The lack of “affordability” in the Affordable Care Act

Jan. 15, 2013 — [In response to the following statment from “Even with the Affordable Care Act, health insurance coverage for many families may remain unaffordable”:]

The ACA generally defines “affordable” insurance as coverage that costs no more than 9.5 percent of an employee’s household income in employee-paid premiums.

If I read this correctly, the ACA interpretation of ‘affordability’ rests solely on employee-paid premiums. If I am correct, couldn’t an employer skirt this issue by offering a relatively modest premium but jacking up the deductibles and copays? Can insurance be affordable with a $75 premium but unaffordable by having a $3,000 deductible and high copays? If the answer is ‘yes’, how does this affect affordability except to make it a moot question?

— Deena Flinchum, Blacksburg, Va.

Editor’s reply:

While the employee’s premium costs are indeed the only factor used to measure the affordability of employer-provided coverage, that coverage must also meet certain other criteria in regard to benefits. Particularly relevant to this question is the requirement that the coverage have an “actuarial value” of at least 60 percent, meaning that the plan must cover at least 60 percent of health costs calculated across an average population. Though 60 percent actuarial value is a low bar that gives plans significant license to have very high deductibles and co-payments, it nonetheless represents some limitation on how much cost sharing the plan can impose.

This requirement, sometimes known as the “minimum value requirement,” is a very important part of the employer mandate, but one which was outside the scope of our article.