House Republicans on Tuesday released their long-awaited plan to replace the Affordable Care Act. Many questions about its implementation remain — chiefly how much it would cost and how many people it would cover — but the legislation does include some specifics about federal funds to help individuals buy health insurance.
Both the ACA and the new Republican proposal, called the American Health Care Act, provide consumers with tax credits to buy a health plan. But each calculates the assistance amounts differently.
According to one early estimate by the Kaiser Family Foundation, that means older, poorer residents would generally receive less assistance from the federal government under the GOP plan than under the ACA. Conversely, younger and wealthier people would get more under the GOP proposal.
Before we delve into how this would work, here’s a quick refresher on who’s directly affected. We’re talking about people who buy their own health insurance, rather than get coverage through work or government programs such as Medicaid and Medicare. Known as the “individual market,” this includes the self-employed, early retirees and low-wage workers.
In Maine, that group made up of about 77,000 people who planned to buy a policy through the ACA marketplace in 2017, plus another roughly 10,000 who shopped outside the marketplace. (That’s a lot of people, but by comparison, 10 times more Mainers get their insurance through work.)
The Republican plan bases tax credits on how old you are, not how much you make.
Under the ACA, about 85 percent of Mainers who signed up for coverage are eligible for tax credits to help them afford their monthly premiums. On average, the credits lower their premiums by $347 a month. It’s fair to say that many of those people couldn’t have afforded coverage without the financial leg up.
The ACA primarily takes into account a family or individual’s income in determining the size of their tax credit, though it also reflects their age and the local cost of health insurance. It’s based on a sliding scale, so people earning less get more, while the richer get a lower credit.
Those with incomes ranging from 100 percent to 400 percent of the federal poverty level ($11,880 to $47,520 for a single individual in 2017) are eligible. If you’re outside that range, you get nothing under the ACA, no matter your age.
The new GOP proposal, however, is based almost entirely on age. Everyone who makes less than $75,000 a year, or $150,000 for couples filing taxes jointly, would get the same amount of federal assistance:
— $2,000 for people under 30
— $2,500 for those between 30 and 40
— $3,000 for those between 40 and 50
— $3,500 for those between 50 and 60
— $4,000 for those over 60
People above that income level would see their credits phased out.
At first glance, this looks like older Mainers would benefit the most. But the GOP plan includes another provision that some experts say would far offset the tax credit advantage.
Republicans want to allow insurers to charge older Americans more.
Older people are generally sicker and therefore cost insurers more money to cover. But the ACA allows insurers to charge older enrollees no more than three times as much as a younger person.
Under the Republican proposal, insurers would be permitted to charge them five times more.
In a relatively old state such as Maine, that could mean much higher premiums for many residents, though lower monthly costs for younger ones.
Without the ACA’s credits that factor in income, older Mainers who are also poorer would lose out even more.
A 60-year-old Maine resident who makes $30,000 a year would invariably get less of a federal tax credit under the GOP plan compared to the ACA, according to the Kaiser estimate. In Penobscot County, for instance, their credit would drop from $9,730 to $4,000 under the Republican proposal.
The Kaiser comparison is based on 2020 figures, when the tax credits would kick in under their plan.
That 60-year-old would have to earn at least $75,000 a year to be better off under the GOP proposal.
Compare that to a 40-year-old making $50,000, about the median household income in Maine. That person would get much more assistance under the GOP plan, Kaiser found. At that income level, the cost of health insurance is still often a burden, so the Republicans’ plan might prove attractive.