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Wednesday, May 31, 2017

The Toll of Trumpcare

By Tim Abel 

Pic of the MomentIf you are a low-income earner and over 64 years of age, just be warned: 
You will be paying more than half of your annual income on health insurance in the individual market under the Republican Party’s new health care bill set to replace Obamacare, the American Health Care Act.

The Congressional Budget Office found that the revised bill does, in fact, bring down overall premiums in the individual market at a rate of between four to twenty percent by 2026 when compared to the current law. 

The variation in percentage differs state-by-state, depending on whether the state accepts regulatory waivers under the American Health Care Act, which would allow insurers to offer much skimpier health plans at lower premiums. 

What this means is that states that allow the waivers would have far lower premiums, but the individual would be covered for a lot less, as well, whereas states that don’t have the waivers would have a higher rate, but more comprehensive coverage.



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Premiums would also differ greatly depending on age and income and it looks pretty grim for individuals in an older age bracket who are on a fixed income.

Using an annual income of $26,500 as an example, an individual aged 21 years old may have an advantage with the new scheme. Currently, under the Affordable Care Act, that individual pays an average of $1,700 per year on insurance premiums. 

This amount would drop to just $1,250 under the American Health Care Act if their state accepts regulatory waivers, although they would be covered for less. 

In a state that doesn’t accept waivers, the average premiums for a 21-year-old would actually increase by around $50 per annum to about $1,750 per year.

However, a 64-year-old on an annual income of $26,500 is currently still spending that average amount of $1,700 per annum on premiums under Obamacare, but things look pretty bleak under the American Health Care Act. 

Under the new Republican bill, roughly 60 percent of their income will go toward insurance premiums if they live in a state that doesn’t accept waivers, forking out around $16,500 a year. It’s still not a whole lot better in other states, where they would be paying $13,600, still more than half of their wages.

If, however, that 64-year-old is making at least $68,200 per year, they look to be better off in certain situations under the Republican Party’s new scheme, one whose tax credit is based on age, not income. 

An annual income of $68,200 is too high to receive a tax credit under Obamacare so the individual would be expected to pay $15,300 in insurance premiums, whereas under Trump’s American Health Care Act, their premium would drop to $13,600 in a state that accepts regulatory waivers, but would actually increase to $16,100 in a state that doesn't.

The reason for this is not just the age-factor, but also because the tax credit under the American Health Care Act starts phasing out at $75,000. Individuals on a yearly income of $75,000 or more will receive fewer, if any, subsidies under the new Republican bill and can expect to pay more in premiums than they would under the Affordable Care Act.

This is all achieved in a variety of ways. First, Obamacare’s income-based tax credits, which gave more to low-income earners, will be abolished and replaced with a tax-credit based on age for those with an annual salary below $75,000, one that gives older people slightly more. 

Also, the American Health Care Act adjusts a rule that Obamacare had in place to protect older people from higher premiums. 

This rule takes into consideration that the elderly are generally in worse health than the young so insurers are only allowed to charge an older person about three times what they would charge a younger person. 

Under the new Republican bill, insurers would be able to charge an older person five times what they would charge a younger person, 66 percent more than they could under Obamacare.
As a result, the Republican bill will, in theory, bring insurance premiums down in general, but at the expense of older and poorer Americans. Nobody knew health care would be so complicated.