For millions, subsidies don't kick in until up to 9.5% of their income goes to premiums.
The lure used to get uninsured Americans to sign up for health law coverage was the promise of generous premium subsidies.
The promise comes with a catch for almost 3 million people earning three to four times the federal poverty rate: They may have to pay up to 9.5% of their income toward that premium before the government subsidy kicks in. That could take a substantial bite from their budgets — potentially as much as $600 a month for a family of three earning $58,590 to $78,120.
As a result, some middle-class families may decide health insurance is beyond their reach and pay a penalty rather than buy coverage. Though consumers in that income range account for a relatively small share of the 17.2 million eligible for subsidies to buy private insurance, that could still spell political trouble for the law. Insurers could see problems if premium costs deter the sign-up of healthy enrollees, whom they need to offset the costs of covering the sick.
"The real question is, will this be affordable?" said Carmen Balber, executive director of Consumer Watchdog, a California-based advocacy group.
It's too early to know the big-picture answer because consumers have until the end of March to buy coverage in the federal and state online marketplaces.
But individual families have begun making their decisions.
"Awfully high" is the verdict of Tim Ross of Madison, Ind., the owner of a light commercial construction firm who canceled coverage for his family of five several years ago during the depths of the recession.
Under the health law, Ross' income qualifies his family for a subsidy that would cover about half the cost of a midlevel "silver" plan, according to online calculators. There are five silver plans he could choose from, his share of the cost ranging from $494 to $590 a month.
Ross, 47, would be responsible for co-pays for doctor visits and prescriptions and an annual family deductible ranging from $4,000 to $7,000.
"I would love to have insurance," said the small businessman, who knows he would take a big chance by remaining uninsured.
He said he is likely to forgo buying a policy, hoping that if a family member needs expensive care, he can negotiate lower prices with doctors and hospitals as he has done in the past.
"We are at the point in our lives where if we want to go out to supper, we can," he said. "If I want to buy my kid a pair of blue jeans, I can do that. If I had to pay $600 a month out of my income, we could no longer do that."
HOW MUCH IS TOO MUCH?
Half of American families spent 3.1% or less of their income on health care before the law took effect — and those who have job-based coverage generally spend less than those who buy their own insurance, studies by Linda Blumberg at the Urban Institute show.
That's because employers pay a large percentage of the cost of health insurance, and those plans tend to be more generous as well.
Still, a quarter of all households spent 8.2% or more on health care, which includes premiums and out-of pocket costs, such as co-payments for doctor visits, hospital care or prescription drugs. Those are the ones most likely to struggle to pay bills — and who risk falling into medical debt.
Even with new coverage that may require some families to spend more than that "doesn't mean they are worse off than before," Blumberg said. "They are still far less exposed than they would be if they got into a car accident and were uninsured" and faced potential financial devastation.
To be sure, the health law's subsidies sharply reduce costs for many lower income Americans, who account for a majority of the uninsured.
Subsidies are pegged to the federal poverty level and are most generous for those who make the least amount of money. Those who earn the poverty level to twice that, or up to about $23,000 for an individual and $39,000 for a family of three, must pay 2% to 6% of their income toward the monthly premium before the subsidy would kick in.
Those who earn two to three times the poverty rate, or up to about $34,500 for an individual and $56,000 for a family of three, must pay up to 8% of the premium cost before the subsidy would kick in.
And those who make three to four times the poverty level — less than 16% of all consumers eligible for federal subsidies — must pay the highest percentage of their income, or up to 9.5% toward the premiums before getting federal help.
The millions who qualify for Medicaid, the state-federal program for the poor, generally pay little or nothing.
Most people with job-based coverage — the majority of insured Americans — are not eligible for subsidies, therefore not affected by the 9.5% requirement.
AN IMPROVEMENT, BUT …
The law's drafters set the 9.5% benchmark during final negotiations over the health law, mainly to meet a directive from the White House and congressional leadership that the law cost less than $1 trillion over 10 years and contain provisions to pay for that. The primary goal was to get the bill passed, not figure out what struggling middle-class families thought they could afford.
"The desire was to get it down as much as possible and stay within the budget target," said John McDonough, a Harvard professor who was a key adviser to the Senate Committee on Health, Education, Labor and Pensions.
He hopes a future Congress will lower the percentage of income subsidy-eligible families must pay. Otherwise, he said, "it won't be affordable to everyone who needs it."
Advocates point to provisions in the law that they say will make coverage a good value to hard-pressed middle-class families, including the provision of preventive care without a co-pay, broad benefits, the capping of out-of-pocket costs and the requirement that people with medical problems get coverage.
"Compared to where we were before, it's an enormous improvement," said Ron Pollack, head of Families USA, an advocacy group that supports the law. "Is it sufficient? That's a different question."
Kaiser Health News is an editorially independent program of the Kaiser Family Foundation.