Brookings: Zero-dollar premiums could improve coverage on ACA exchanges compared to those paying small amount

Completely eliminating premiums for low-income Affordable Care Act exchange customers that pay a very small amount a month could boost coverage by 48,000 this year, a new analysis finds. 

The analysis released Wednesday by the Brookings Institute comes as Congress is debating whether to renew enhanced subsidies that ensured some ACA customers paid nothing in premiums or a small amount.

The subsidies passed as part of the American Rescue Plan Act are expected to expire after this year.

Brookings’ analysis said that even requiring customers to pay even a small amount such as a few dollars a month can lead to enrollment declines. 

“That is likely because remitting a premium involves significant cognitive and hassle costs, which can cause enrollees to miss payments — and thus lose coverage — even when a premium imposes a minimal financial burden,” the analysis said. 

Researcher Matt Fiedler estimated 404,000 Marketplace customers are in states where the exchange is run by that owe a small premium of around $3 a month on average. 

“About three-fifths of these cases result from special rules that govern how the premium tax credit applies to plans that include benefits that are not considered essential health benefits (EHB),” the analysis said. “These quirks of the credit’s design cause some enrollees to owe a small premium that exclusively covers the cost of their plan’s non-EHB benefits. In other cases, enrollees owe small positive premiums simply because their plan’s premium is slightly larger than their tax credit.”

Policymakers could eliminate these small premium payments by hiking the tax credit up to fully cover an enrollee’s complete premium where they would otherwise owe such a small amount. This approach could lead to an increase in 48,000 people getting and keeping coverage on in 2022 at a cost of $336 million, Fiedler wrote.

Another option is policymakers could either allow or mandate insurers to waive very small premium payments.

“It is unclear how many insurers would actually choose to waive small positive premiums if allowed but not required to do so, and all versions of this approach would do less to reduce administrative hassles for enrollees and insurers than simply increasing the premium tax credit to cover small residual premiums,” the analysis said. 

Brookings also found that most enrollees (68%) that owe the smallest premiums usually reside in states that did not expand Medicaid under the ACA. 

Small premium payments will likely become rarer if the enhanced tax credits go away after 2022 as enrollees with income at or below 150% of the federal poverty level would “always be required to make a premium contribution to the benchmark plan, which would virtually eliminate zero or near-zero premiums silver plans,” the analysis said.

There has been empirical evidence in another study that looked at Colorado’s marketplace and the difference between those with no premium payments and consumers with small payments.

“They find little evidence that availability of a zero-premium plan affects initial take-up or plan selection decisions,” the analysis said. “However, they find that selecting a zero-premium plan increases the number of days a person is covered over the course of the year by 8-16% … seemingly mostly by reducing delays in initiation of premium payments.”

The findings come as Congress is continuing to debate whether to keep around the enhanced subsidies.

The Biden administration and state-run exchanges said that action is needed quickly as plans are formulating their rates for the 2023 coverage year ahead of open enrollment that starts in November.