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Recovery Legislation Should Reduce Marketplace Deductibles, Other Cost Sharing

The American Rescue Plan’s increased help paying health insurance premiums is already flowing to marketplace enrollees, and President Biden has proposed making the increases permanent as part of recovery legislation. That’s an essential step toward making health care more affordable. But to ensure this coverage adequately serves the many marketplace enrollees with low incomes — and the millions more uninsured people who could enroll in marketplace plans — we also need to reduce their deductibles and other cost-sharing charges.

The Rescue Plan boosted premium tax credits for two years, reducing premium costs for millions of current marketplace enrollees and making many others newly eligible for the credits. Partly as a result, marketplace enrollment is expected to rise by 1.7 million in 2022. Still, deductibles and other high cost-sharing charges can cause people to delay or avoid needed medical care.

Marketplace enrollees with incomes up to 250 percent of the poverty line (about $19,500 a year for an individual) are eligible for plans with reduced cost sharing. If they enroll in a silver plan, they receive a version with a lower deductible and out-of-pocket maximum and lower charges to see a doctor or fill a prescription. (The silver plan an eligible person receives depends on their income, with people up to 150 percent of the poverty line getting the versions with the lowest cost sharing.) About 5.3 million people, or half of the people enrolled in marketplace plans across all states, were enrolled in plans with reduced cost sharing as of mid-2020.

But even with this help, some costs are high. For example, a person with income of roughly $26,000 a year (around 200 percent of the poverty line) is eligible for a silver plan with reduced cost sharing, but the reductions aren’t very significant; their average deductible is about $3,400, or 13 percent of their income. And people over 250 percent of poverty don’t get any federal cost-sharing help. Their deductibles average nearly $5,000 for a silver plan. (All numbers reflect plans with combined deductibles for drugs and medical care.)

High cost-sharing charges especially affect people with low incomes. Some 73 percent of people who signed up for marketplace coverage during 2021 open enrollment had incomes between 100 and 250 percent of poverty — that is, below or only modestly above the eligibility limit for Medicaid — and a large body of research shows that even small amounts of cost sharing can reduce Medicaid beneficiaries’ use of care, including for prescription drugs, mental health visits, and primary and preventive care. People at somewhat higher incomes (up to three times the poverty line) also face challenges paying for health care.

Research also shows that high cost-sharing charges can magnify racial and ethnic inequities in health care, while lowering cost-sharing charges can reduce these inequities. For example, Black cancer survivors in high-deductible plans face more barriers to care (such as delaying filling a prescription to save money or being unable to see a specialist because of cost) than their white counterparts. And lowering cost sharing for drugs that prevent heart attacks narrows racial disparities in access to medication and health outcomes for heart attack survivors. Disparities in health outcomes and access to health care reflect multiple factors, including structural barriers such as income and wealth disparities and racial discrimination built into the labor market and health care system.

Beyond helping people get needed care and reducing financial strain, reducing deductibles and other out-of-pocket costs could lead more people to buy coverage. Even if the premium is low, people may be put off by a high deductible and think that the coverage won’t provide much help if they develop a high-cost health problem.

A Senate bill would increase cost-sharing help for marketplace enrollees, making people up to 400 percent of poverty eligible for plans that are more generous than current gold-level plans. People with incomes up to 300 percent of poverty could get plans equivalent to or better than the top-level platinum plans, with low cost-sharing amounts.

Such improvements would help more marketplace enrollees, including the many uninsured and low-income people who could enroll in plans, get the care and financial protection they need.