BEYOND THE NUMBERS
The House may soon consider legislation to extend the Children’s Health Insurance Program (CHIP) and community health center funding that includes a harmful provision that would take insurance away from as many as 688,000 low- and moderate-income people each year who miss a premium payment.
People who now get federal advance premium tax credits (APTC) to help them afford insurance in the health care marketplaces have three months to pay overdue premiums before insurers can end their coverage. The legislation would shorten that grace period to one determined by state law — generally 30 days or less — making it harder for enrollees to catch up on missed payments. While a few states may mitigate the harm by enacting longer state grace periods, most would likely keep their existing grace periods.
As we’ve written, the current grace period is far from a free ride. If a person doesn’t catch up on all overdue premiums by the end of the third month, his or her coverage ends retroactively to the end of the first month of the grace period.
Enrollees often do catch up on missed payments. That’s been the experience in Washington State’s marketplace, the only one known to track and publicly report this information. More than half of Washington’s enrollees who receive APTC enter a grace period at some point — probably because most marketplace enrollees have income below 250 percent of the poverty line and many of them barely make ends meet. But while most who enter a grace period make a premium payment, in an average of about three weeks, a significant number of them don’t pay until the second or third month. Under the legislation, these people would have their policies cancelled and become uninsured.
The Congressional Budget Office (CBO) “score” for this bill bears that out. CBO’s projection of $4.9 billion in federal savings — essentially from the federal government providing APTC to fewer people — doesn’t come from insurance companies dropping so-called free riders who don’t pay their premiums; rather, it reflects the loss of coverage among people who “would have paid their delinquent premiums during the second or third month of their grace period [but] would instead have their coverage terminated under this bill.” CBO’s projection also assumes minimal savings from people who fail to pay their premiums and are terminated after three months: these people already receive no APTC for the second and third month of the grace period, and they must either pay their share of the first month’s premium to their insurer or they will owe back their APTC from the first month on their tax return. (Likewise, insurers cover no claims in the second and third months of the grace period.)
We applied Washington State’s experience to the entire marketplace population to project how shortening the grace period would affect enrollees in every marketplace. Between 259,000 and 688,000 people who would have paid their premiums could lose insurance if the grace period shrinks to 30 days, our analysis finds.
We started with marketplace enrollment for everyone who received APTC in 2017 and applied Washington’s 2015 and 2016 experiences to establish a range of people who would become uninsured if the grace period shrinks. The 2015 data, similar to the state’s experience in 2014, show that 51 percent of enrollees enter the grace period and, of those, 62 percent pay a premium once in the grace period. We made that an upper bound on our estimate. The 2016 data show a much lower percentage of people entering a grace period (22 percent) and, of those, a somewhat lower share paying a premium (54 percent). As Washington’s report explained, the failure of one large insurer, Premera, to report data on people who entered a grace period and made a payment compromised the 2016 data. Rather than discard that year’s data altogether, we used it as a lower bound in our estimate.
The average time to payment was about three weeks in 2015 and 2016 (20 and 24 days, respectively). Bearing in mind the average time to payment, we conservatively estimated the share of people who paid in the second and third months at 25 percent of those who made any payment.
Applied to the nationwide marketplace data, this showed 259,000 to 688,000 people who would have made a premium payment but instead would lose coverage. This rough estimate is in the range of what’s implied by CBO’s estimate of over $4 billion in tax credit savings, and it’s consistent with CBO’s statement that “fewer than 500,000 people would have their coverage terminated at some point each year.”
The legislation’s shortened grace periods would hurt low- and moderate-income individuals and families who miss even part of a payment for any reason, such as a costly home or car repair. It would leave well-intentioned consumers with too little time to catch up on premiums when they fall behind and would lock people out of coverage for the rest of the year, raising the number of uninsured.
We shouldn’t take coverage away from other low-income people to pay for essential health priorities like extending CHIP, which provides health coverage for children in low- and moderate-income families, and funding for community health centers, which provide health care for more than 27 million people.