(WASHINGTON) — After weeks of wrangling within their ranks, House Republicans have released a proposal to replace the Affordable Care Act.
Called the American Health Care Act, the proposed bill would keep certain popular provisions, like allowing children to remain on parents’ insurance until age 26 and not denying coverage to people with pre-existing conditions. But, it also proposes sweeping changes to health insurance programs that will affect Americans at many income levels and ages.
More than 20 million additional people have health insurance, under the ACA rules.
Here are the top ways the new bill dubbed “Trumpcare” will likely affect consumers.
Major Change in Tax Credits
Under the new bill, qualifications for tax credits to help pay for health insurance will change significantly.
Both the Affordable Care Act and the American Health Care Act include tax credits to provide support for individuals to buy health insurance. The ACA takes into account family income, cost of insurance and age. But the new bill mainly focuses on age and household income; credits phase out at income levels over $75,000 or $150,000 for married filing jointly, according to the Kaiser Family Foundation.
Annual household tax credits of between $2,000 and $14,000, depending on the age of each household member and the total income, will be available to those who purchase health coverage under the proposed bill.
People who are older, lower-income and live in areas with high insurance premiums likely receive fewer tax credits under the new bill than they would have under the ACA. Those who are younger, with higher income, and live in areas with lower insurance premiums will likely receive more government assistance than they currently do, according to the Kaiser Family Foundation.
Christine Eibner, an economist with the RAND Corporation, said that the current plan will mean the same credit will go to a much wider array of people.
“A single person at six times the poverty level would be eligible for the same tax credits as someone at the poverty level,” Eibner said.
Additionally she said up to $14,000 in tax credits may seem like a large amount to cover health insurance, but many people with low incomes will not be eligible for that high level of tax credits.
An older person making around 150 percent of the poverty level or $18,000 a year may be more likely to qualify for $4,000 in tax credits.
“It’s possible to be facing a $12,000 premium in total,” for an older person, Eibner said. “I don’t see how you could afford that.”
Medicaid Expansion Funds to Stop After 2020
Under the new bill, Medicaid expansion offered by the states will continue to receive extra federal funds until 2020. States that currently offer Medicaid to people below 138 percent of the poverty level will no longer receive extra funds for new expansion candidates after 2020, Kaiser Health News says. But they would be able to receive funds for those already enrolled.
States would determine their own rules for expanding Medicaid to new people, or not, after 2020.
Additionally, after 2020 state Medicaid plans will no longer be required to provide “essential health benefits” including emergency services, pregnancy and newborn care, prescription drugs and pediatric services.
New Insurance Premiums for Older Adults vs. Younger Adults
The new plan could mean older adults will face higher insurance costs, while younger adults may see premiums decrease with the change in how insurance companies can charge for comparable plans.
Under the ACA, insurance companies could charge up to three times the amount for an older person’s insurance plan compared to a younger person, or a 3-to-1 ratio. The new plan would allow health insurers to charge five times the amount, which could greatly increase the premiums older people would have pay for comparable plans. States would be able to set their own age ratios.
Eibner said that Americans who are in the oldest age bracket before being eligible for Medicare could pay the most for coverage.
“They will face higher premiums than they currently do and the younger people will face [smaller] premiums,” Eibner said.
Penalty for Break in Coverage
The new plan will no longer include the “individual mandate” that imposed a tax penalty on people who did not have health insurance.
Under the ACA those who did not have health insurance in 2015 and did not meet the criteria for forgiveness, were required to pay $695 in a tax penalty or 2.5 percent of their income on federal taxes.
Under the American Health Care Act that penalty would be abolished. However, those who choose to let their insurance coverage lapse for any reason would potentially face a 30 percent surcharge on their insurance for one year.
Eibner said that it’s possible that some young people will not view insurance as a necessity and be more willing to bet that they can afford the 30 percent surcharge on health insurance down the line.
“It doesn’t seem that punitive,” said Eibner. “You’re still guaranteed that you can get health insurance … for some people that might be affordable and you might end up with employer coverage in the interim.”
David Cutler, Professor of Applied Economics at Harvard University and formerly of the National Institutes of Health and the National Academy of Sciences, said without giving more incentive to buy insurance he expects to see a decline in the number of people purchasing it.
“The subsidies in the affordable care were more generous and they [still] did not induce as many people to take up coverage as was thought,” Cutler told ABC News. “If you make the policies less generous and subsidies less generous, you have got to have a negative effect. There’s just no way around it; can’t make the thing be worse and hope more people take it up.”
Expanded Health Savings Account
While under the ACA families could contribute a maximum of $2,500 in pre-tax dollars to a healthcare savings account (HSA) to pay for medical care, the new bill proposes allowing families nearly double that amount in annual HSA contributions beginning in 2018.
Additionally, the rules around what kind of medical costs can be paid for through HSAs would be expanded.
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