The Satisfied Unsubsidized: Obamacare’s Hidden Winners

For some veterans of the individual market who don't qualify for tax credits, the post-ACA insurance landscape looks good.

More than 80 percent of the people who have signed up for health plans through state or federal Affordable Care Act exchanges qualify for subsidies to help pay premiums and out-of-pocket medical expenses. But what about all the millions who don't have access to employer-sponsored health insurance but also don't qualify for subsidies?

About half of the 12 million Americans buying health insurance on the individual market are subsidy-ineligible, according to the Urban Institute. Are they all fuming and lining up to appear in anti-Obamacare commercials?

Chances are not. As veterans of the individual market, many are accustomed to its shocks and uncertainties. About a quarter of them received cancellation notices last fall, and others face substantial premium hikes. Some will be forced to pay more than in the past, in some cases in part because they are covered for services they don't want, like childbirth or mental healthcare. But many are finding their options much better and their status less precarious than in the pre-ACA market.

I spoke recently to several people whose family income disqualifies them for subsidies and who bought insurance on the individual market for 2014. All had family members with preexisting conditions, which means they benefited from the ACA's prohibition on basing price or eligibility on medical history. All had been paying above-market rates or faced limited choices because of a family member's medical history.

That puts them in a special category: former victims of the harsh pre-ACA market, current beneficiaries of the law's requirement that everyone jump in the risk pool together. Some ACA opponents argue loudly that their newfound fortune comes at the expense of their healthy counterparts in the individual market—at least, the half of them who do not qualify for subsidies. And that’s true to a degree—forbidding insurers from charging some people more based on their medical history raises the cost for those who appear today to be in perfect health.

This special category is huge, though. The percentage of Americans with preexisting conditions is anywhere from 19 to 50 percent, according to an HHS report overviewing various studies. And that's just individuals—in households with more than one person, the chances that someone will have a medical condition that jacked up the price of insurance in the pre-ACA world multiplies.

Among the "satisfied unsubsidized," a few patterns emerged. Most of the people I interviewed saw no reason to buy their plans through or the state exchanges. Doing so would only add a layer of bureaucracy, though several used the window-shopping function on the exchanges to scope out the market. All those who bought off-exchange found it much easier than in the past to buy through a broker or directly from an insurer in the post-ACA market, where an insurer cannot ask for information about a buyer's medical history. And all found better coverage for the money than they could get before the ACA went into full effect.

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Karen is an artist who lives in Colorado with her husband. Both are in their mid-forties and have been self-employed for more than a decade. Karen had a rare, benign tumor that required complicated treatment, locking her into one plan for 10 years. Initially, that didn’t keep the couple from acquiring affordable coverage. Working through a broker, they found an Anthem BlueCross BlueShield plan for a few hundred dollars per month. "But the rates went up 20 to 30 percent every year," Karen recalls. "I kept renewing. I was terrified to change anything. I thought even changing to a different policy with the same company might result in rescission." By 2013, the couple was paying $1,200 a month.

"It was uncommon, and arguably illegal, for insurers to raise an individual’s premium because of their health status” before the ACA, says Larry Levitt, a senior vice president at the Kaiser Family Foundation. “What was more common was for insurers to close product lines to new sales"—and then jack up the prices, trapping sick customers.

When ConnectForHealthColorado, the state's ACA exchange, opened last fall, Karen found a Kaiser Permanente plan for 2014 that’s comparable to the family’s previous plan but is saving them $657 per month in premiums. But she didn’t buy the plan on ConnectForHealthColorado. Deterred by news reports about website not working, she called the broker she used 10 years ago, who suggested going directly through the insurer.

"Applying directly to Kaiser saved us time over applying through our state's exchange, because we didn't have to go through the rigmarole of seeing if we qualified for a subsidy when I knew up front that we didn't," Karen explains. The application process was also a lot easier than in the past, because insurers no longer require detailed medical histories. "You just have to give them your credit card, your ages and location, and boom—you're done."

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Brad is an Atlanta-based consultant in his early fifties, married with three children in their late teens and early twenties. His oldest daughter suffers from a painful chronic nerve condition that motivated her to found a nonprofit in her mid-teens, which she still runs. Pre-ACA, the family pieced together a complex mosaic of insurance coverage. Brad had a solo policy from a former employer for whom he now consults; his wife’s policy covered her and the couple's two sons; and their daughter had a small-business plan through her nonprofit. Total premium cost: $1,800 per month.

"I waited patiently for the ACA and tried the first month to navigate the website, but had no luck,” Brad says. “Finally, in December, I was able to get on the site and look for plans in Georgia that included the doctors we used—most especially for my daughter and her preexisting condition. I found one for around $1,100 per month for my family, and being the capitalist I am, went to compare it to the private marketplace.”

