceutical industries hate single-payer, and use their immense financial and political power to exclude the single-payer alternative and really try to shut that out of the debate.”

Making the best decision for your health

There’s certainly still much to learn about the implementation of Affordable Care Act, and some of the new, very significant provisions in the law should not be disregarded. But what is clear is how crucial it is for young adults to purchase Obamacare in order for the law to really work as planned. Educating young adults is certainly important in order for them to make the best decision for their health. But it’s also important to remember that young adults, and presumably most people for that matter, want to take care of their health. And so even if most of them enroll, perhaps in order to avoid the penalty, it’s important to investigate if they have access to the care they need. And if most don’t purchase healthcare, it’s crucial to examine why.

For many young people, including Melissa Cornelius, the decision not to enroll in Obamacare this upcoming year will be due to a lack of affordability. “To me, the goal of the Affordable Care Act is to get more people to have health insurance," she said. "But I need healthcare.”

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