Insured Americans' MOOP exposure rises relentlessly
After premium increases exceeding 20% roiled the ACA marketplace in 2017 and 2018, premiums have been essentially flat for three years. That's good news for unsubsidized enrollees, who left the market in droves in 2017-18. The flat premiums reflect a stable market, to which insurers have been returning.
Premiums are only half of the affordability equation, however. For those who require substantial medical care, out-of-pocket costs can loom even larger. And these costs have been rising relentlessly, reflecting the degree to which medical inflation continues to outpace overall inflation, particularly in private insurance.
While deductibles are the most familiar proxy for out-of-pocket costs, the ACA's statutory annual out-of-pocket maximum (MOOP) is an at least equally important measure. The MOOP represents an enrollee's total exposure in a healthcare system in which a short hospital stay will likely hit the cap. The MOOP, moreover, applies to employer-sponsored insurance as well. Every year, the Center for Medicare and Medicaid Services (CMS) resets the highest allowable MOOP.
The MOOP cap has been rising relentlessly since the inception of the ACA marketplace, from $6,300 for an individual in 2014 to a proposed $9,100 in 2022 - a 44% increase over 9 years. (MOOP for a couple or family is double the individual amount.). The yearly increase is calculated to reflect the average increase in commercial market premiums, which in turn presumably reflects the cost of care paid for by commercial plans. For comparison, median household income increased 16% from 2014 to 2020; the maximum allowable MOOP increased 29% in that span.
In 2019, CMS under Trump-appointed administrator Seema Verma gave an extra jolt to the climb in MOOP by including individual market premiums in the 2013 (pre-ACA) baseline against which yearly premium increases are measured (see pdf pg. 85 here). The ACA's restructuring of the individual market as of 2014 raised average premiums substantially, by requiring insurers to cover all prospective enrollees without regard to their medical condition and mandating coverage of the ACA's 10 Essential Health Benefits. Pre-ACA, medically underwritten individual market premiums were lower on average than premiums in employer-sponsored plans. Thus, putting the pre-ACA individual market premiums into the baseline against which premiums are measured boosted the increase since 2013, adding 2.5% to the 2020 MOOP.
The ACA's requirement that health plans qualifying as Minimal Essential Coverage (e.g., plans that fulfill the ACA's employer mandate) cap enrollees' annual out-of-pocket costs provided a vital new protection to insured Americans. But the allowable MOOP cap is grotesquely high by international standards, and its steep increase reflects a major weakness in the ACA's attempt to provide "affordable" coverage.
While the ACA imposed significant new price controls on Medicare, it does nothing to reduce the cost of care in commercial insurance, which continues to outpace inflation. Marketplace plans are designed to cover a fixed percentage of the average enrollee's medical costs (the "actuarial value") -- 60% for bronze, 70% for silver 80% for gold. (For low income enrollees, silver plan AV is boosted via Cost Sharing Reduction (CSR) subsidies to 94%, 87% or 73% AV according to income level). As costs rise, so does the dollar value of enrollees' share of costs -- an increase reflected in the MOOP, as well as in deductibles.
Not everyone is subject to the maximum allowable MOOP. Most employer plans have lower caps: the average in 2020 was $4,039, according to the KFF's annual Employer Health Benefits Survey (p. 130). For ACA marketplace enrollees with incomes up to 200% of the Federal Poverty Level, CSR reduces the highest allowable silver plan MOOP to $3,000 (it's usually far lower at incomes up to 150% FPL, averaging $1,187 in 2020). But many marketplace plans, including silver and gold plans, impose the highest allowable MOOP. In 2020, the average MOOP in silver plans without CSR was $7,735.
The plague of punitive hospital bill collection that afflicts many U.S. markets largely reflects the exposure of many insured Americans to medical costs beyond what they can afford. To a single person earning $25,000 per year (just under 200% FPL), a $3,000 MOOP is a huge vulnerability; likewise for a family of four with an income of $66,000 (just over 250% FPL), insured with a family MOOP of $18,000.
The cost of care in public health insurance programs -- Medicare and Medicaid -- rises far more slowly* than in commercially insured plans. Medicaid enrollees have zero OOP exposure, or close to it, if they can get the care they need within often narrow provider networks. The federal government could subsidize coverage more affordably in a public program for those now subsidized in the marketplace , with much slower annual increases in enrollees' costs. We don't do that because we are slaves to market ideology and corporate interests -- in this case the medical industry's.
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* In 2018, for example, according to CMS, per-enrollee spending increased 6.7% over 2017 in private health insurance, 3.7% in Medicare, and 2.0% in Medicaid. Increases in 2017 were 4.9% in private insurance, 1.6% in Medicare, and 1.2% in Medicaid.