The good news: Three-quarters of people who were eligible for the most generous financial subsidies on the federal health insurance exchange this year signed up for coverage, according to a new analysis by Avalere Health. The puzzler: Enrollment dropped off substantially for people with only slightly higher incomes who would also have qualified for significant subsidies.

Stiffer penalties for not having coverage and redoubled efforts to reach out and educate people about the health law and their obligations may be keys to increasing enrollment for people in these income groups, says Caroline Pearson, a senior vice president at Avalere Health.

Subsidies alone aren’t enough, she says.

“The carrots as a standalone don’t work,” Pearson says, referring to subsidies that are available to make coverage more affordable for people with incomes between 100 and 400 percent of the federal poverty level. “You have to make people aware of the mandate, and as the mandate penalties increase that will strengthen the effect.”

Unless they qualify for an exemption, most people are required by the law to have health insurance or face fines. The penalty for not having health insurance in 2014 was the greater of $95 or 1 percent of annual income. This year, the penalty increases to $325 or 2 percent of income, and in 2016 rises to $695 or 2.5 percent of income.

Avalere based its analysis on the number of people who in 2013 would have been eligible to enroll on the federal marketplace that serves 37 states because they didn’t have group coverage or were uninsured and the number that bought a marketplace plan during the 2015 open enrollment period that ended in February.

While 76 percent of eligible people with incomes between 100 and 150 percent of the federal poverty level ($11,670 to $17,505 for an individual) enrolled in plans in 2014, only 41 percent of those whose income was between 151 and 200 percent of poverty ($17,622 to $23,340) signed up. In the next income bracket, eligible individuals with incomes between 201 and 250 percent of poverty ($23,457 to $29,175), just 30 percent enrolled coverage on the federal marketplace, the analysis found.

Only 2 percent of eligible people whose incomes were 400 percent of the poverty level ($46,680) or higher enrolled on the exchange, the Avalere analysis found. Since they were ineligible for subsidies, those individuals had little motivation to buy a plan through the exchange and may have bought coverage outside it.

Many of those with more modest incomes could have received significant subsidies on the exchange, including premium tax credits and cost sharing subsidies to reduce out-of-pocket costs such as deductibles and copayments.

For people with incomes between 151 and 200 percent of poverty, and to a lesser extent those in the next higher income bracket, “the financial incentive is still quite high and the benefit is high,” says Pearson. “That’s where education seems important.”

Please contact Kaiser Health News to send comments or ideas for future topics for the Insuring Your Health column.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Catherine Jarett ran into a nasty surprise after she sent a form to Medi-Cal on behalf of her clients. An estate attorney, Jarett was hired by the sons of an elderly Vallejo woman who had died. For more than 20 years, the woman had been enrolled in Medi-Cal, as the state’s Medicaid insurance program for the poor is known.

After Jarett filed the form with Medi-Cal — a death notice as required — the state sent a bill for a hefty $76,349. Jarett was stunned. It was for the cost of health, vision and dental insurance, she said.

The bill was part of Medi-Cal’s “estate recovery program.” Under a federal law not widely known to consumers, states can seize assets of Medicaid beneficiaries after they die. “I was never aware of this wrinkle that they could recover for health insurance,” Jarett said.

Jarett’s clients did not want to speak to reporters, but Jarett said they insisted their mother had not been to the doctor in years and had even died at home. But Jarett said the charges included a breakdown by month of the state’s payments to a managed care plan as part of Medi-Cal.

While a 1993 federal law mandates that states recover assets for nursing home care, the law makes it optional that states recover for medical services — doctor visits, hospital stays and the like — for people 55 and over. Advocates say just 10 states do this optional recovery, but it isn’t clear that the other states pursue the assets as aggressively as California.

“It’s an awful system, and it needs to be changed. It absolutely needs to be changed,” said Pat McGinnis, executive director of California Advocates for Nursing Home Reform. Her group is sponsoring a bill, SB33, introduced by state Sen. Ed Hernandez (D-West Covina), that would abolish this optional recovery. The bill was heard by the Senate Health Committee on Wednesday and passed out of committee by a vote of 8-0. It will go before the Senate Appropriations committee next.

