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Health exchanges attracting low-income participants

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Participation in public health insurance exchanges is heavily skewed in favor of those with very low incomes, according to a new analysis.

While 76% of eligible individuals with incomes between 100% and 150% of the federal poverty level enrolled in plans offered in the federal health insurance exchange, just 20% of those with incomes between 251% and 300% of the federal level opted for coverage, according to analysis by Avalere Health L.L.C., a Washington-based consultant.

The federal exchange offers coverage in the 37 states that declined to set up their own exchanges, which were authorized by the health care reform law.

The reason for the decline in the exchange participation rate as individual income rises is basic, says Avalere: The amount of the federal premium subsidy provided to buy exchange coverage declines with higher income.

For example, a 25-year-old living in the District of Columbia suburb of Arlington, Virginia, who earns $12,000 a year and opts for single coverage would be eligible for a premium subsidy of just over $200 a month. However, if the same individual earned $25,000 a year, the premium subsidy would be only about $91 a month, according to a plan premium calculator available on the HealthCare.gov federal exchange website.

“Exchanges will need to attract higher-income individuals to ensure enrollment continues to grow over time,” Caroline Pearson, an Avalere senior vice president, said in a statement.

With premium subsidies apparently not sufficient to boost participation significantly, a “greater emphasis on individual mandate penalties may be needed to increase enrollment among low- and middle-income individuals,” Ms. Pearson said.

This year, the penalty for not having coverage is $325 or 2% of taxable income, whichever is greater.