Under pressure to repeal and replace the Affordable Care Act (ACA), Republican leaders released a new plan titled the American Health Care Act (AHCA), which is being called Trumpcare. A Congressional Budget Office report says that although the new plan will reduce the federal deficit by $337 billion over the next 10 years, it could leave 24 million more Americans without insurance by 2026 compared to the uninsured rate under Obamacare. In addition, the CBO report claimed that health insurance rates could rise significantly over the next two years before dropping substantially for younger, healthier enrollees.
Rising Insurance Premiums
According to the Congressional Budget Office, healthcare premiums could rise between 15 and 20 percent at the outset of Trumpcare’s passage. This is contrary to promises made by President Trump and other Republicans during their campaigns that their plan would lower premiums, which many Americans complain are already too high. Uncertainty in the insurance market is a major contributing factor to skyrocketing premiums. Insurance companies are setting rates now for next year. Because the future of the healthcare law is unclear, many are raising rates in anticipation of the worst outcome. In a meeting with small business owners recently, President Trump said that it was possible that rates will go up for the next year or two, but he expected them to drop eventually.
Lower Rates for Younger Americans
It is true that the Congressional Budget Office report indicated that insurance rates would eventually begin to go down after the first year or two. In fact, they predict that premiums will be about 10 percent lower than rates under Obamacare by 2026. However, the premiums that will go down are for younger, healthier individuals. The report predicted that older Americans may still be paying significantly higher premiums even when premiums for younger Americans drop, something most older Americans cannot afford.
According to the CBO, a 21-year old with an income of $26,500 per year is paying $1,700 in premiums under the ACA. Under Trumpcare, the same person would pay $1,450 in premiums each year. If that same person is 64 and making the same annual salary, premiums would be the same under Obamacare but jump to $14,600 under Trumpcare, an increase of 750 percent. Trumpcare’s age-based tax credits do little to offset these costs even after Republicans released an amended proposal on March 20 that would grant additional subsidies for people aged 50 to 64.
Age-Based Tax Credits
Under Obamacare, income-based tax credits were designed to give more money to people with lower incomes. Instead, the Republican plan provides tax credits to anyone who earns less than $75,000 a year with adjustments, provided that that person also doesn’t qualify for job-based coverage or government programs like Medicaid. The new bill would also eliminate protections designed to keep older people from outrageously high premiums. Obamacare allows insurance companies to charge no more than three times more in premiums for older Americans than for younger people. Under the Republican plan, that limit increases to five times as much, effectively allowing an increase of 66 percent in premium costs. Republicans argue that this will eliminate the risk of healthy people leaving the insurance market once the individual mandate is eliminated.
Elimination of Mandates
Of the projected millions of people who will lose coverage if Trumpcare gets passed, about 6 million are those who will drop health insurance once there’s no individual mandate forcing them to sign up. The individual mandate required all Americans to purchase health insurance or face an IRS tax penalty. The Congressional Budget Office reported that without the mandate, many healthy people will simply choose not to have health insurance.
Without enough healthy people paying premiums, it will be much more difficult for insurance companies to cover the costs of sick and older people, causing premiums to rise. Republicans believe that charging young people lower premiums will encourage them to remain insured, bringing down the cost of insurance. The CBO agreed with that assessment, claiming that lower premiums would encourage younger, healthier people to remain in the marketplace, but that it would be at the cost of older Americans who can least afford high premiums.
Changes to Insurance Protection
Another proposal from Republicans includes changing what has to be covered under a major medical plan. Currently, the ACA has strict requirements regarding what health insurance policies must cover, including things like outpatient care, emergency room treatment, inpatient care, maternity and newborn care, as well as mental health or substance abuse treatment. It must also cover prescription drugs, devices, lab tests, pediatric care and some preventive services. Republicans have suggested that Americans be permitted to pick and choose which services they want covered. For example, older Americans would not need coverage for maternity or newborn care. Allowing Americans to choose coverage could also reduce the cost of premiums since plans would be less robust than they are now.
Selling Insurance Across State Lines
During the election, then-candidate Trump suggested allowing insurance companies to sell insurance across state lines to lower premiums. As it stands, states can sell across their borders if they come to an agreement with participating states, but no state currently participates in this option. Republicans support allowing insurance companies to choose the states where they want to sell their products, claiming that this would promote regulatory competition and provide an incentive for insurers to reduce premiums. Insurance companies could tailor policies to consumers rather than providing a list of benefits that may not be desired by a large segment of the population.
It remains to be seen how premiums will be affected should the ACA be repealed and the AHCA take its place. Analysts indicate that premiums will rise over the next few years, although they could drop again after an initial increase. However, many also say that the premiums will remain high for older people even after initial passage of the law.