Last year, a similar bill sailed through the legislature, but was ultimately vetoed by Gov. Jerry Brown. Still, in a statement last September when he vetoed the bill, Brown left an opening. He said estate protection might be a “reasonable policy goal,” but that the cost “needs to be considered alongside other worthwhile policy changes.”

Figuring out that cost is a challenge. In 2013 and 2014, the state recovered $61 million in 3,900 cases, said Carol Sloan with the Department of Health Care Services. But the state does not break down how much of that $61 million is for nursing home care and how much of it is for medical services.

For perspective, $17.8 billion in state general fund dollars went to Medi-Cal last year. The total budget for Medi-Cal is significantly more than that after adding in federal dollars and various taxes— $85.7 billion.

‘Leery’ of Medi-Cal

Like the attorney Jarett, Anne-Louise Vernon, 60, of Campbell, had never heard of estate recovery. She had been “so looking forward,” she says, to signing up for insurance under the Affordable Care Act. Her income was too low for her to qualify for subsidies to purchase insurance on the Covered California marketplace. Instead, she qualified for Medi-Cal.

Vernon said she was “leery,” and asked if there were strings attached. “I was told, ‘No, no, it’s completely free.’” She said it was some time later, when she was looking around online, that she found a reference on an FAQ page about assets being seized. She was furious.

“So you’re breaking the law if you don’t have health insurance,” Vernon said, referring to Obamacare’s “individual mandate” that everyone have health insurance. She said she felt forced into Medi-Cal: “They don’t tell people it’s a loan.”

Vernon held onto her home years ago after a divorce, but said she was “involuntarily retired” and has been living on savings. She knows she could shelter her home but doesn’t want to take that step. “I’m 60! I’m not going to sign my house over to my kids at this age.”

For other people, attorneys’ fees to take the legal steps to shelter a property are a big issue. “People who end up on Medi-Cal are poor people,” said McGinnis. “They’re the ones that usually cannot afford to pay an attorney $300 to $400 an hour.”

‘Collection Agency for the Feds’

Estate recovery has become a much bigger issue since the rollout of Obamacare started more than a year ago. Under the expansion of Medicaid, people earning up to 138 percent of the federal poverty level are eligible (in states like California that are participating in the expansion). But for those people, 100 percent of the cost of their health coverage is borne by the federal government for the first three years, drifting down to 90 percent after that, and any recovered money would be returned to the federal government.

“What are we? A collection agency for the feds?” asked McGinnis, who also says CANHR is hearing from consumers who will disenroll from Medi-Cal if the policy has not changed. Other advocates believe the policy is a barrier to enrollment for some people.

For now, Vernon is staying on Medi-Cal. Like 80 percent of Medi-Cal beneficiaries in California, she is enrolled in a managed care plan. When she wanted to know what her Medi-Cal coverage cost, she spent “hours and hours on the phone” calling both her managed care plan and the state, she says, and got the runaround from both of them. No one could tell her what her coverage cost.

Finally, an advocate sent her a link to the exact page on a state website where she could find out how to file a request for information — with a $25 fee. She finally got an answer: $578.71 a month. If she stays on Medi-Cal for another five years until she’s 65, when she becomes eligible for Medicare, the state will have paid almost $35,000 for her managed care premium. After she dies, the state could bill her estate for that amount — or more, if she continues on Medi-Cal.

Ironically, if Vernon, and others like her, earned just a bit more money, they would qualify for heavily subsidized private insurance through the Covered California exchange. The state estimates that the “per member per month” premium for those newly eligible for Medi-Cal who are 55 and older (remember, the state can’t collect on people under 55) is $620.98, or nearly $75,000 over 10 years.

Vernon plugged her age and ZIP code into the Covered California insurance calculator, but increased her income to $17,000 to see what would happen.

