Money & Policy

Replacing Obamacare: 5 Things People 50+ Need to Watch For

What it could mean for premiums, subsidies and long-term care

Part of the Political Issues and Policies Special Report

The House Republicans have released their plan to replace The Affordable Care Act with The American Health Care Act (which some are dubbing Trumpcare). This legislation, of course, could change dramatically before a version of it becomes law. But based on its current provisions, here are the five things people 50 and older need to watch for:

1. Your health insurance premiums could rise sharply until you’re 65. I flagged this possibility to Next Avenue readers back in November in my blog post, “How Amending the Affordable Care Act Could Raise Boomer Premiums.”

As I explained, under The Affordable Care Act, in most states, health insurers can use federal guidelines based on someone’s age to determine the cost of his or her premiums for insurance bought on the open market. But premiums for people 64 and older can’t be more than three times what they are for 21-year-olds; at age 50, they’re capped at 1.78 times what the younger people pay. These are known as community rating restrictions and the age ratings are known as “age bands.” The 64-year-olds have a 3-to-1 rate banding.

The new House Republicans’ bill, however, would let health insurers charge older Americans up to five times more than what younger Americans pay (or a 5-to-1 band).

Average premium increases for those 60+ would be more than 4 ½ times those 20 to 29 and 18,000 people ages 50 to 64 could lose coverage.

A recent research report by the AARP Public Policy Institute said that such a change would “impose a significant financial burden and make it even more difficult for older adults to afford the health care that they need.”

With the 5:1 age rating, the report said, premiums for those 60+ would rise 22 percent or by $3,192 per year, on average — from $14,724 to $17,916. Premiums for people age 50 to 59 would go up 14 percent or by $1,524 per year, on average — from $11,316 to $12,840. (By contrast, young adults in their 20s would see their premiums fall 15 percent, dropping from $4,704 to $4,008.)

Put another way, average premium increases for those 60+ would be more than four and a half times the size of premium reductions for those 20 to 29. The report also estimated that 18,000 people ages 50 to 64 would lose health coverage due to this change.

As Vox.com puts it: “Older Americans could struggle to purchase coverage in this market, where their costs would rise.”

As you might expect, AARP is mounting strong opposition to the age-band change. It’s being joined by the Leadership Council of Aging Organizations, a coalition of nonprofits representing older Americans.

Republicans say this proposal needs to be viewed in the broader context of the entire legislation which would, they say, lower insurance prices due to heightened competition and by letting health insurers sell less-expensive policies, with fewer benefits than the law now mandates. The House bill would let states define the “essential health benefits” insurers must offer. As Slate explains: “By reducing the number of services insurers will be required to cover, the Republican plan would likely bring down premiums for people who want more bare-bones coverage, but they could end up on the hook should they ever get sick.”

2. You might get more help from the government to pay for your premiums. Under current law, people earning up to about $48,000 ($98,000 for a family of four) buying health insurance through the Affordable Care Act exchanges receive tax subsidies based on their income, age and geographic region. The Republican bill would provide tax credits based mostly on age (because older people tend to have higher health costs than younger ones). So the older you are, the larger your tax break would be.

People 50 to 60 would qualify for tax credits of $3,500 per year and those 60 and older would get a $4,000 credit. By contrast, Americans age 30 and younger would be eligible for a $2,000 tax credit. Upper-income people of any age would get smaller credits or none at all, however. The bill starts phasing out the credits at $75,000 for individuals and $150,000 for people who file jointly.

For low- and middle-income older Americans, however, the new tax breaks would be smaller than the tax subsidies they might have received under The Affordable Care Act. A recent Kaiser Family Foundation report estimated that a 60-year-old with a $20,000 income would receive nearly $6,000 less in tax credits from the Republican plan than before and one earning $40,000 would see a tax credit about $3,000 smaller than under Obamacare.

“You’re jacking up the prices and giving people less of a subsidy, which is a damaging combination,” AARP legislative policy director David Certner told Vox.com.

3. You could be socked with a 30 percent health premium surcharge if you let your coverage lapse. The Republican bill would continue Obamacare’s requirement that health insurers accept people with pre-existing conditions. But, starting in 2019, if you have a lapse in coverage of more than 63 days before reapplying for insurance, you’d owe that new 30 percent surcharge.

And why might someone over 50 have such a long lapse in health coverage? For one thing, you could lose your job and not be able to afford buying health insurance until you got a new one. And, as you likely know, it typically takes older job seekers much longer to get hired than younger ones — if they get hired at all.

4. Your Millennial kids will still be able to stay on your health insurance policy until age 26. That popular Obamacare provision doesn’t change with the Republican replacement bill. It’s one section that seems to be repeal-resistant.

5. You or your parents might no longer qualify for Medicaid’s long-term care coverage. Medicare, the federal health program for people 65 and older, generally doesn’t pay for long-term care costs. But Medicaid, the federal/state health program mostly for low-income Americans, does. The Republican bill to replace Obamacare, however, would dramatically change Medicaid, switching to what’s called a “per capita” allotment or a block grant.

“Long-term care providers across the country are disappointed that cuts to Medicaid are included in the Obamacare repeal and replace bill released yesterday,” Mark Parkinson, president and CEO of the American Health Care Association/National Center for Assisted Living, told Provider. “The current Medicaid system underfunds nursing center care by $22.46 per day, resulting in a shortfall of nearly $7 billion annually. The bill released yesterday will sharply reduce Medicaid funds across the board for all beneficiaries, making it harder than ever to maintain access to care for the most vulnerable in our society.”

Parkinson added: “We strongly encourage Congress to protect Medicaid access for seniors and people with disabilities in the Obamacare repeal and replace effort.”

The Affordable Care Act let states expand Medicaid and led to 10.7 million low-income people becoming eligible for it. Starting in 2020, the bill revamps the way Medicaid is funded, ending the so-called “enhanced federal (Medicaid) funding” for enrollees.

By switching to a Medicaid per capita system, where the federal government would set a limit on how much to reimburse states per enrollee, “states may have incentives to reduce Medicaid payments and restrict benefits,” Kaiser Family Foundation analysts Robin Rudowitz, Rachel Garfield and Katherine Young have written.

Confused? Well, as President Trump recently famously said: “Nobody knew health care could be so complicated.”

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By Richard Eisenberg
Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Follow him on Twitter.

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