For better or worse, Californians who aren’t insured through their employers could see major changes in their health insurance costs under a Republican replacement for the Affordable Care Act.
A House GOP proposal introduced Monday would provide substantially less financial help to many consumers in higher-cost areas of California, from San Francisco to Monterey. But people in lower-cost markets like Los Angeles could fare better.
That’s because the Republican proposal takes a simpler, across-the-board approach to tax credits than the current law. The ACA offers a wide range of subsidies that take into account household income and the local cost of coverage. The nationwide Republican tax credits are tied just to age, starting at $2,000 per year for people under 30 and increasing to $4,000 for those over 60.
That doesn’t bode well for a 60-year-old in Santa Cruz. If he makes $40,000 a year, he would receive $12,836 in ACA premium subsidies to buy insurance on the state exchange for 2017, according to an analysis by the Kaiser Family Foundation. The subsidy takes into account the person’s income and the cost of insurance in the coastal town. (California Healthline is an editorially independent service of the foundation.)
The House’s American Health Care Act would cut that person’s assistance to $4,000, based purely on his age. A 60-year-old making $20,000 a year in the same town would be even worse off, because his low income wouldn’t be part of the calculation. He would get nearly $12,000 less under the House plan than under the current law.
But the GOP’s plan could benefit younger consumers in general and particularly those in lower-priced markets of Southern California. Under current law, a 27-year-old in Los Angeles making $40,000 doesn’t get any ACA subsidy because the cost of coverage is low for someone of her income. She has to pay her entire premium.
But under the House plan, she would qualify for a flat $2,000 tax credit based entirely on her age.
The GOP plan would begin to phase out age-based tax credits when an individual’s annual income reached $75,000. The upper limit under the ACA is 400 percent of the federal poverty level or about $47,000 for an individual and more than $97,000 for a family of four.
Cynthia Cox, associate director of health reform and private insurance at the Kaiser Family Foundation, said any replacement plan for the ACA will create "winners and losers."
She said "the people likely to gain under the ACA replacement are those who are younger, higher income and live in lower-cost areas. That might be millennials living in Los Angeles."
But she said the added costs imposed on consumers in other markets could be enormous. "For a person living in Santa Cruz or another high-cost area, that is a big chunk of their income to come up with," she said.
The Kaiser Family Foundation has created an interactive map that compares county-level estimates of premium tax credits consumers would receive under the Affordable Care Act in 2020 with what they’d receive under the GOP legislation.
California has long had a north-south divide on medical costs. Health policy experts say the lack of competition in Northern California helps explain why health insurance premiums are, on average, about 25 percent higher compared to the southern part of the state.
For 2017, rates in the Covered California exchange rose by 13.2 percent, on average, statewide. But premiums in the Santa Cruz-Monterey area jumped by nearly 29 percent.
Peter Lee, executive director of Covered California, said ignoring income and location in issuing tax credits may force thousands of people to drop coverage.
"The wide variations in the health-care system across California could result in consumers in some areas being priced out of coverage," Lee said. "The analysis of some early proposals also underscores the importance of providing financial help that is directly tied to a consumer’s income."
Cox said some Republicans are purposely ignoring those geographic differences because they don’t want to reward higher-priced areas with more generous taxpayer subsidies. The hope is that lower tax credits could put pressure on insurers or medical providers to charge less.
Lanhee Chen, a conservative health-policy expert and a fellow at Stanford University’s Hoover Institution, said the House Republicans’ tax-credit proposal would simplify the process and have a "positive impact on bringing down health costs over the long run."
But even some critics of Obamacare think Republicans will have to alter their approach and account for differences in health costs within states and across the country.
"The impact will not be uniform and many parts of the country will be big losers — and not just the high-cost big cities that are traditionally Democratic areas," said Robert Laszewski, a Virginia-based health care consultant and frequent critic of the ACA. "Many of the highest cost places are Republican strongholds. Geographic rating is as basic to health insurance 101 as anything."