As Republicans in Washington, D.C. work to repeal the Affordable Care Act and replace it with their proposed alternative, the American Health Care Act, New York policymakers are working to understand how the bill will impact the state’s health insurance market if it becomes law.
According to analysis from the New York Department of Health, over one million New Yorkers would face a “significant loss of health care” under the Republican plan. The department also found that the plan would shift $2.4 billion in costs to hospitals and state and local governments each year, beginning in 2020, and $4.2 billion over the next four years. Nationwide, the Congressional Budget Office projects that the bill would increase the number of uninsured Americans by 24 million by 2026, but would cut federal deficits by $336 billion over the same period.
“In the end, people who will still have insurance will fall into two groups under this plan: older Americans and lower-income people who will pay more for coverage or lose it altogether, and higher-income people who will pay less,” Governor Andrew Cuomo said in a press release announcing the Department of Health’s findings.
Bill Hammond, director of health policy at the Empire Center, said that one of the largest groups that stands to lose coverage consists of low-income New Yorkers covered under the state’s Essential Plan. The Department of Health found that under the American Health Care Act the state would be forced to eliminate the Essential Plan, which provides subsidized insurance for low-income New Yorkers who do not qualify for Medicaid and is financed mostly with federal money. Funding for the $4 billion program would be cut under the Republican replacement bill. As of January 2016, about 380,000 New Yorkers were enrolled in the Essential Plan.
The state’s online health care marketplace would likely remain in place under the American Health Care Act, but the tax credits available to individuals purchasing insurance through the state exchange would be restructured. The Republican plan grants individuals tax credits based on age rather than income, meaning that many New Yorkers would face significant changes in their out-of-pocket premium costs. The available tax credits increase with age, from $2,000 for those under 30 to $4,000 for those over 60.
Analysis performed by the Kaiser Family Foundation provides an approximate picture of the changes in subsidies Manhattan residents would face under the Republican proposal. For example, a 27-year-old earning $30,000 per year living in Manhattan would see her health care subsidy cut by about half, from $3,970 per year under the Affordable Care Act to $2,000 per year under House Republicans’ plan.
Older Manhattanites would fare better than their younger neighbors under the Republican plan, according to the Kaiser analysis. The subsidies available to 60-year-olds earning $30,000 per year would remain virtually unchanged, while 60-year-olds earning more than $40,000 would see their subsidies increase — in some cases, drastically. A 60-year-old with an income of $75,000 receives no subsidy under the Affordable Care Act, but would be the recipient of a new $4,000 tax credit courtesy of the House plan.
“For people who are very low-income and young, that’s going to be a lot less than the tax credits they have been getting,” Hammond said. “For people who are a little higher-income and a little older, they might actually come out ahead.”
The main demographic that stands to benefit from the American Health Care Act, Hammond said, consists of people purchasing insurance through state marketplaces who do not qualify for an income-based tax credit under the current system but would qualify for a new age-based credit under the Republican proposal. Individuals earning above 400 percent of the federal poverty level — about $48,000 per year — are currently ineligible for tax credits under the Affordable Care Act, but the Republican plan offers full subsidies to those earning up to $75,000. “It’s not a huge group,” Hammond said, noting that it would largely be made up of small-business owners and self-employed individuals. “Most people who are making that kind of money have a job with benefits, so they’re not affected.”
Some aspects of the New York’s current health care system stand at odds with the Republican proposal.
Under the American Health Care Act, federal tax credits cannot be used to purchase insurance policies that cover abortion, but in New York state most health care plans are required to cover abortions. The discrepancy could make it difficult for New Yorkers to claim federal tax credits, absent some adjustment from the state. As a workaround, insurance companies could begin offering separate policies that cover abortion that individuals could purchase without using tax credits.
The age-based tax credits of the American Health Care Act are based on the fact that, in most states, older people pay higher insurance premiums than the young. Under the Affordable Care Act insurers are barred from charging their oldest customers more than three times what their youngest customers pay in premiums. The Republican replacement bill raises that ratio to five-to-one. Since older people will pay higher premiums, the thinking goes, they should get a more substantial tax credit.
But New York is one of two states that mandates that insurers not charge different premiums based on age. Companies are required to charge the same premium for the same coverage for all customers, regardless of age.
“Those tax credits don’t make any sense in New York,” Hammond said. “If everybody’s paying the same premium, why would you offer a higher tax credit for the old customer than the young customer?” State policy runs afoul of the logic underlying the new bill, and would likely require adjustment if the Republican plan becomes law.