She found she could get a plan for as little as $31 a month, “estate recovery free,” she noted. These plans come with a $2,250 out-of-pocket limit, but even if a 55-year-old maxed that out every year, the 10-year total of deductible plus premium is $26,220 — about $50,000 less than what would be accrued on Medi-Cal, with no estate recovery.

This story is part of a reporting partnership that includes KQED, NPR and Kaiser Health News.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Got a high-deductible health plan? The kind that doesn’t pay most medical bills until they exceed several thousand dollars? You’re a foot soldier who’s been drafted in the war against high health costs.

Companies that switch workers into high-deductible plans can reap enormous savings, consultants will tell you — and not just by making employees pay more. Total costs paid by everybody — employer, employee and insurance company — tend to fall in the first year or rise more slowly when consumers have more at stake at the health-care checkout counter whether or not they’re making medically wise choices.

Consumers with high deductibles sometimes skip procedures, think harder about getting treatment and shop for lower prices when they do seek care.

What nobody knows is whether such plans, also sold to individuals and families through the health law’s online exchanges, will backfire. If people choose not to have important preventive care and end up needing an expensive hospital stay years later as a result, everybody is worse off.

A new study delivers cautiously optimistic results for employers and policymakers, if not for consumers paying a higher share of their own health care costs.

Researchers led by Amelia Haviland at Carnegie Mellon University found that overall savings at companies introducing high-deductible plans lasted for up to three years afterwards. If there were any cost-related time bombs caused by forgone care, at least they didn’t blow up by then.

“Three years out there consistently seems to be a reduction in total health care spending” at employers offering high-deductible plans, Haviland said in an interview. Although the study says nothing about what might happen after that, “this was interesting to us that it persists for this amount of time.”

The savings were substantial: 5 percent on average for employers offering high-deductible plans compared with results at companies that didn’t offer them. And that was for the whole company, whether or not all workers took the high-deductible option.

The size of the study was impressive; it covered 13 million employees and dependents at 54 big companies. All savings were from reduced spending on pharmaceuticals and doctor visits and other outpatient care. There was no sign of what often happens when high-risk patients miss preventive care: spikes in emergency-room visits and hospital admissions.

The suits in human resources call this kind of coverage a “consumer-directed” health plan. It sounds less scary than the old name for coverage with huge deductibles: catastrophic health insurance.

But having consumers direct their own care also requires making sure they know enough to make smart choices like getting vaccines, but skipping dubious procedures like an expensive MRI scan at the first sign of back pain.

Not all employers are doing a terrific job. Most high-deductible plan members surveyed in a recent California study had no idea that preventive screenings, office visits and other important care required little or no out-of-pocket payment. One in five said they had avoided preventive care because of the cost.

“This evidence of persistent reductions in spending places even greater importance on developing evidence on how they are achieved,” Kate Bundorf, a Stanford health economist not involved in the study, said of consumer-directed plans. “Are consumers foregoing preventive care?  Are they less adherent to [effective] medicine? Or are they reducing their use of low-value office visits and corresponding drugs or substituting to cheaper yet similarly effective prescribed drugs?”

Employers and consultants are trying to educate people about avoiding needless procedures and finding quality caregivers at better prices.

That might explain why the companies offering high-deductible plans saw such significant savings even though not all workers signed up, Haviland said. Even employees with traditional, lower-deductible plans may be using the shopping tools.

The study doesn’t close the book on consumer-directed plans.

“What happens five years or ten years down the line when people develop more consequences of reducing high-value, necessary care?” she asked. Nobody knows.

And the study doesn’t address a side effect of high-deductibles that doctors can’t treat: pocketbook trauma. Consumer-directed plans, often paired with tax-favored health savings accounts, can require families to pay $5,000 or more per year in out-of-pocket costs.

Three people out of five with low incomes and half of those with moderate incomes told the Commonwealth Fund last year their deductibles are hard to afford. Many households simply lack the resources to make out-of-pocket health costs, shows a recent study by the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the Foundation.)

As in all battles, the front-line infantry often makes the biggest sacrifice.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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