Even $1 premium discourages some low-income individuals from coverage: study

Even charging a dollar premium for healthcare benefits can discourage some low-income individuals from getting coverage, but price isn’t the only factor involved, according to a study in Health Affairs.

The administrative burden—filling out the forms on time, for instance—involved in paying even a small monthly premium might discourage some from getting coverage, especially if they didn’t have to pay before. Researchers from Harvard University drew this conclusion after examining 2016 and 2017 data on the Health Connector, the Affordable Care Act marketplace in Massachusetts. 

They looked at coverage retention after premiums for some plans rose from zero to less than $10 for most enrollees, finding that enrollment fell by 14% the following year. “This attrition was attributable to terminations for nonpayment; most terminations occurred at the end of January, implying that a significant number of affected enrollees never initiated premium payments,” the study states. “These findings suggest that even very small premiums act as enrollment barriers, which may sometimes reflect administrative burdens more than financial hardship.”

Corresponding author Adrianna McIntyre, PhD, of the Harvard T.H. Chan School of Public Health, told Fierce Healthcare in an email that “the plan terminations we observed suggested that a considerable number of enrollees whose plans took on positive premiums didn’t know that they needed to start making monthly payments, didn’t know how, or found the process so cumbersome that they ultimately never made sufficient payments to stay enrolled.”

The researchers suggest that policy initiatives might go a long way to addressing the problem. They cite federal legislation in 2021 that increased financial assistance for households buying insurance on the ACA marketplace. Thanks to those subsidies, about 79% of individuals who currently have ACA coverage, and an additional 62% of uninsured people, can access at least one plan with zero premiums.

“Different policymakers will have different priorities and authorities,” said McIntyre. “For example, state policymakers could allocate state funding to defray very small premiums and help mitigate coverage loss. Federal policymakers are better positioned to use the tax system for potential fixes—you might imagine, for example, that enrollees are permitted to be delinquent on premiums up to a certain dollar amount before being terminated, with their overdue payments collected at tax time (similar to how the IRS ‘reconciles’ premium subsidies when enrollees file their taxes).”

However, these increased subsidies are set to end next year.

Individuals with incomes below 150% of the poverty level generally qualify for two zero-premium silver plans in a given area. ACA silver plans offer additional financial help for out-of-pocket costs at the point of care. Individuals with higher incomes can obtain zero premium plans at the bronze level, which stint somewhat on the benefits offered.

“However, a plan being zero-premium in one year is not a guarantee that it will remain zero-premium the following year,” the study stated. “Turnover in zero-premium status is particularly common for silver-tier plans available to Marketplace enrollees with incomes of 100% to 150% of poverty.”

In 2022, 93% of enrollees lived in counties in which at least one -zero premium plan started charging a nominal fee. For 84% of those enrollees, all zero-premium silver plans began charging premiums in 2022. “Our findings suggest that these enrollees are highly vulnerable to being terminated for nonpayment,” the study said.

Using an event study design looking at 9,012 ACA subscribers, researchers compared enrollment continuity for 6,730 individuals in areas where they paid zero premium in 2016 but then had to pay some sort of premium in 2017, ranging for the most part from $1 to $9 for single enrollees. Among those with family plans, 88% faced an increase of less than $10, although the maximum premium for a family could be as much as $36 a month. The remaining 2,282 enrollees did not face an increase in premiums.

“Differential enrollment changes for people in plans that took on premiums of $1 (the lowest premium) were about two-thirds the magnitude of the differential enrollment changes for enrollees whose plans took on premiums of $9 (the highest premium),” the study stated. “If one infers that a new $1 premium was primarily an administrative (rather than financial) burden, our results suggest that hassle costs and awareness issues drove an enrollment decrease of 12 percentage points, with the remainder of the effect size at higher premiums coming from issues related to ability or willingness to pay for insurance.”

Many ACA enrollees who pay premiums do so through automatic deductions from bank accounts. However, researchers said that absent that method, enrollees suddenly hit with premiums must remember to pay the premium either by mail or telephone each month. At a minimum, this represents one more item on the to-do lists of often busy individuals. In addition, they must be attuned to sometimes complicated rules about how to qualify for ACA subsidies.

“In the case of very small premiums, administrative burdens may present a larger obstacle to staying insured than financial costs, particularly if those premiums are newly introduced to incumbent enrollees who previously did not need to make regular payments,” the study concluded. “Given the prevalence and volatility of zero-premium coverage in ACA Marketplaces, coverage retention is likely to suffer if state and federal policy design is inattentive to these dynamics, leading to people becoming unnecessarily uninsured.”

McIntyre said that “our findings emphasize the importance of people with marketplace coverage actively shopping each year during open enrollment, especially if they elected a plan because of its $0 premium. There’s no guarantee that it will still be $0 in the new year and failure to pay the new premiums could result in unexpected coverage loss.”