For those with income just more than the cutoff, healthcare ‘subsidy cliff’ looms

March 09-- Mar. 9--The man was about 62, Megan Halena said, and shopping for health insurance.

Halena, program director for Duluth-based Generations Health Care Initiatives, was helping him look for a plan he could afford in the marketplace that's part of the Affordable Care Act. Generations spearheads Insure Duluth, the coalition that helps people navigate MNsure.

She had to tell the man his income level was too high for him to qualify for tax credits. He walked away.

"He could not afford the premium," Halena explained. "He was someone who had medical needs or health care needs. But he was going to try to wait it out for Medicare, was what he told me."

The man was a victim of what the Kaiser Family Foundation, in a report released last week, calls the "subsidy cliff." Under the Affordable Care Act, monthly premiums are subsidized via tax credits for enrollees whose incomes are no more than 400 percent of the federal poverty line.

That means the subsidy disappears for an individual making $48,560 or more or for a family with an income above $100,400. That boosts premiums, the report said, especially for older adults who aren't old enough to receive Medicare, and especially in rural areas.

In St. Louis, Carlton, Lake, Cook and Itasca counties, for instance, a 60-year-old making $50,000 -- 412 percent of the federal poverty line -- would pay $590 monthly for the least expensive "brass plan" -- 14 percent of her income.

That plan carries a deductible of $6,850 for an individual, said Eileen Smith, spokeswoman for the Minnesota Council of Health Plans, which represents the insurance industry. So even after paying 14 percent of her income to cover her premium, the enrollee potentially faces paying another 13 percent in deductibles.

A majority of people who get health insurance through MNsure are subsidized, Smith said, but not by a lot. This year, 123,731 people signed up via MNsure, she said, and 57 percent of them received federal help with payments.

But it's only a small subset of the people served by Insure Duluth, Halena said -- 23 out of 1,300.

As premiums have become less manageable for some, the ranks of the uninsured have grown in Minnesota, she said -- from 4 percent after the Affordable Care Act was first implemented to between 5 1/2 and 6 percent today.

According to the Kaiser Family Foundation report, the burden on 60-year-olds making $50,000 is less in some places, such as much of upstate New York. But Northeastern Minnesota is relatively well off. In Douglas, Bayfield and Ashland counties, the premium is $876 per month, or 21 percent of the individual's income. In Cherry County, Neb., it's $1,314, or 32 percent of income.

Halena said she's encouraged that Gov. Tim Walz's proposed budget includes a 20 percent health insurance premium subsidy for people over 400 percent of the federal poverty level.

In contrast, the Minnesota Council of Health Plans would like to see an extension of the state's reinsurance plan, which is due to expire after this year, Smith said. Reinsurance, passed by the Legislature in 2017, covers 80 percent of medical bills between $50,000 and $250,000, the idea being that giving insurers some protection from major bills prompts them to lower their rates.

This has succeeded, Smith said, cutting premiums in the state by 20 percent on average.

"They didn't even come close to using all the money (for reinsurance), so there is enough money in the budget that hasn't been spent to do it at least for another year or two," she said.

There doesn't seem to be support for both extending reinsurance and approving Walz's subsidy proposal, Smith said.

For now, Halena said, most people who bypassed health insurance because it's unaffordable will have to live with that choice all year.

"This is a population that's locked out for the rest of the year, unless there's a qualifying life event, which getting sick is not one," she said. "That's a scary thing."

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