That turned out to be a wise idea. Brad found a Humana plan that included the family’s current doctors with a family deductible of $2,500, just half that of the plan he’d considered on the exchange. While the monthly premium was about $100 more expensive, he felt the tradeoff was worthwhile. "I was surprised the private market was so accommodating,” Brad says. “Before the ACA, I couldn't find anything like this."

But the ACA doesn’t directly address the family's greatest coverage challenge. Brad’s daughter is in the midst of treatments that many insurers deem experimental. Her past insurer did not cover them, and Brad does not yet know whether their new insurer will.

Like Karen, Brad is close to people who view the law differently from the way he does. "Amazingly enough, the ACA has benefited my two conservative brothers more than anyone in my family,” he said. One qualifies for subsidies and went from no health insurance to a plan that costs $20 per month. The other, a cancer survivor, had COBRA coverage through his ex-wife that was set to run out, driving him to look for a job in a large company just for the health insurance rather than continue to run his own business, as he prefers. Now, his ACA plan costs less than his COBRA coverage did, and he is free to stay self-employed. “They still don't like Obama, but are happy with this outcome," Brad says.

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Marissa's daughter Jenny is a college student in Minnesota with expensive ongoing medication needs. Before the ACA came into full effect this January, her compulsory student-health plan cost $265 per month, with a high deductible and out-of-pocket maximum. After comparison-shopping on MNsure, the state exchange, Jenny bought a platinum plan directly from the insurer with a monthly premium of $187 and a $1,000 deductible and out-of-pocket maximum. Marissa estimates that it will save her $3,000 in drug costs and premiums.

If Jenny had applied through the exchange, she would have been pushed into the Medicaid pool and lost some doctor choices, because her parents don’t claim her as a dependent. Luckily for Jenny and her family, Minneapolis is the cheapest ACA market in the country, and Jenny's platinum plan costs less than a silver plan would in many markets. Her savings are a counterpoint to the "rate shock" that some young Americans have experienced as they switch from barebones plans that were cheap but don’t comply with new ACA standards. (A large majority of uninsured young Americans also qualify for ACA subsidies).

Unlike Karen and Brad, who simply saw no upside to buying through the federal or state websites since they weren’t subsidy-eligible, Jenny had a good reason to avoid the exchange. Jonathan and Rose, forty-somethings in Washington State who are also subsidy-ineligible, viewed that option differently. Over the course of 20 years, the couple had cycled variously through employer policies, COBRA, two state high-risk pools (Rose has a preexisting condition) and individual policies. They compared plans on- and off-exchange and found those on the exchange marginally cheaper. But they could have bought the plan of their choice, available through the state exchange, directly from the insurer. Why not spare themselves the extra step as Karen and Brad did? "I chose to buy through the exchange because future income is never guaranteed and if I end up unemployed or with a lower-than-expected income in 2014, I can get the subsidies later when I file my taxes, if I'm eligible," Jonathan explained.

Frank, 40, a film producer, and his wife Sharon, also 40, a film editor, live and work in Los Angeles. The couple has a five-year-old son. In 2003, Sharon was diagnosed with thyroid cancer, which was caught early and treated successfully—and a lucky intuition led Sharon to remain insured through COBRA when a short-term gig ended. Since then, the couple has bobbed and weaved through the insurance system, getting some relief from a California law providing protection against medical underwriting for a person who maintains continuous coverage, but suffering a series of rate hikes in different plans that left them paying $1,100 per month by 2013. After finding coverage that met the family’s needs for $850 per month for 2014, Frank wrote on Facebook that he had found great insurance at a sharply reduced price. An acquaintance retorted that last year she and her family were paying $400-plus and were now paying $800: "The only people helped by the ACA had preexisting conditions."

"My thought was, 'and you were paying nothing for years,'" Frank says. As someone who's bought a lot of different plans, he notes, "I've never seen this as a well thought-out or well-run market. Insurers seemed to be making it up as they go along over the years. I'm not surprised to find that there were people in a perfect sweet spot, paying virtually nothing."

It may be years before healthcare scholars have the data to weigh the experiences of people like Karen, Brad, Frank, Jenny, and their families against those of unsubsidized buyers in the individual market who saw the rates rise when the ACA went into effect. (In the larger picture, the ACA’s winners far outnumber losers, as those whom the law will help obtain insurance far outnumber those subject to rate hikes.) It's worth keeping in mind, though, that those untroubled by preexisting conditions or by the need to find insurance in the individual market can lose those advantages at any moment—as well as their financial status. Uncertainty is the universal preexisting condition—and thanks to the ACA, such changes should no longer threaten financial ruin or lack of access to medical care.