Benefits under the Affordable Care Act would have reduced out-of-pocket expenses
Research Activities, December 2012, No. 388
People receiving individual health insurance currently do not have the same insurance benefits as do people covered under employer-sponsored plans. Benefits under these individual policies tend to be less generous, with higher deductibles and copays. Sometimes, prescription drugs are not covered. However, under the Affordable Care Act, individual insurance will be more generous, including mandated coverage for prescription drugs and reduced caps on out-of-pocket expenses.
Steven C. Hill, Ph.D., a researcher with the Agency for Healthcare Research and Quality (AHRQ), examines how these new reforms would have impacted out-of-pocket spending had they been available from 2001 to 2008. He finds that consumers would have saved $280 in average annual spending on medical care and drugs. In addition, individuals would not face very high out-of-pocket expenses for major health events.
Using data from the Medical Expenditure Panel Survey Household Component, Dr. Hill focused on out-of-pocket spending for medical care and prescription drugs. Owing to the small number of people with individual insurance, data were pooled together from each year. There were three subgroups of special interest: adults with chronic conditions, the near-elderly (ages 55-64), and low-income people. Finally, those with individual insurance were compared with those insured through small employers or large employers. Adults with individual insurance used fewer physician services and had less use of emergency departments and hospitals than those insured through large employers. Adults with individual insurance spent $1,100 out of pocket per year compared with $546 for adults insured by large employers and $607 for adults insured by small employers. The percentage of people with individual insurance with annual out-of-pocket expenses over $3,000 was more than twice the rate of those with insurance from small employers.
The near-elderly and those with chronic conditions who had individual insurance had significantly higher out-of-pocket spending compared to healthier younger adults. Benefits under the Affordable Care Act would have saved the near-elderly $589 per year. The savings would be $535 for people with low incomes. All adults with individual insurance would have a reduced likelihood of having out-of-pocket expenses exceeding $6,000 annually. According to Dr. Hill, the probability of having spending above this level will drop from the current level of 2.6 percent to 0.6 percent once provisions in the Affordable Care Act go into effect.
More details are in "Individual insurance benefits to be available under health reform would have cut out-of-pocket spending in 2001-2008," by Dr. Hill, in the June 2012 Health Affairs 31(6), pp. 1349-1356. Reprints (AHRQ Publication No. 12-R087) are available from the AHRQ Publications Online Store .