Potential ACA-Qualifying Households Segment Summary October 2013
Source: 2012–13 MacroMonitor
Unlike the majority of developed countries, the United States ties health-care-insurance coverage to employment; the Affordable Care Act (ACA) is the latest step in the process of decoupling coverage from employment at a time when employment numbers are disappointing, the middle class is in sharp decline, and health-care-insurance premiums have risen 155% since 1990, according to a recent US Department of Commerce study. Medicare (1960) and Medicaid (1965) provide health-care coverage to retired and indigent households, respectively, but do not provide for households such as those above the poverty line but struggling financially, individuals too young to retire from work, or people who have not paid into Medicare for a minimum of ten years.
By design, the ACA provides health-care-insurance options to these households as well as to workers for companies that do not provide an employee-sponsored plan. Because most information about ACA has been generated by politicians (opposed to the plan) and reported on by media (always looking for a sensational story), the majority of households are confused. The law is admittedly complicated, because, of necessity, many variables determine qualification, plan selection, and premiums. For example, households between 133% and 400% of the poverty level (a combination of household income and the number of family members—see the October 2013 Quick Stats) may qualify. See the government-issued table of Federal Poverty Guidelines for specifics. Subsidies, in the form of tax credits, are available to qualifying households to offset the cost of premiums.
The Kaiser Family Foundation has a calculator to help households determine, in general, what their premium might be and how much of a tax credit they might receive. Qualifying parameters appear to be quite broad and tax credits generous—an average of one-third the cost of coverage for individuals currently buying insurance on their own, according to a Kaiser Study. The competitiveness of state and the federal marketplace "exchanges" is likely to lower premium costs.
Marketplace exchanges open for enrollment on 1 October 2013. The population of uninsured households (40.6 million households) is diverse. Age, a component of ACA-plan premium costs, subdivides the uninsured population in this summary. MacroMonitor data are available for households with no health-care insurance; with heads younger than the age of 35 (10.6 million households), between the ages of 35 and 55 (14.6 million households), and between the ages of 55 and 65 (7.7 million households); and household heads age 65 and older (7.6 million households). The summary details uninsured households with heads younger than age 35 (younger households) and household heads (HHH) between the ages of 55 and 65 (preretired households)—two government-targeted populations.
- The mean age of younger household heads is 29; the mean age of preretired heads is 59.
- Mean household income for younger households is $49K; for preretired households, mean income is $40K; 35% of younger households and 44% of preretired households in the low socioeconmic level will likely qualify.
- Almost half of both HHH have a high school diploma or less.
- Two in five younger HHH are single; the same proportion for both groups are married. Half of younger households have dependent children; in over one-third, children are younger than age 11. In comparison, only one in five preretired households have dependent children; roughly 14% have Boomerang children, and somewhat more than one-third have financially dependent adults.
- Younger HHH are significantly more likely than all HHH to be unemployed and looking for work (14%); preretired primary HHH are significantly more likely to be unable to work (23%).
- Almost one-third of uninsured HHs with heads between the ages of 55 and 65 are already retired, and half are preretired; of unretired households in this group, one-third are not preparing for retirement.
- Two-thirds of younger households do not include a member with any government- sponsored health-care coverage, in comparison with 59% of preretired households that do.
- Almost one in five younger households did not file an income tax return in 2011, in comparison with 35% of preretired households that did not file; clearly, tax credits will not help these households.
- Younger households have a mean net worth of $97K, in comparison with a mean net worth for preretired households of $193K; both means are significantly lower than that for all US households: $364.5K. Lower-than-average net worth will help some preretired HHs to qualify for ACA coverage.
- The incidence of assets for both groups —except savings accounts for younger households (above average) and business and home ownership for preretired households (average)—is significantly less than that for all households. The small-business or "shop" exchanges, available to companies with fewer than 25 employees, could prove beneficial to some of these HHs.
- The majority of uninsured households with an employed HHH work for an employer that offers medical insurance—four in five younger employed households (3.6 million households) and three-quarters of preretired households (1.2 million households). With time, the incidence of employer-sponsored health-care insurance plans is likely to decline, offset by the incidence of employers switching to defined-benefit plans.
- Of all households without health insurance, younger households spend an annual mean of $1195 on health and health-related insurance; preretired households spend a mean of $845. According to the most recent Kaiser study, one in four individuals use no health-care services in a given year.
Financial Attitudes and Tidbits
The majority of uninsured households are no more or less likely than average to agree (net) with most of MacroMonitor's 135+ financial attitudes. Some exceptions:
- About half of all uninsured households struggle to make ends meet: half of younger households and three in five preretired households. An additional 12% of younger households and 11% of preretired households require assistance. As a result, 41% of younger households and 47% of preretired households have no savings or investment goals.
- Younger households without health-care insurance are more likely than all households to resent financial-institution profits from their business—individuals who are generally disenfranchised and who often feel entitled head two in five younger households. Many of these individuals do not use credit responsibly or feel obligated to make good on financial commitments if times are tough, because they have no resources to do so. Benefits such as free screenings and no preexisting conditions to qualify will likely not be attractive to many younger HHH who typically do not visit doctors or health-care facilities except in emergency situations.
- Many preretired households feel particularly vulnerable; more than half feel as though they are living on the financial edge. Unlike younger households, roughly seven in ten preretired households are financially responsible and do manage within their financial resources. Free screenings and the elimination of the preexisting condition to quality for insurance will be most attractive to these households. Premiums for preretired household heads will be higher than for young household heads because of their age.
Overall, apprehension exists about changes in health-care-insurance coverage and doubt about whether the law will work as its writers envision. A number of assumptions about the ACA must materialize for uninsured households to benefit. For example, people without health-care insurance will be enticed by lower-cost premiums to secure coverage. Second, tax credits (subsidies) will enable uninsured households to afford premiums. Third, individuals' ability to "shop" policies through exchange brokers will reduce premiums; resulting market competitiveness will keep premiums low. And fourth, people will pay health-care-insurance premiums rather than pay a fine for not having health-care coverage.
The number of households motivated by low-cost premiums for health-care coverage will depend on whether premiums are low enough to be affordable to half of uninsured households already struggling to make ends meet. Tax credits will not motivate the one-quarter of uninsured households that do not file income tax returns. The process of securing a policy through an exchange broker will be of interest to only some portion of uninsured households—those with enough interest to engage—a process that traditional insurers are not promoting and the reason for unprecedented lobbying expenditures by a wide variety of health-care-related parties in Washington, DC. What portion of households will elect to pay a fee for noncoverage because it will be less expensive than paying premiums for coverage remains a question—the fee-collection policy is as yet unspecified.
Traditional health-care-insurance providers' challenge is to sharpen their pencils with respect to their offers while at the same time ensuring company profit. Learning as much as possible about the types of uninsured households is essential for success. Further, understanding how to communicate with target households—and how to reach them—is especially challenging because almost 80% of uninsured households have used no sources for financial information in the past 12 months.
New Deliverables for MacroMonitor Subscribers
If these households are important to your business and you would like to learn more, contact us to request the edited data tables and charts comparing all age groups of uninsured households on which this Segment Summary is based.
Also available is the new October 2013 Dirty Dozen, a set of approximately one dozen annotated graphic-analysis charts covering topics related to health-care insurance.