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Affordable Care Act Conjures Mixed Reactions in Rural America

Affordable Care Act could be confusing for rural Americans, but group says it has potential for lower-income families

Published on: Aug 22, 2013

More than a year after the U.S. Supreme Court upheld the Affordable Care Act, rural interests are still focused on what changes the program could bring after the enrollment period kicks off Oct. 1.

The ACA, or "Obamacare" as it is called by some, will introduce state-operated or federally facilitated health insurance marketplaces and require millions of rural Americans to make health insurance purchasing decisions, says Jon Bailey of the Center For Rural Affairs.

Bailey recently authored a CFRA study on the effects of the ACA, summarizing the new provisions and how they will impact some rural Americans.

According to Bailey, a determining factor for most stakeholders in the discussion is the dollar amount in premiums individuals and families must pay for their choice of coverage.

Affordable Care Act could be confusing for rural Americans, but group says it has potential for lower-income families
Affordable Care Act could be confusing for rural Americans, but group says it has potential for lower-income families

While differing opinions quickly surface about the broader scope of the ACA, Bailey argues that price breaks could result in acceptance of the program among rural residents.

Those price breaks include tax credit provisions that are dependent upon the income of the purchaser and the type of insurance selected. To receive tax credits, individuals or families must be between 100% and 400% of the federal poverty level – that's between $11,000 and $45,000 for an individual and between $23,000 and $94,000 for a family of four in 2013.

Those making more than 400% of the FPL will not qualify for tax credits, but may have new insurance options through the federal marketplace. Similarly, those who are self-employed will also have new options.

The cost-share program could be another benefit to lower-income rural stakeholders, CFRA says. The cost-share kicks in for Americans with incomes below 250% of the FPL, or about $59,000 for a family of four and $29,000 for an individual in 2013.

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These programs will allow many underinsured rural Americans to obtain the tests and check-ups they should at lower cost, thus potentially enhancing their long-term health, Bailey says.

The group points out that that rural populations are responsible for nearly 22% more of their total health care costs than are urban or suburban residents. Moreover, CFRA reports that rural residents receive fewer regular medical check-ups and routine diagnostic tests than they medically and statistically should.

"With generally lower rural incomes combined with higher uninsured rates, more rural residents are likely to be eligible for cost-sharing assistance in the exchanges," Bailey says. "That is what makes the exchanges ... vitally important to rural Americans."

But some aren't sold the provisions. As noted, families or individuals with incomes above 400% of the FPL won't receive any premium subsidy, leading the Congressional Research Service in a July 31 report to deduce that persons in the higher income category will face premiums similar to what they paid before the ACA, absent other effects the law might have on reducing the cost of health insurance.

CRS notes that ACA places caps on the premium users pay for their insurance, which is adjusted based on income. The cap, however, tops out at 9.5% for persons and families at under 400% of the FPL and disappears when incomes are over 400% of the FPL.

An additional cost for persons not interested in insurance, the ACA includes a provision that requires people who can afford health insurance to have it. If not, they will pay a fee equal to 1% of his or her income or $95. The fee will increase, eventually elevating to 2.5% of his or her income or $695 per person, whichever is higher.

Several legislators who often advocate for agricultural interests also oppose the plan, including Nebraska Republican Sens. Deb Fischer and Mike Johanns. The two argue that the plan will be costly and difficult to implement.

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They point out that even though the plan is touted as a tax-free program, the Congressional Budget Office estimates an average individual mandate of nearly $1,200. And, they question the role of the more than 20 federal agencies charged with implementing the program.

The American Farm Bureau Federation has specifically questioned the Health Insurance Tax, a provision passed with the ACA that the group says will pass higher costs on to consumers in the form of higher private coverage premiums.

Fair comparisons?

As a host of arguments and legislative propositions to defund the ACA keep rolling in, the future of the program could be characterized as uncertain. Even so, CFRA's Bailey says cost claims are an "apples to oranges" comparison.

"The numerous reforms to health insurance contained in the law will make health plans available in the marketplaces different from health plans any consumer has now," he explains in his latest paper. "Comparisons of current premium costs and premium costs through the marketplaces focus solely on sticker prices. Because premium assistance tax credits are so individualized, general statements are not possible," he says.

In addition, Bailey warns that current comparisons of overall premium costs generally do not include economic effects on eligible families.

Read the CRS report, Health Insurance Premium Credits in the Patient Protection and Affordable Care Act; and the CFRA's report, Making Health Insurance Affordable: Assistance to Individuals and Families in the Affordable Care Act.