In states that chose not to expand Medicaid, the minimum income   level for individuals to qualify for APTC and cost-sharing subsidies is   100 percent of the FPL, as specified in PPACA, assuming the state’s   As of January  Medicaid eligibility threshold is at or below this level.2015, 27 states and the District of Columbia opted to expand Medicaid  under PPACA. Early Evidence Suggests That While the APTC Likely Contributed to an Expansion of Coverage, the Small Employer Tax Credit Has Had Little Effect

Early evidence suggests that the APTC likely contributed to an expansion  of health insurance coverage because it significantly reduced the cost of  premiums for those eligible, though there are limitations to measuring the  effects of the APTC using currently available data. For example, one study  found that the rate of uninsured among individuals with household  incomes between 139 and 400 percent of the FPL fell 9 percentage  points between January 1, 2012, and June 30, 2014, in Medicaid  expansion states. This expansion in health insurance coverage is likely partially a result of  the APTC having reduced the cost of health insurance premiums for  those deemed eligible. Among those who selected a plan  through 1 of the 34 federally facilitated exchanges or the 2 state-based  exchanges that used the federal website for enrollment in 2014 and were  deemed eligible for the APTC (4.7 million individuals), the APTC reduced  premiums by 76 percent, on average (see table 4). As of January 2015, data were not available on the extent to which the  APTC reduced 2015 premiums for enrollees. Studies that examined  changes in premiums between 2014 and 2015 found that, on average,  premiums changed modestly. While Most Nonelderly Adults Had Access to Affordable Health Insurance Coverage, Maintaining Minimum Essential Coverage May Be Challenging for Some

Most nonelderly adults had access to affordable minimum essential  coverage through their employer, Medicaid, the exchanges, or other  sources, although about 16 percent of nonelderly adults remained  uninsured as of March 2014. While there are many reasons people  remain uninsured, some—including certain families or individuals not  eligible for the APTC—may not have access to affordable coverage. Regardless of the affordability of premiums, some  may face challenges in maintaining their insurance. Some Individuals without Affordable ESI Who Are Not Financially Eligible for the APTC

Some nonelderly adults who lack access to affordable coverage  elsewhere, such as through an employer, and instead shop for health  insurance coverage on the individual exchanges may find this insurance  unaffordable without financial assistance from the APTC—those with  household incomes greater than 400 percent of the FPL. Based on nine household scenarios we examined, the affordability of the  lowest-cost bronze plans available varied across different demographic  subsets in the United States, for example:  Individual age 60-years-old: A 60-year-old individual with household  income at 450 percent of the FPL would have had to spend greater  than 8 percent of their household income for the lowest-cost bronze  plan in most (84 percent) of the 501 rating areas in the United  States. Individual age 27-years-old: The lowest-cost bronze plan would  have been considered affordable in all but one rating area for a   27-year-old with income too high to receive the APTC. For example, a change in  employment status can affect eligibility for ESI, the most common form of  insurance for the nonelderly. Concluding Observations

This report provides an early look at the effect of the tax credits and  affordability of health insurance under PPACA, finding that evidence  suggests that the APTC likely contributed to an expansion of health  insurance coverage because it significantly reduced the cost of premiums  for those eligible. As a result, it is important to note that our  findings about the first year of the exchanges cannot be generalized to  future years. Agency Comments

We received technical comments on a draft of this report from HHS and  IRS and incorporated them as appropriate. Among these studies, we identified  summary results from three surveys that estimated the change in the rate  of uninsured nonelderly adults between 2013 and 2014 by household  income amounts comparable to APTC eligibility limits. We interviewed a range of experts to explore what is known about the  effects of the APTC and the small employer tax credit on health insurance  coverage and what is known about the extent to which health benefit  plans are available and individuals are able to maintain minimum  essential coverage, as well as what is known about the potential effects of  changing the ESI affordability threshold. We asked experts at 11 research  and industry organizations, in addition to officials at the Department of  Health and Human Services (HHS) and the Internal Revenue Service  (IRS), about their work related to the potential effect of tax credits on  health insurance coverage, the types of individuals that may have more or  less difficulty maintaining minimum essential coverage, and the potential  effects on employers, employees, and federal costs of changing the ESI  affordability threshold (we did not ask every question of every expert).
Why GAO Did This Study

