Single parents would see sharpest increase in health care premiums under House subsidy plan

April 13, 2013

Posted By Andrew Stein On April 13, 2013 @ 3:40 am In Recent | 7 Comments

The above graph represents the shift in what families earning 186 percent of the 2013 federal poverty line would pay for adult health insurance premiums under the Vermont House proposal for state aid and the Affordable Care Act.
Lawmakers have repeatedly said that when Vermont’s new health insurance marketplace — Vermont Health Connect [2] — goes into effect, there will be winners and there will be losers.

When the state’s subsidized insurance programs, Catamount and VHAP, end in 2014, some low-income Vermonters will see their health insurance premiums drop and others will see rates increase. To cushion the cost hikes that these Vermonters would otherwise run into under the Affordable Care Act, the Vermont House passed a new subsidy program.

But due to the way the federal system subsidizes health insurance – and the fact that Vermont lawmakers have built the state system from this model – the House proposal would deal one population substantially steeper premiums than they pay now.

That demographic? Single parents, earning roughly $25,000 a year or more, who are losing their Catamount coverage.

Sarah Robinson, a health policy analyst at Voices for Vermont’s Children, said that these increases could cause many struggling parents to forgo health insurance, which, in turn, would affect their children.

“There is research indicating that even when children have access to care, their well-being is impacted when their parent’s ability to access affordable care changes,” she said, pointing to federal government and Urban Institute studies that link parental insurance enrollment and access to care with their children [3].

How the House proposal hurts single parents
The Vermont House Health Care Committee, which voted to recommend the subsidy [4], used a similar calculation to the one that Gov. Peter Shumlin and his administration recommended at the outset of the session [5].

The calculation is tied to federal subsidies in the Affordable Care Act, which follow a linear curve, rather than the step increases that are applied to the Catamount and VHAP programs (see the figure below, for an example).[6]



The feds use the subsidies to cap premiums at a certain percentage of a household’s income, and the administration and the House Health Committee recommended subsidies that lower those caps by 1.5 percent. These subsidies are part of $4.35 million in state aid aimed at mitigating cost associated with the exchange for households earning 133-300 percent of the federal poverty line.

This state aid is on top of the the federal premium subsidies, and the feds have agreed to pay an extra 55 percent of the total amount that the state pays in its additional premium assistance.

The general thinking here is that the state’s new premium subsidy program would align and build from the feds’, it would draw down extra federal dollars, and the subsidies would be more evenly distributed across income levels.

While it is true that the premium subsidies are more proportional for individuals and households with two adults than they are now, the policy doesn’t pan out so well for single parents.

Take, for example, a single parent earning $28,850 annually with one kid. That parent will pay $1,200 a year, or $480 extra for health insurance premiums than the $720 he or she currently pays in annual Catamount premiums. A single parent earning $36,326 a year with two children will pay more than twice as much in premiums (as the graph at the top of the story indicates). These figures do not include the $180 annual premium for Dr. Dynasaur that these families making 186 percent of the 2013 federal poverty line would be eligible for. Dr. Dynasaur, which will continue until 2019, is the state’s low-income health insurance program for children and doesn’t require co-pays or deductibles.

Meanwhile, two adults earning $28,850 annually will pay $240 less than the annual amount of $1,440 that they currently pay for Catamount.

The reason the two adults will pay less while single parents pay more is that Catamount charges a flat premium per adult and the Affordable Care Act sets premium caps based on household size. Therefore, the single parent with the one child was previously paying for one adult, while the two adults were paying for two adults.

Under the House proposal, which uses the federal model, a two-adult household and an adult-child household will both now pay the same amount because the subsidies are based on household size, and they are both considered by the feds as two-person households.

At this income level, there is relatively no effect on the amount that these individuals are liable for paying in health care costs throughout a year. Their annual out-of-pocket maximums for medical treatments — the amount that they are responsible for paying in a year for medical services — are actually $50 to $100 less.

But go up several thousand dollars to a higher income bracket, and this working class of Vermonters is liable for almost four times the amount they currently are on the health care hook for. And single parents at this income level are facing increases in premiums of roughly $1,500 in some instances.

As the below graph illustrates, a single parent earning $42,497 a year with one child will pay $2,869, or $709 more in annual premiums than the $2,160 he or she currently pays under Catamount. An adult earning $53,512 a year with two children will pay $1,463 more in premiums than the $2,160 the parent currently pays. At the same time, a two-adult household earning $42,497 annually will pay $2,869, or $1,451 less in a year than the $4,320 the adults currently pay for their Catamount plans.[7]


What the above graph doesn’t show are the steep hikes in out-of-pocket maximums that all of these households will face. Individual adults at the above income level, 274 percent of the federal poverty line, are liable for $1,050 in annual health care costs under Catamount, but they would be responsible for $4,000 annually under the House’s proposal.

Out-of-pocket maximums only affect those individuals who need substantial care, like the chronically ill.

Peter Sterling, director of Vermont Campaign for Health Care Security, says that the House proposal would “create a whole new class of uninsured or underinsured Vermonters.”

“The administration keeps saying there are winners and losers in the exchange. But that is like saying there are winners and losers on the Titanic. Sure, a few people got rescued but most went down with the ship,” he said. “While a small percentage of Catamount and VHAP eligible people will see somewhat lower premiums, the overwhelming majority of low and middle income Vermonters will be paying much more for their health care.”

Robin Lunge, Shumlin’s director of health care reform, said that one of the problems with Catamount is that there are barriers to entry.

“You can’t get into Catamount if you’ve had insurance for the last year,” she said. “That’s a significant barrier for a lot of Vermonters to have affordable coverage. I think what you’ll see in the exchange when that barrier no longer exists, and with the federal premium tax credits available, is that this will really help a lot of middle income Vermonters.”

Lunge said that the federal guidelines have been changing quickly since the Affordable Care Act passed, and she said she wasn’t certain whether the administration was aware that single parents would experience such higher increases in their premiums.

“This is something that has developed only recently, in terms of having a clear sense of how the feds were calculating the federal premium tax credits,” she said. “So, we didn’t have the information at the beginning of the proposal, I don’t think.”

Does that mean the administration would recommend to legislators a safety net for single parents?

“We’d be interested, but it’s complicated because of federal dynamics,” Lunge said. “I’m not sure it’s something we have within our power to fix.”


URLs in this post:

[1] Image:

[2] Vermont Health Connect:

[3] link parental insurance enrollment and access to care with their children:

[4] recommend the subsidy:

[5] recommended at the outset of the session:

[6] Image:

[7] Image:

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