When health insurance is sold on a new online exchange later this year, more than 233,000 Connecticut residents will be eligible for federal subsidies to offset the price of their premiums, according to a new report Tuesday by Families USA.
The subsidies, part of the Affordable Care Act reforms, will be offered on a sliding scale to individuals and families who earn as much as 400 percent of the federal poverty level. Subsidies will be available as people fill out their application and shop for health insurance, and the federal government will pay a portion of premiums directly to the insurance company.
Families USA, an advocacy group that supports broad access to affordable health coverage, was unable to say how much the average subsidy would be — because insurance companies have not yet filed proposed rates, and the subsidies are based on percentages of residents’ incomes.
“This will reduce premiums by thousands of dollars for people,” said Ron Pollack, executive director of Families USA. “It means that the remaining premium that the individual or family needs to pay is considerably lower than they would have paid otherwise.”
The goal of the exchanges, combined with expanded Medicaid eligibility for poor and disabled people, is to reduce the number of uninsured people — about 350,000 in Connecticut. Most of the 233,000 who are eligible for subsidies are uninsured, Families USA said, but an exact number is not available. The figure includes 42,000 children under age 18, and it includes some people who have jobs that offer insurance at a high cost, and some who buy insurance on the individual market.
Health insurance on the exchange for individuals and small businesses is likely to be more expensive than it is now, mostly because of increased coverage mandates and other underwriting changes. Insurers are expected to submit rates this month for health plans that will be available for purchase in October for coverage in 2014.
Those prices, if approved by the Connecticut Insurance Department, will be reduced by federal subsidies for those eligible, based on a scale that targets about 3.5 percent of household income among the poorest purchasers, rising to about 9 percent of income for those at 4 times the poverty rate.
Geographically in Connecticut, the number of people eligible for subsidies is evenly spread out: 53,860 in Hartford County, 60,900 in New Haven County and 56,680 in Fairfield County, according to Families USA.
Connecticut residents with annual income between 200 and 400 percent of the federal poverty level — $47,100 and $94,200 for a family of four — will make up 61 percent of those in the state eligible for the tax credits, the report shows. The rest are closer to the poverty rate, but still not able to qualify for the Medicaid because of their income or citizenship status.
The taxpayer-funded discounts will not be avaialble for people who have employer-based health coverage that’s deemed affordable — and large and midsize employers who don’t offer affordable coverage will face penalties.
In Connecticut, about 59 percent of the population has employer-based health insurance compared with 49 percent nationally, according to the Kaiser Family Foundation, a nonprofit health research organization.
Health exchange subsidies nationwide will cost U.S. taxpayers $1 trillion through 2022, according to a July 2012 estimate by the nonpartisan Congressional Budget Office. Additionally, the expansion of Medicaid for adults and children is expected to cost $642 billion during that timeframe and small businesses will receive $23 billion during that period.
However, if the Affordable Care Act were to be repealed, it would increase the federal budget deficit by an additional $109 billion for health care expenses in a 10-year period between 2013 and 2022, according the CBO.
“The tax credit subsidies are a game changer,” Pollack said. “They will make health coverage affordable for huge numbers of uninsured families who would have been priced out of health coverage and care they need. It will also be very helpful to people who have purchased private health coverage, but who have had difficulty paying for it.”