Obamacare affordability worries, confusion persist as deadline nears

A reader from Florida wrote in with a question: “How can I afford Obamacare with a job that pays less than $8?”

Several readers from across the country have asked similar questions, reflecting a longstanding concern about the federal health law, as well as some confusion about who will face a penalty for not having insurance.

From the start, affordability has been a major concern of both critics and supporters of the law officially called the Patient Protection and Affordable Care Act. Supporters point to the financial assistance available to help millions of Americans pay their premiums, allowing many people to buy coverage at dramatically discounted prices. Critics, meanwhile, note that in many cases, insurance prices have increased, and that nearly all Americans are now required to have coverage or pay a penalty.

Affordability is relative and, to be sure, few people considered health insurance an affordable product before Obamacare. But no one was required to buy it.

Some people worried about affordability are actually not required to get coverage: Those with very low incomes are exempt from the individual coverage mandate and won’t have to pay a penalty for not being covered. Others with slightly higher incomes likely would face a penalty, even if they find their deeply subsidized coverage options hard to afford.

And a key factor in the options available to people is what state they live in.

Poor in Florida (and 24 other states)

Let’s take the Florida reader, for example. He wrote:

“I just noticed that we hard working Americans have to buy health insurance otherwise we will have to pay a tax penalty next year. Please tell me how I can afford to pay $350 to $500 a month insurance premium and have to pay $6,500 to doctors before I can qualify for $0 copay.”

The man earns less than $1,500 a month. He has kids and applied for Medicaid but was rejected. He signed off with “My name is someone who can’t afford health insurance.”

So what are his options?

Earning less than $18,000 per year, the writer falls below the poverty line for a family of three. (Eligibility for private insurance and subsidies to help pay for it is based on the federal 2013 poverty guidelines, not the slightly higher figures used for 2014.)

That’s where his location comes into play. If he lived in one of the states expanding Medicaid to cover more low-income residents, he’d qualify for that program. But he lives in Florida, one of 25 states that have not expanded Medicaid as part of Obamacare. And he falls into something of a loophole.

When the health law passed in 2010, it effectively required all states to expand their Medicaid programs to cover people earning up to 138 percent of the poverty level. It also called for the federal government to subsidize insurance premiums for people earning between 100 percent and 400 percent of the poverty level. Based on that, anyone earning below 400 percent of the poverty level — that is, $94,200 for a family of four — would qualify for either Medicaid or discounted private insurance.

But in 2012, the U.S. Supreme Court ruled that states didn’t have to expand Medicaid, and half the states either opted not to or haven’t yet decided. The court upheld the rest of the law, allowing people earning between 100 percent and 400 percent of the poverty level to get discounts buying insurance. But because of how the law was written, people who earn below the poverty line don’t qualify for federal subsidies to discount their insurance costs, even in states that don’t expand Medicaid.

So the reader is right that he’s not going to get help buying insurance.

But the federal government won’t require him to pay a financial penalty. People who don’t qualify for Medicaid because their states aren’t expanding the program can qualify for a hardship exemption from the penalty for not having coverage.

Poor in New York (and other states that expanded Medicaid)

Another reader, from New York, raised similar concerns:

“I simply can’t afford the lowest possible (non-affordable Obamacare) insurance. I can barely pay my rent.”

The writer added that she has been unemployed for 2 ½ years despite looking for a job daily. She earns $5,000 a year.

Because New York is expanding Medicaid, her income should qualify her for coverage under that program.

But even if she lived in one of the states that hasn’t expanded Medicaid, the woman would not have to pay a penalty for not having coverage. That’s because her income falls below the threshold for filing federal income taxes (it varies by filing status and age, but is $10,000 for a single person under 65).

People whose income is too low to require them to file a tax return are considered exempt from the requirement for having coverage, and from the penalty for not having it.

Connecticut affordability problem: The working poor

Like New York, Connecticut is expanding its Medicaid program. That means that people with very low incomes are eligible for coverage through the program, which is known as HUSKY.

But there’s another group in Connecticut that’s had concerns about affordability: People who earn just a little too much to qualify for Medicaid. They have the option of buying heavily subsidized private insurance through Access Health CT, the state’s health insurance exchange. Some people have eagerly signed up for the reduced-cost policies. But for many people who are uninsured, even deeply discounted insurance represents a new expense that can seem hard to fit into a tight budget.

Let’s take a person earning Connecticut’s current minimum wage, $8.70 per hour. Working full time, that person would earn $18,096 per year, which is too high to qualify for Medicaid.

Instead, he’d qualify for discounted private insurance through Access Health CT, the state’s health insurance exchange. For a 35-year-old in Hartford County, that could mean coverage as low as $52 per month.

That’s far lower than what people without financial assistance pay for coverage. But, according to people shopping for coverage and those helping people sign up, that can still be a daunting sum to someone whose income leaves him struggling to pay for the basics.

Buying insurance without subsidies

There’s another group in Connecticut that’s also raised concerns about affordability: Those who earn too much to qualify for subsidies.

The new requirements of Obamacare mean that most individual-market health plans had to be scrapped and replaced with plans that cover additional benefits, like maternity care.

And while in the past, insurance companies got to decide who to sell plans to, allowing them to choose to cover only those who were healthy, now carriers must cover anyone who wants to buy insurance. That means that the cost of providing medical care to the people covered by each plan is likely to be higher than it was in the past (although supporters of the law hope that the requirement that everyone have insurance — including young, healthy people who might have eschewed coverage in the past — could help to balance out the overall health status of the insurance pool and mitigate cost increases from covering those in poor health).

All that means that most people who bought insurance through the state’s individual market in the past would likely be paying higher premiums for similar plans this year, were it not for the federal subsidies that discount premium costs. About two-thirds of the people buying private insurance through Connecticut’s exchange qualify for the federal subsidies.

But for the other third, and for people who buy their individual-market insurance outside the exchange, there’s nothing to help temper any cost increases.

The cutoff for getting a subsidy is based on income. For a family of four, it’s $94,200. That’s not poor by any measure, but in parts of Connecticut, people earning just above the subsidy limit say, that leaves them feeling solidly middle class. And, they add, it means they, too, are still struggling to afford their insurance.

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