Working poor might find their costs unaffordable

March 1, 2012

Affordable healthcare might be out of the reach of the nation's working poor.

While he makes a good point, he came off as being callous because he made these comments to the anguished mother of a child who needs a high-cost drug to manage his chronic condition. Santorum was concerned about consumers being blind to healthcare costs, while the mother was concerned about the affordability of prescribed medical treatments for her son.

In spite of what policymakers might say, there is no way to create a rational definition of what is "affordable" and for whom. For the purposes of policy, however, such definitions exist.

Consider the math. Minimum wage is $7.25 per hour, so the lowest-paid full-time worker's annual gross income would be $15,080. For argument's sake, let's say modified adjusted gross income is the same. In this example, our worker might qualify for newly expanded Medicaid, might be offered an employer-sponsored plan-affordable or not-or might shop with subsidies on his state's exchange. Even among those choices, our worker might still face out-of-pocket costs that he finds quite unaffordable.

Yes, the law defines an out-of-pocket maximum of $1,983 for those like our worker who earn up to 200% of federal poverty level (FPL), but that's 13% of his income. Is that affordable?

The fact remains that affordability definitions and assumptions are not particularly helpful to the parent who struggles to provide medication for her son or to the growing population of the "working poor."

PAYING HIGHER PREMIUMS

The Commonwealth Fund released data last month supporting the intuitive fact that low-income adults are more likely to be uninsured and are uninsured for a longer period of time. Specifically, 35% of those below 133% of FPL today report being uninsured for two years or more, which is not surprising. However, 18% of those between 133% and 249% of FPL-the working poor-report being uninsured for two years or more.

Employer-plan premiums are also slanted against the working poor. According to December 2011 data from the Bureau of Labor Statistics, those in the lowest quartile of workers in private industry (earning $10.69 per hour or less) are forking over 6% more money for health coverage than higher-paid workers.

Policymakers will increasingly consider the vulnerable population of the working poor. Starting in 2014, states will be able to cover those earning up to 200% of FPL in a Medicaid-like Basic Health Plan with significant support from federal funds. The plan will also mesh with Medicaid for ease of enrollment. Implementation will be limited by each state's budget and political will, but managed care organizations would be wise to go after such state contracts.

The selling point will be attractive plan designs that offer the working poor some choices so they themselves can decide what is affordable.

Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at julie.miller@advanstar.com