How will new GOP tax credits compare with health insurance premiums?

Under the new Republican plan to repeal and replace the Affordable Care Act, tax credits would assist uninsured people to buy coverage. But the criteria that determine eligibility is shifting, with age becoming a greater factor than income. Judy Woodruff talks to Julie Rovner of Kaiser Health News about the impact if the plan becomes law.

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    Now a closer look at what could change if the Affordable Care Act, often referred to as Obamacare, is repealed and replaced. The battle is expected to last through the spring, or longer.

    Tonight, we are starting an occasional series on the potential impact if the current Republican leadership plan becomes law.

    First up, the tax credits that go to uninsured people to enable them to buy coverage.

    To qualify under the current law, this is dependent on your income and where you live. The Republican bill is shifting those criteria. Income matters, but age is much more crucial.

    To get a refundable tax credit, some people over 60 could qualify for $4,000 a year. Those between 40 and 50 years old could qualify for $3,000 a year. People under 30 could get $2,000.

    Here's the chairman of the House Ways and Means Committee, Kevin Brady, talking about the Republican approach.

  • REP. KEVIN BRADY, R-Texas:

    I think a key element of the tax credit is that it is really targeted and tailored to the individual. It is a credit that is immediately available to them. It grows and increases with age because your health care costs go up as you get older.


    To help break all this down, I'm joined by Julie Rovner of Kaiser Health News. She follows this closely.

    Welcome back to the program, Julie. So, why did the Republicans decide to change these criteria?

  • JULIE ROVNER, Kaiser Health News:

    Well, one of the problems with the existing credits is that not enough young, healthy people were signing up. So this is an effort to say, we want to get more young, healthy people into the pool.

    And, now, while the credits are smaller for younger people, they're also going to reduce their premiums by changing how insurers can charge. Right now, insurers can only charge three times as much for older people as younger people. They're going to make that five times as much. So that's going to make premiums much less expensive for the younger people, hence, even the smaller tax credit will go further.


    So how much is this expected to change the group of people who then will be able to be eligible for the tax credit?


    Well, it's not entirely clear. It's going to change who are winners and losers. Older people will, obviously, have to pay more.

    Even though they get twice as big a tax credit, they could be charged five times as much in premiums. So it's not at all clear that it's going to entice that many more younger people to join up.

    Republicans also wanted to sort of scale back how complicated the tax credits are under the current Affordable Care Act, and this would definitely do that.


    Do we have a way of knowing how much premiums would change in cost?


    Well, we don't, other than the facts that premiums could — premiums could change for a lot of different reasons.

    But one of the important things here is that premiums vary by where you live because health care cost different amounts in different parts of the country. So, if you live in a low-cost part of the country, that same flat tax credit would go much further than if you live in a much more expensive part of the country.

    The current Affordable Care Act tax credits take that into account, because they are based on how much the insurance costs in your area. These are not.


    So, that geography issue is another significant change here.


    That's right.

    It's really the way it all acts together. It's not just the tax credits. It's the tax credits, plus what they're based on, plus how old you are, plus where you live, and a little bit of income. The Affordable Care Act tax credits are based almost exclusively on your income. They basically say you only have to spend a certain percentage of your income to afford health insurance.

    That's not what these tax credits would do. And the Republicans hope that there would be insurance available that would match or at least almost match these tax credits, so that people could afford to buy coverage.


    Now, we see, Julie, that among the more conservative Republicans, they are still unhappy with this approach.


    They are very unhappy. They call it Obamacare-lite.

    They are tax credits. They're available to people even who don't owe any taxes. And Republicans say that's a new entitlement, and why should they be voting for a new entitlement, if they were going to repeal the old one?


    And the leadership defense of it is what?


    Well, the leadership defense of it is, they want people — they don't want to throw people off of their coverage. There are a lot of people who got coverage based on the existing tax credits.

    There might be different people who could afford insurance on the new tax credits, but at least they wouldn't be taking them away and telling everybody, we're not going to be giving you any help anymore. You're on your own.


    And quickly, Julie, under this new proposal, would there be a lapse in coverage, some kind of penalty? What is in there to protect people who are now covered?


    Well, rather the individual mandate, where people are required to either have coverage or pay a penalty, what this says is, if you have a lapse of more than 63 days, and then you sign up again, you have to pay 30 percent more for a year.

    So, there would be a penalty when you re-up, basically, instead of a penalty for not having coverage.


    Julie Rovner, we thank you.


    Thank you.


    And next time, we're going to take a closer look at the Medicaid changes proposed in the American Health Care Act.

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