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Analysis: Low-Income, Chronically Ill Remain Underinsured In Exchanges Despite Subsidies

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File photo of a doctor holding a stethoscope. (Photo credit: Adam Berry/Getty Images)

File photo of a doctor holding a stethoscope. (Photo credit: Adam Berry/Getty Images)

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WASHINGTON (CBS DC) – An Avalere Health analysis finds that even with government subsidies, low-income or chronically ill individuals will be underinsured in the Affordable Care Act exchanges.

The DC-based healthcare group finds that many individuals enrolled in the second-tier insurance plans (Silver, Bronze) will hit their maximum out-of-pocket cap (OOP) while still being considered underinsured.

“Patients with high healthcare needs will benefit the most from new out-of-pocket caps, but they will still face considerable expenses before they reach the cap,” said Caroline Pearson, vice president at Avalere Health. “These costs could result in inadequate or inconsistent care for high-need, low-income exchange enrollees.”

The analysis provides the example that a person earning $23,000 (nearly 200 percent of the poverty level) will have a reduced out-of-pocket maximum that is still 23 percent of their annual income ($5,200) – or more than twice the definition of underinsurance.

“The insurance being sold under the exchange is very different from a standard employer plan, and consumers with chronic illnesses will need to anticipate significant out-of-pocket cost.” said Dan Mendelson, CEO of Avalere. “In the longer term, this design raises important questions about what we want insurance to be, and invites a discussion of the rules under which exchange plans will operate.”

The analysis was done by comparing the OOP maximums under the Affordable Care Act to the poverty level for 2013, and assumed that those earning 200 percent of the poverty level have a maximum of $5,200. Those earning less than 138 percent of poverty in states that expand Medicaid will be enrolled in coverage with lower cost-sharing, which will reduce OOP costs in a similar way to those in states not expanding Medicaid.

The Commonwealth Fund defines underinsurance as out-of-pocket expenses that are more than 10 percent of income for individuals earning more than twice the poverty level. Similarly, those with out-of-pocket costs that are greater than 5 percent of income for people earning less than twice the poverty level.

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