What if you make 401% of the FPL?

A new study by the Annals of Internal Medicine, as reported by the Cleveland Plain Dealer , says that, for many people whose income is just above 400% of the Federal Poverty Level – about $47,000 for an individual – the cost of paying the penalty is greater than the cost of coverage. In the author’s words, because they make too much money to qualify for federal assistance, “a ‘subsidy cliff’ exists” for them. The article goes on to say that many of these individuals would have to pay more than 8% of their income for the lowest-cost bronze plan, which would actually exempt them from the penalties under the individual mandate.

For brokers, this isn’t really news. We’ve known for a long time that the penalty isn’t very large when compared with the cost of coverage and that a lot of people will qualify for an affordability exemption under the mandate. However, the study does still raise an important point about a demographic that is in need of a solution.

After examining premiums for every county in the United States, more than 3,000 of them, the researchers found that “Nearly two-thirds of all counties in the U.S. lack affordable plans for people ages 50 to 64 with incomes just above the cut-off for subsidy eligibility.” In other words, these folks would be exempt from the individual mandate since no affordable option exists for them, but that still doesn’t solve their bigger problem: they need health insurance.

Fortunately, there is a solution, albeit a short-term one. That solution is a short-term medical plan. These plans, as the name implies, are temporary in nature, usually lasting up to 6 months with the option to renew once, and they are not guaranteed-issue, which means that people can be declined based on medical conditions. They also don’t qualify as creditable coverage, so someone who purchases one of these plans may still have to pay a penalty if they are not exempt. But, on the bright side, these short-term plans do provide pretty good coverage, often with lower out-of-pocket limits than a “more comprehensive” ACA-compliant plan. And, best of all, the premium is a lot lower.

Unfortunately, for a lot of individuals and employers, there aren’t any great options, but at least there are some options. And for people in the 50 to 64 age range, it’s not like they had a lot of good options before the law was passed either. At least now, those with medical conditions will qualify for coverage, and healthy individuals who can’t afford comprehensive coverage can still protect their family, at least for a little while, buy purchasing short-term coverage.

As a side note, short-term medical plans are not available through any state-based or federally-facilitated exchange site, but they are available through a private exchange.

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