The Uninsured: A Primer - Key Facts about Health Insurance and the Uninsured Under the Affordable Care Act
How has health insurance coverage changed under the ACA?
In the past, gaps in the public insurance system and lack of access to affordable private coverage left millions without health insurance, and the number of uninsured Americans grew over time, particularly during economic downturns. By 2013, the year before the major coverage provisions of the ACA went into effect, more than 44 million people lacked coverage.1 Under the ACA, as of 2014, Medicaid coverage has been expanded to nearly all adults with incomes at or below 138% of poverty in states that have adopted the expansion, and tax credits are available for people with incomes up to 400% of poverty who purchase coverage through a health insurance marketplace. Millions of people have enrolled in these new coverage options, and the uninsured rate has dropped to a historic low. Coverage gains were particularly large among low-income people living in states that expanded Medicaid. Still, millions of people—27.6 million nonelderly in 20162—remain without coverage.
Health Insurance Coverage before the ACA
The ACA’s coverage provisions built on and attempted to fill gaps in a piecemeal insurance system that left many without affordable coverage. This system had built up over time and included employer-based coverage for many—but not all—workers and their families, public coverage for some low-income people, and directly-purchased coverage for a small number of people who bought policies on the non-group market (Figure 1). (Medicare covers most people over age 65 as well as some younger people with disabilities.) Under this system, many were ineligible for coverage or could only access coverage that was too costly for them to afford. In 2013, 44.1 million nonelderly people in the U.S. lacked health insurance.3 Poor and low-income adults were particularly likely to lack coverage, and the main reason that most people said they lacked coverage was inability to afford the cost.4
Historically, the majority of employers offered group health insurance policies to their employees and to their employees’ families, but not all workers had access to or could afford such coverage. In 2013, 57% of firms offered employee coverage, with workers in low-wage and small firms less likely than other workers to be offered coverage.5 Many low- and moderate-income workers who were offered employer coverage found their share of the premium unaffordable, especially if they needed more expensive family coverage.6
The availability of employer-sponsored coverage and the share of the population with this type of coverage declined over time. From 1999 to 2013, the share of firms that offered workers health benefits declined from 66% to 57%, primarily due to fewer small firms offering coverage.7 Also during this period, health insurance premiums and the employee’s share of those premiums nearly doubled, outpacing growth in workers’ earnings and overall inflation.8 The share of the nonelderly population with employer-sponsored coverage declined between 2000 and 2007,9 even during years when the economy was strong and growth in health insurance premiums was slow. The Great Recession caused an even steeper drop in employer coverage from 2008 to 2010 due to rising unemployment. As the economy began to stabilize from 2010 to 2013, the decline in employer coverage slowed, but rates of employer coverage remained below pre-recession levels.10
Very few people were covered by non-group health insurance policies prior to the ACA. Private policies directly purchased in the non-group, or individual, market (i.e., outside of employer-sponsored benefits) covered only 5% of people under age 65 in 2013.11 Though, on average, non-group insurance premiums were lower than those for employer-sponsored coverage, enrollees paid 100% of the cost because they could not share that premium expense with an employer. Further, premiums in the non-group market could vary by age or health status, and people with health problems or at risk for health problems could be charged high rates, offered only limited coverage, or denied coverage altogether.
Medicaid and CHIP have been important sources of coverage for low-income children and people with disabilities, but in the past, coverage for adults without disabilities was limited. In 2013, Medicaid and CHIP covered just under a fifth (19%) of the nonelderly population12 by primarily covering four categories of low-income individuals: children, their parents, pregnant women, and individuals with disabilities.13 Prior to the ACA, federal law required state Medicaid programs to cover school age children up to 100% of the poverty level (133% for infants and preschool children), and states took up options to expand coverage to children in families with higher incomes (typically 200% of poverty or higher) through both Medicaid and CHIP. In contrast, the role of Medicaid for nonelderly adults without a disability remained very limited. In most states, parent eligibility remained very limited, often below 50% of the poverty level, and adults without dependent children—regardless of how poor—were ineligible for Medicaid.
