A closer look at BCRA credits

by Bill Hammond |  | NY Torch

Insurance tax credits in the U.S. Senate GOP’s health plan would have a mixed effect on New Yorkers, reducing net premiums for some young, low-income consumers shopping in the non-group market, but raising costs for older ones.

Overall, the credits are less generous than those in the Affordable Care Act. They cut off at 350 percent of poverty rather than 400 percent, and they’re intended to purchase plans with higher deductibles and copayments.

While the ACA’s tax credits are based on income, and the House GOP’s are based on age, the Senate’s tax credits combine the two approaches.

Like the ACA, the Senate plan caps the net premium cost for low-income consumers as a percentage of income, a ceiling that increases with higher pay. Above 150 percent of the federal poverty level, the Senate’s cap would also increase with age. Older consumers would be expected to pay as much as 16.2 percent of their income for coverage, compared to a maximum of 9.5 percent under current law. Credit-eligible consumers under 29 would pay no more than 6.5 percent of income.

The higher costs for older consumers would reflect their higher medical costs and, in most states, their higher premiums. New York, however, is one of two states, along with Vermont, that have banned individual and small-group insurers from charging higher premiums based on age. The Senate’s Better Care Reconciliation Act would effectively override that policy for New Yorkers using the credits.

The charts below illustrate the impact of the proposed changes in the Senate and House health plans for various age and income groups. They do not attempt to project actual premiums. Instead, they start with a hypothetical premium of $5,000 per year for individual coverage, and show how different tax credits would affect net cost for different consumers. The charts do not factor in the possibility that changes to other parts of federal law, such as coverage regulations or taxation, would increase or decrease the hypothetical $5,000 premium.

The group of New Yorkers with the most to lose are enrollees in the Essential Plan, which is government-operated and costs no more than $20 a month for people up to 200 percent of the federal poverty level. Both the House and Senate plans would reduce available federal funding for the program, and the Cuomo administration has said it would be unlikely to continue. The alternative for most enrollees would using tax credits to buy commercial insurance. The Senate’s credits would offset most of the premium, especially for younger consumers, but net costs would still be substantially higher than the Essential Plan.

Among individuals with income of $30,150, or 250 percent of the poverty level, the impact would be mixed. Young consumers would pay less under the Senate plan than under current law, while older consumers would pay more and middle-aged consumers would be relatively unaffected.

Among individuals with income of $42,210, or 350 percent of the poverty level, young consumers would still see savings with the Senate plan, but middle-aged and older consumers would pay more. Above 350 percent of poverty, consumers would no longer be eligible for tax credits and would pay the full premium.

As mentioned above, the Senate plan would tie tax credits to less generous coverage – with minimum actuarial value of 58 percent instead of 70 percent under current law. That is expected to lower premiums – or at least slow their growth – but would also translate into substantially higher deductibles and copayments.

The Senate plan, like the House plan, would repeal Obamacare’s individual mandate, replacing it with a six-month waiting period to buy insurance for people who let their coverage lapse for more than 63 days in a year.

Analysts at the Congressional Budget Office project that the combined effect of changes in the Senate plan would both reduce the incentive for people to buy insurance and make it less affordable for many – resulting in a net drop in commercial coverage of 7 million over the next decade. The CBO projects that another 15 million would not have coverage due to cutbacks in Medicaid.