GOP health plan shifts benefits toward people with higher income

Coverage for tens of thousands in Wisconsin could be in jeopardy

Cynthia Haq remembers the surge of patients she saw when the Affordable Care Act first expanded health insurance to millions of Americans.

“Hundreds of patients were streaming into our clinics for the first time, some who hadn’t seen a doctor in 20 years,” said Haq, a doctor and professor at the University of Wisconsin School of Medicine and Public Health who works in Milwaukee.

She also recalls the days before the law was passed, when she’d have to call fellow doctors to plead with them to treat an uninsured patient with, say, a broken jaw.

Republicans’ current plan to replace Obamacare has her worried that those days may return.

“I’m nearly in a panic state about what’s going to happen to my patients,” Haq said.

Almost 200,000 people in Wisconsin gained insurance coverage when the ACA took effect, most of them with

very low or relatively low incomes — such as people making $14 an hour, or about $29,000 a year.

Many of them eventually stand to lose their health insurance under the Republican plan that was released Monday. And others who are older and who have relatively low incomes are likely to end up paying more for less coverage.

But the plan would benefit people with higher incomes who don’t receive health insurance through an employer and who haven’t been eligible for the subsidies available through the Affordable Care Act.

They account for an estimated 44% of the market in Wisconsin for people who buy health insurance on their own — about 147,000 people — based on research by the University of Wisconsin Population Health Institute. Many of them saw their premiums soar under the Affordable Care Act.

The Republican plan also would make changes that some insurance executives believe are needed to sustain the market for insurance sold directly to individuals and families.

Broadly, the Republican replacement plan — titled the American Health Care Act — would hurt people with low incomes or who are older while benefiting people who have higher incomes or who are younger, said Justin Sydnor, a professor of risk management and insurance at the University of Wisconsin-Madison.

“Those are quite clear effects,” he said. Here’s an example: A 40-year-old couple with two children and a household income of $150,000 would get tax credits totaling $10,000 under the Republican plan.

To put that in perspective, the lowest-cost plan available in Milwaukee for that family costs $11,640 a year — with deductibles that can top more than $13,000.

That family doesn’t get any tax credits under the Affordable Care Act.

It also doesn’t receive the tax breaks granted to people who get health insurance through an employer. The Republican replacement plan, spearheaded by House Speaker Paul Ryan, would lessen that inequity.

The proposed plan, though, would be far less generous for people who have low incomes or who are older — and most policy experts believe that millions of people are likely to lose their coverage. That has prompted the American Medical Association, the American Hospital Association and other medical groups to oppose the Republican replacement plan.

Parsing the winners and losers under the Republican plan gets complicated but hinges primarily on how tax credits are allocated.

The Obamacare way

The Affordable Care Act provides tax credits to low- and middle-income households and caps the percentage of their income that goes to pay for health insurance at 9.69%. People with very low incomes pay a lower percentage of their income for insurance and receive additional subsidies to offset deductibles and other out-of-pocket expenses.

People in low-wage jobs that don’t provide health insurance made up the largest share of the uninsured before the law. And two out of three people who bought plans on the marketplaces set up by Obamacare receive the additional subsidies.

“There were many people prior to the ACA who were working full time and yet could not afford health insurance and didn’t have it offered by their employer,” Sydnor said.

Also, people with incomes below the poverty threshold — $11,880 this year — are eligible for Medicaid in the 31 states that have expanded their programs under the law. Roughly 11 million Americans gained health insurance in those states. Wisconsin wasn’t among those states but still was able to cover an additional 144,000 adults because of changes in the law.

The GOP proposal

The Republican replacement plan changes all that.

It would provide flat tax credits tied to age, not income, up to much higher income thresholds. Starting in 2020, the credits would range from $2,000 a year up to age 29, and $4,000 for someone 60 or older.

Families could claim credits for up five people, up to $14,000 a year and up to an income of $290,000.

As under the Affordable Care Act, children under 26 could remain on their parents’ plan.

The full credit is available for incomes up to $75,000 for an individual and $150,000 for a couple, then phases out.

But the proposed plan would end additional subsidies available under the Affordable Care Act to people with very low incomes.

It also would gradually cut off the additional federal dollars that 31 states have used to expand their Medicaid programs and that cover 11 million people.

Other changes would lower the cost of insurance for people who are younger while raising it for those who are older by allowing health insurers to charge older people five times more than young people. That’s compared to the current cap of three times more under the Affordable Care Act.

“There is no scenario in which premiums won’t go up for older people who are sick,” said Colleen Grogan, a professor who specializes in health policy at the University of Chicago.

Appealing to youth

That change and others,

though, would enable health insurers to design health plans that appeal to people who are young and healthy.

One of the flaws in the Affordable Care Act is too few people who are young or healthy or both have bought plans sold on the marketplaces — in part because many of them consider the plans too costly even with the federal subsidies. Healthy people are needed to offset the cost of insuring people with pre-existing health conditions.

The additional flexibility that the Republican proposal gives to insurers to design new health plans is a step in the right direction, said Coreen DicusJohnson, president and chief executive of Network Health, which is owned by Froedtert Health and Ascension.

That flexibility would enable insurers to sell low-cost plans with high deductibles that could appeal to healthy people who need insurance only to protect themselves from serious illnesses or injuries.

The $2,000 tax credit, for instance, then could cover the entire annual premium for a high-deductible health plan for someone in his or her 20s.

The problem with the proposed plan, DicusJohnson said, is it eventually

eliminates the additional subsidies that offset deductibles and other costs for people with low incomes.

Another question is how much the Republican plan would cost, not to mention how it would be paid for.

The proposal repeals most of the taxes that fund the Affordable Care Act, reducing federal revenue by at least $600 billion over 10 years based on a preliminary, incomplete estimate by the Joint Committee on Taxation.

The Congressional Budget Office — the nonpartisan agency that analyzes proposed legislation — has yet to analyze the proposal.

“There’s enough uncertainty about what this bill will mean that we very much need to see the CBO score to know the full impact,” said Sydnor, the insurance professor at UWMadison.

The legislation, which has the backing of President Donald Trump, is facing opposition not only from Democrats but also from hard-line conservatives in the House as well as from moderate Republicans in the Senate.

“It reflects the fact that there are no easy fixes — there is no low-hanging fruit to be had — in health care policy,” Sydnor said.