Insurance coverage varied by state depending on the income distribution in the state, the nature of employment in the state, and the reach of state Medicaid programs. Insurance market regulations and the availability of jobs with employer-sponsored coverage also influenced the insurance rate in each state.14 Massachusetts had the lowest uninsured rate in the country in 2013 (4%), due in part to health reform legislation enacted in 2006, while four states (Nevada, Texas, Arizona and Florida) had uninsured rates above 20%.15
ACA Coverage Provisions
The ACA expanded Medicaid eligibility to adults with incomes at or below 138% of poverty, but the 2012 Supreme Court ruling effectively made the expansion a state option. In addition to Medicaid’s traditional role of covering low-income children, parents, pregnant women, and people with disabilities (as well as some low-income elderly), the ACA expanded Medicaid to nearly all adults with incomes at or below 138% of the poverty level (including low-income adults without dependent children who had historically had no path to coverage). Under the law, the federal government provided 100 percent of the cost of expansion from calendar years 2014-2016, and the federal share of costs gradually phases down to (and remains at) 90 percent by 2020. As of September 2017, 32 states16, including DC, had expanded Medicaid under the ACA.17 There is no deadline for states to expand Medicaid under the ACA, and discussion about the Medicaid expansion continues in other states.
The ACA established health insurance marketplaces where individuals and small employers can purchase insurance. Health insurance marketplaces operate in each state, but only some states run their own marketplace.18 These marketplaces are designed to ensure a more level competitive environment for insurers and to provide consumers with information on cost and quality to help them choose among plans. To help make coverage purchased in these new marketplaces more affordable, the federal government provides tax credits for people with incomes between 100% and 400% of poverty ($20,160 to $80,640 for a family of three in 2016).19,20 These tax credits are available on a sliding scale based on income and limit premium costs to a share of income. In addition, ACA makes available cost-sharing subsidies to reduce what people with incomes between 100% and 250% of poverty have to pay out-of-pocket to access health services.21
Coverage for immigrants remains limited under the ACA. Lawfully-present immigrants can receive coverage through the ACA coverage expansions, although they continue to face eligibility restrictions in Medicaid that have been in place since prior to the ACA. Specifically, many lawfully present non-citizens who would otherwise be eligible for Medicaid remain subject to a five-year waiting period before they may enroll.22 Lawfully present immigrants are eligible for tax credits for coverage purchased through a marketplace, regardless of the number of years they have been in the U.S.23 In addition, lawfully present immigrants who would be eligible for Medicaid but are in a five-year waiting period are also eligible for tax credits for marketplace coverage. Undocumented immigrants are ineligible for Medicaid and are prohibited from purchasing coverage through a marketplace or receiving tax credits.
The ACA includes provisions to promote employer-based coverage. Large and medium-size employers (those with 50 or more full-time equivalent employees, or FTEs) now are assessed a fee up to $2,000 per full-time employee (in excess of 30 employees) if they do not offer affordable coverage and have at least one employee who receives a marketplace premium tax credit. To avoid penalties, employers must offer insurance that pays for at least 60% of covered health care expenses, and the employee’s share of the individual premium must not exceed 9.5% of family income.24 In addition, the ACA established the Small Business Health Options Program (SHOP) marketplace, where employers with no more than 50 full-time equivalent (FTE) employees can purchase coverage25 and employers with no more than 25 FTE employees and annual wages of less than $52,000 may be eligible for tax credits (for up to two years) to reduce the cost of SHOP coverage.26,27 The Centers for Medicare and Medicaid Services (CMS) recently announced plans to change the way that employers access SHOP plans, effective January 1, 2018.28
The ACA also extends dependent coverage in the private market. As of 2010, young adults may remain on their parents’ private plans (including non-group and employer-based plans) until age 26. This provision led to drastic decline in the young adult uninsured rate from 34% in 2010 to 14% in 2016.29
Under the ACA, almost all people are required to have health insurance coverage or be subject to a tax penalty. This requirement was intended to encourage healthier individuals to purchase coverage through the marketplace. The requirement only applies to those with access to affordable coverage, defined as costing no more than 8% of an individual’s or family’s income (certain other exemptions to the mandate also are granted). The penalty is assessed as 2.5% percent of family income, with both a minimum and maximum. The penalty can be no less than a flat dollar amount equal to $695 per adult plus $347.50 per child, up to $2,085 for the family. The penalty also can be no more than the national average premium for a bronze plan, which averaged $272 for single coverage and $1,360 for a family of five or more in 2017.
Changes in The Number of Uninsured Under the ACA
Under the ACA, the uninsured rate has declined to a historic low. The share of the nonelderly population that lacked insurance coverage hovered around 16% between 1998 and 2007, then peaked during the ensuing economic recession (Figure 2). As early provisions of the ACA went into effect in 2010, and as the economy improved, the uninsured rate began to drop. When the major ACA coverage provisions went into effect in 2014, the uninsured rate dropped dramatically and continued to fall in subsequent years. In 2016, the nonelderly uninsured rate was 10.3%, the lowest in decades.
