The Obamacare problem that Democrats don’t want to talk about

Bill Clinton made a very specific critique of Obamacare last week — one that most Democrats won’t.

“The people that are getting killed in this deal are … individuals who make just a little too much to get any of these subsidies,” Clinton said while campaigning last week in Flint, Michigan. “People are out there busting it [and] wind up with their premiums doubled and their coverage cut in half.”

This was not just some off-the-cuff riff. Clinton was addressing a serious problem with Obamacare. It’s one that people like Julianna Pieknik know all too well.

Pieknik is a 37-year-old PhD student in Maryland, who shares a house with four roommates. She earns $42,000, which is just slightly too much to qualify for tax credits where she lives. This year, she paid a $250 premium for a plan with no deductible. Next year, to keep same level of coverage, she needs to pay $450 — and she doesn’t think she can afford that.

So right now she’s facing a choice: Pay a lot more money, or scale back her level of coverage.

“I am still in panic mode,” Pieknik says. “I haven’t decided whether to switch to an ultra-risky plan and hope for the best.”

The Obama administration often describes unsubsidized enrollees like Pieknik as a relatively small part of the individual market. Health and Human Services Secretary Sylvia Mathews Burwell recently told reporters that in the marketplace, “85 percent of folks receive subsidies.”

This is true, but it also leaves out something important: that there are millions of people buying their own coverage outside of the marketplace. And none of them receive subsidies. So they don’t have any financial cushion to protect against the larger premium increases most observers expect to see in 2017.

“They are the red-haired stepchildren of American health reform,” says Kevin Coleman, head of research and data at HealthPocket. “They don’t have strong sympathy within the government and have typically been ignored.”

We don’t know exactly how many people buy unsubsidized coverage off the marketplaces — estimates range from about 7 million to 12 million — but we do know it’s a large group that, when open enrollment begins in a few years, is likely to face bigger premium increases than ever before.

Much of Clinton’s remarks centered on a very specific group of Americans: those who are uninsured and earn too much money to qualify for subsidized coverage — and who are exposed to double-digit premium increases.

“The people that are getting killed in this deal are small-business people and individuals who make just a little too much to get any of these subsidies,” Clinton remarked in Flint.

A bit of background is helpful here. The Affordable Care Act provides subsidies to purchase health insurance to people who earn less than 400 percent of the poverty line — $47,520 for an individual or $97,200 for a family of four.

These subsidies limit how much an individual has to pay for coverage. For example, someone earning $47,000 won’t have to spend more than 9.6 percent of her income on midlevel coverage. The government will kick in subsidies to cover the rest.

(The reason that Pieknik, who earns $42,000, does not qualify for subsidies is that a midlevel plan where she lives only costs 8.6 percent of her income. So the government considers her under the affordability threshold and doesn’t provide a subsidy. But committing 8.6 percent of income to premiums, as Pieknik has found, can still be a pretty big strain on a budget.)

There are many people who earn too much to qualify for subsidies, and they don’t have any sort of protection against high premiums.

This is becoming especially important this year, with premiums expected to rise, on average, by 9 percent — significantly higher than prior years. Last year, for example, the average increase was just 2 percent.

And many increases are much higher. If an insurance plan jacks up rates by 25 percent (the average in Connecticut this year) or 62 percent (Blue Cross Blue Shield’s approved increase in Tennessee) — as many are this year, after losing money on the marketplaces — then a person who doesn’t qualify for subsidies will have to pay that full increase.

We have really great data on who has health insurance through the marketplaces because those are government-run entities that keep track of each and every sign-up.

So the government knows, for example, that 8.5 million people bought coverage through the Healthcare.gov marketplace in 2016 — and 7.1 million of those people got a subsidy.

But finding data on people who sign up outside of the marketplace is actually pretty tough. These people don’t go through one central clearinghouse to buy plans. Instead, they might be going to a local insurance broker’s office or signing up through an individual insurance plan’s website.

So the best we have is a handful of estimates on how big this market is. The Obama administration thinks there are 6.9 million people buying coverage off the marketplace. It thinks 2.5 million of those people would be eligible for subsidies if they switched to the marketplace.

Charles Gaba of ACA Signups estimates it to be 9.1 million. And a survey of Blue Cross Blue Shield plans — which dominate the Obamacare marketplaces — shows that about half of the enrollees aren’t subsidized.

Among those on the marketplace, only 17 percent did not receive a subsidy in 2016. But when you include all these people estimated to be buying outside the marketplace, that figure jumps to 31 percent, according to a report from the consulting firm McKinsey.

The premiums off marketplace can be expensive, particularly for those who earn just a little too much to qualify for any subsidies. But expensive, some enrollees argue, is better than not having any coverage at all.

Rebecca Barson, a 39-year-old consultant in Washington, DC, says her unsubsidized premium is “probably my second biggest cost after housing.”

She pays $420 per month for her plan, and that’s a big line in her budget. And she’s a bit worried about how that rate might change next year.

But $420 doesn’t seem that expensive to Barson — because when she shopped for insurance before the health care law, in 2008, insurance plans wanted to charge her premiums over $1,000 due to a preexisting condition.

“It’s a concern, that my rate will be going up,” Barson says. “But at least I know it won’t be going up to $1,000.”

The subsidized Obamacare population is guaranteed affordable premiums. But that’s not the case in the unsubsidized market, which means the unsubsidized market creates winners and losers.

It’s true that there are more people buying coverage outside the marketplace than we usually acknowledge — and that their premiums are higher than the people in the subsidized markets. But whether that feels affordable can hinge a lot on what the marketplace looked like before Obamacare launched — and that will vary a lot from person to person.

For some, like Pieknik, it’s creating tough decisions. Pieknik doesn’t use much health care — she estimates that she goes to the doctor about three times a year or so — but she prefers buying the protection against a catastrophe.

This year, she might not get that option.

“It only takes one thing to happen to you, unless you have decent coverage, to go thousands of dollars in debt,” Pieknik says. “It’s hard to think how I would come up with that money, if my coverage weren’t as good and something did happen.”