New federal law helps many non-Medicare patients, too

The Inflation Reduction Act signed earlier this month by President Joe Biden has gotten lots of attention for provisions intended to reduce climate change, and for ways it will keep down prescription costs for older Americans on Medicare.

But perhaps getting less attention is how the act will help keep down health costs for 14.5 million other Americans, including about 200,000 Ohioans.

The new law will do so by extending enhanced subsidies on insurance exchanges in the Affordable Care Act marketplace for an additional three years — through 2025. That will save people from spikes in health costs that would have averaged 53% nationally, the Kaiser Family Foundation reported.

The subsidies were created by the American Rescue Plan Act, which was signed by Biden in March 2021 to help recover from the coronavirus pandemic. The subsidies were set to expire this year.

The insurance exchanges were created as a part of the 2010 Affordable Care Act, commonly known as Obamacare. They were intended to reduce the percentage of uninsured Americans by giving them a competitive marketplace in which to purchase healthcare and to provide subsidies for qualifying people.

Reducing the number of uninsured Ohioans saves everybody money several ways.

In a nutshell, it gives people access to preventative care. That allows many to stay healthy and productive instead of becoming catastrophically sick, unproductive and racking up enormous health bills that everybody has to pay.

And that doesn’t even take into account the immense personal toll that unmanaged chronic illness and early death take on people and their families.

Combined with expanded eligibility for Medicaid under Obamacare, the ACA exchanges seem to have had a positive result. While more than 14% of Americans were uninsured when the law passed in 2010, it was at an all-time low of 8% in the first quarter of this year, the U.S. Department of Health and Human Services reported.

The subsidy enhancements created last year also appear to have had a good effect.

The U.S. Centers for Medicare and Medicaid Services reported that enrollments in the Obamacare marketplaces jumped by 21% between 2021 and 2022. In Ohio, they climbed by a whopping 29%, to 260,000, or nearly 3% of the state’s under-65 population.

And as of last year, a huge portion of that group was getting subsidies to purchase insurance on the healthcare exchanges.

In Ohio, 76% of those then-enrolled received tax subsidies, KFF reported. If that hasn’t changed much, it means almost 200,000 Ohioans are getting subsidies in the marketplace now.

How much of a hit they dodged because of the law signed this month depends on age, income, zip code and the number of people in a family — and how many of them are enrolled. But helpfully, KFF created two online calculators that determine the size of individuals’ current subsidies and what they would be if last year’s enhancements were allowed to expire.

Three hypothetical examples of people living in different circumstances around Ohio show that people with modest incomes are avoiding substantial cost increases.

For example, two 60-year-olds in Youngstown earning a combined $70,000 pay $5,950 a year for their coverage with the enhanced subsidies. If the enhancements went away, they would have to pay the full $19,409 cost on the healthcare exchange — a difference of $13,459 a year.

Consider another example: A 40 and a 35-year-old living in Waverly with 14 and 17-year old kids making $80,000 a year. Insurance for all four on the marketplace with the current subsidies costs $4,840 a year. Without them it would cost $7,688, or $2,848 more.

And finally, imagine a 25 and a 23-year-old living with a three-year-old child in central Columbus and earning a combined $80,000 a year. Losing the subsidy would cost them an extra $1,600 a year.

There’s an obvious reason why savings go down for younger people — because they’re presumably healthier, insurance is cheaper in the first place. But such savings seem likely to be welcomed by people in a state where median family income is $58,116.

Extension of the subsidies, however, comes with a cost. The Congressional Budget Office estimates that extension of subsidies nationally will cost $64 billion through 2025.

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This story was republished from the Ohio Capital Journal under a Creative Commons license.