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Comparing Two Iowa Counties on Health Insurance Tax Credits

Once again, another attempt is being made by the other major political party to fix what ails our national healthcare ‘system.’ But this newest attempt by House Republicans, the American Health Care Act (AHCA), has already been met with opposition by major stakeholders, such as the American Medical Association, American Hospital Association, the insurance industry, in addition to Democrats and uber-conservative Republicans.

Despite the flurry of headlines, summaries, analysis and opinions about what this bill does and does not do, the Congressional Budget Office (CBO) has scored that the cost of this bill would reduce the federal deficit by $337 billion through 2026, however, it would leave 14 million people without insurance in 2018 compared with the ACA.  The CBO just released its’ findings.

To ensure coverage, the Affordable Care Act (ACA) currently subsidizes insurance premiums based on age and income. The ACA also attempts to factor the local cost of insurance into its subsidy. In addition, for those making less than 250% of poverty, cost-sharing assistance is provided to lower the deductibles and copayments for those enrolled in eligible marketplaces. The AHCA, on the other hand, provides tax credits based on age only, and this phases out for individuals with incomes above $75,000.

For any healthcare reform plan to work, there must be a large incentive for young and healthy people to seek coverage to help equalize (or subsidize) the unhealthy population. This is largely known as Health Insurance 101 – mitigating adverse selection risks.

I took great interest in an interactive map (at the county-level) provided by the Kaiser Family Foundation that compares estimated premium tax credits consumers would receive under the ACA in 2020 compared to what they would receive under the AHCA released by House Republican leaders on March 6. The interactive map does not factor in the cost-sharing assistance offered through the ACA, only the premium subsidy (ACA) and tax credits (AHCA).

I wanted to learn just how different subsidies and tax credits were between the ACA and AHCA, based on age and income, comparing a metropolitan county (Polk) to a rural county that I grew up (Appanoose). The results are quite staggering.

As a 27-year-old earning $20,000 and living in Polk county in 2020, the ACA is estimated to provide a $2,360 subsidy while the AHCA would provide a $2,000 tax credit. Living at this same age (and income) in Appanoose county, the ACA would provide an even greater subsidy of $4,440 vs. $2,000 (AHCA). At this younger age, and presumably healthy, this individual would have a greater incentive to seek insurance coverage through the marketplace under the ACA compared to the new version that would replace it. We don’t know if the replacement plan will generate lower-premium health plans for the public to purchase – this is pure speculation at this point.

Below are summaries of how people compare based on age, income and location (Polk and Appanoose counties). The subsidies and tax credits in red indicate that this amount is less than the opposing plan at that same age (ACA or AHCA). Generally speaking, the comparisons suggest that older people with lower-income (and live in higher-premium areas) receive larger tax credits under the ACA than they would under the AHCA replacement plan. This first chart is for those who earn $20,000, $30,000 and $40,000 annually.

This next chart compares people who earn $50,000, $75,000 and $100,000.

As I have written numerous times in the past, this second attempt to fix healthcare will be meaningless unless we focus on the true drivers of cost, which includes waste, lack of transparency and the exceedingly poor health of our population.

With that said, what are we really trying to solve?

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  1. Andrew Williams says:

    Thank you for helping clarify the complexities of both plans. Of, course your closing thoughts are the real deal.

    • David Lind says:

      Thank you, Andrew. There are many moving parts to this Act, which makes it difficult to summarize in a very brief blog.

  2. Anne Kinzel says:

    What a devastating indictment of the replacement plan. Low subsidies that reduce with age. If this is trying to fix a problem, well enough said. What this plan does is drive older (and more expensive covered lives) towards uninsurance. Presumably if enough of them went away (and died quietly, if/when they needed care) then the cost of coverage just might go down.

    Any attempt at fair, universal coverage without a mandate is an adolescent fantasy.

    • Sharon Johnson says:

      No one says it out loud, but remember the Big Tobacco sort-out? There was actual documentation about the benefits of decreasing population size by death from . . . fill in the blanks with your own choice of words. Your comments are insightful. I am neither an expert, nor as well read as David and many others, but there’s one thing I can never quite figure out. How beneficial are income tax credits for low income people who can’t afford to buy insurance?

      • David Lind says:

        Sharon, your question is VERY intuitive regarding income tax credits for those unable to pay. This simple question too often gets swept under the rug without much forethought about the consequences.
        Thank you for sharing your comments.

      • Anne Kinzel says:

        Sharon: David is right, youare asking what is the most important question. The tax credits, even refundable, carry greater weight with people who have more to spend. THe other issue is that businesses will tailor their offering to meet the cuts as they will want to continue selling insurance.

        With such small tax credits and the imperative of not excluding preexisting conditions, the actual benefit value will have to be quite low and will possibly veer into catastrophic coverage only. This is a diasaster looming and we will continue to fall down international health rankings.

  3. Kris Jensen says:

    David, Another great post. It will be interesting to see how the plan gets priced today. Perhaps this will open a few eyes to the speed that we are moving to replace and the real impact to people.

    • David Lind says:

      Thanks, Kris. The CBO pricing will be quite revealing, as you say. At what point will we get a much-needed bipartisan consensus to engineer true reform?

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