The number of uninsured individuals and the rising cost of health insurance have been long-standing issues. PPACA mandated that most individuals have health insurance that provides minimum essential coverage or pay a tax penalty. To make health insurance more affordable and expand access, PPACA created the APTC to subsidize the cost of exchange plans' premiums for those eligible. PPACA used two standards for defining affordability of health insurance: 8 percent of household income for the purposes of minimum essential coverage and 9.5 percent for APTC eligibility for individuals offered employer-sponsored plans.
PPACA mandated that GAO review the affordability of health insurance coverage. GAO examined (1) what is known about the effects of the APTC and (2) the extent to which affordable health benefits plans are available and individuals are able to maintain minimum essential coverage. GAO conducted a structured literature search to identify studies on the rate of uninsured individuals, among other topics, and interviewed experts from HHS, the Internal Revenue Service (IRS), and 11 research and industry organizations to understand factors affecting affordability. GAO also analyzed the variation in the affordability of exchange plan premiums nationwide using 2014 data—the most recent data available at the time of GAO's analysis.
GAO received technical comments on a draft of this report from HHS and IRS and incorporated them as appropriate.

What GAO Found

Early evidence suggests that the advance premium tax credit (APTC)—the refundable tax credit that can be paid on an advance basis—likely contributed to an expansion of health insurance coverage in 2014 because it significantly reduced the cost of exchange plans' premiums for those eligible. Although there are limitations to measuring the effects of the APTC using currently available data, surveys GAO identified estimated that the uninsured rate declined significantly among households with incomes eligible for the APTC. For example, one survey found that the rate of uninsured among individuals with household incomes that make them financially eligible for the APTC fell 5.2 percentage points between September 2013 and September 2014.This expansion in health insurance coverage is likely partially a result of the APTC having reduced the cost of health insurance premiums for those eligible. Among those eligible for the APTC who the Department of Health and Human Services (HHS) initially reported selected a plan through a federally facilitated exchange or one of two state-based exchanges, the APTC reduced premiums by 76 percent, on average. As of January 2015, data were not yet available on the extent to which the APTC reduced 2015 premiums, although studies have found that, on average, premiums (before applying the APTC) changed only modestly from 2014 to 2015, though some areas saw significant increases or decreases.
Most nonelderly adults had access to affordable health benefits plans—as defined by the Patient Protection and Affordable Care Act (PPACA)—but some may face challenges maintaining coverage. Most nonelderly adults had access to affordable plans through their employer, Medicaid, the exchanges, or other sources as of March 2014, although about 16 percent of nonelderly adults remained uninsured. While there are many reasons people remain uninsured, some people may not have access to affordable coverage, including (1) low-income nonelderly adults—those with household income below 100 percent of the federal poverty level—who live in one of the 23 states that chose not to expand Medicaid and (2) some nonelderly adults who do not have affordable employer-sponsored insurance and who were not eligible for the APTC. For those with incomes too high to qualify for the APTC, the affordability of health insurance coverage available in the individual exchanges in 2014 varied by age, household size, income, and location. For example, a 60-year-old with an income of 450 percent of the federal poverty level would have had to spend more than 8 percent of their household income for the lowest-cost plan in 84 percent of all health insurance rating areas in the United States, but a 27-year-old had access to an affordable plan in all but one. Regardless of the affordability of premiums, some may face challenges in maintaining coverage that qualifies under PPACA as minimum essential coverage; for example, changes in income can result in changes in APTC eligibility.
This report provides an early look at the effect of the APTC and the affordability of health insurance under PPACA. However, it is important to note that these findings about the first year of the exchanges cannot be generalized to future years. Numerous factors, including additional data and changes in trends in health care costs, could affect the affordability of health insurance going forward.