Over 16 million more people have health coverage in 2016 compared to 2013. Corresponding with implementation of the ACA’s coverage provisions, the total number of nonelderly uninsured individuals nationally dropped from 44.1 million in 2013 to 27.6 million in 2016, with the biggest decline in the first two years of ACA implementation.30 Because the expansions are largely targeted to adults, who have historically had higher uninsured rates than children, nearly the entire decline in the number of uninsured people under the ACA has occurred among adults (Figure 3).
Coverage gains have been largest among low-income people, people of color, and young adults—groups that had high uninsured rates prior to 2014. While uninsured rates decreased across all income groups from 2013 to 2016, they declined most sharply for poor and near-poor people, dropping by 9.5 percentage points and 11.3 percentage points, respectively. Also during this period, the uninsured rate declined by 12.8 percentage points for adults age 19-25. Among racial and ethnic groups, Hispanics, Blacks, and Asians had particularly large declines in uninsured rates, with each group seeing a drop of over 7 percentage points from 2013 to 2016 (Figure 4).31
Growth in Medicaid and directly-purchased coverage accounted for much of the decline in the uninsured rate. As of June 2017, national enrollment in Medicaid and CHIP had grown by over 17 million people since September 2013 (before the ACA Medicaid expansion), a 29% increase in monthly Medicaid enrollment.32 In addition, as of March 2017, over 10 million individuals were enrolled in a marketplace plan and had paid their first month’s premium, the vast majority of whom (84%) received premium subsidies.33
States that expanded Medicaid had larger gains in coverage than states that did not. Uninsured rates dropped nearly immediately in expansion states following implementation of the ACA’s coverage provisions, with sharp declines among the low-income population widely attributed to gains in Medicaid coverage. Uninsured rates among the low-income population dropped somewhat in non-expansion states as well, in part as a result of the availability of ACA subsidies for private insurance to those with incomes above poverty, increased participation among those eligible but not enrolled in Medicaid, and increased outreach and enrollment efforts surrounding the ACA in all states; however, reductions in non-expansion states were far more limited than the substantial declines observed in expansion states.34 Among nonelderly adults, Medicaid expansion states had a 9.2 percentage point drop in uninsured rates between 2013 and 2016, versus a 4.8 point drop in non-expansion states (Figure 5).35
Some people continue to purchase non-group coverage outside the marketplace. Among the nonelderly adult non-group market in winter 2016, nearly two-thirds of individuals (64%) reported having coverage obtained from a state or federal marketplace, 19% have ACA-compliant coverage purchased outside of the marketplace, and 12% have non-ACA-compliant plans (those that have been in effect since before January 1, 2014).36 People purchasing coverage outside the marketplace are not eligible for ACA premium tax credits.
Offer, eligibility, and take-up rates of employer sponsored insurance are largely unchanged since 2013. Over half (53%) of all firms offered health benefits in 2017, a rate similar to that in 2013 (57%).37 Similarly, the percentage of workers eligible for health benefits at offering firms in 2017 (79%) is similar to 2013 (77%), and take-up rates have also remained steady, with 78% of eligible workers taking up offered coverage in 2017 compared to 80% in 2013.38
Even with the ACA, many remain uninsured. Of the remaining uninsured in 2016, over one in four (14.6 million, or 53%) are eligible for financial assistance through either Medicaid or subsidized marketplace coverage. However, nearly half of uninsured people remain outside the reach of the ACA. Some (3.9 million, or 14%) are ineligible due to their immigration status, and others (2.4 million, or 9%) are ineligible due to their state’s decision not to expand Medicaid. The remainder of the uninsured either has an offer of coverage through an employer or has income above the limit for marketplace tax credits (Figure 6). These patterns of eligibility vary by state.39
In the nineteen states that had not expanded Medicaid as of November 2017,40 2.4 million poor adults fall into a “coverage gap.”41 These adults have incomes above Medicaid eligibility limits in their state but below the lower limit for marketplace premium tax credits, which begin at 100% of poverty. In non-expansion states, the median income eligibility level for parents is 44% of poverty and 0% for childless adults.42 People in the coverage gap are concentrated in Southern states, with the largest number of people in the coverage gap in Texas (638,000 people, or 27%) followed by Florida (384,000, or 16%), Georgia (240,000, or 10%), and North Carolina (208,000, or 9%).43Introduction Who remains uninsured after the ACA and why do they lack coverage?