Wow. That was a loud groan! We know. This isn’t a popular topic. It’s complicated and political and expensive and frustrating. But it’s also important. And for many of you out there, things are about to change. So we want to give you a heads up on what to be looking for with health insurance reform.
With Obamacare, health insurance coverage was essentially mandated for every American. Although this was not a “guarantee” of coverage, there was at least an attempt to build a system that made affordable health care accessible to most Americans. Will this change? For sure.
Lets look at the general policy ideas contained in the GOP House plan. First of all, the “employer mandate” that requires companies of over 50 people to offer health insurance, may go way. So even if you currently have insurance through your employer, there may be a chance that it will end.
But the biggest change comes from the role of the government in helping pay for health insurance. The current policy proposals will move the government out of managing the system and instead give the heavy lifting to the tax code. People will now buy insurance through private companies and get financial relief through their taxes. How this works is important to understand.
If you hear a lot of talk about tax deductions, then most of the relief will go to people who are well off. Deductions reduce your income, thus reducing your taxes. So if you don’t make much money, you don’t have a lot of tax to “deduct”, so the relief will be small.
If you hear talk about credits, this is good. It is a dollar for dollar reduction of your taxes. If you hear talk about “advanceable and refundable” credits, this is even better. It means that you will get the credit as a refund, even if you don’t owe tax. And if it is “advanced”, you will get it when you pay your insurance premium, so you don’t have to wait until tax time to get the credit.
Right now, the House policy proposal revolves around advanceable, refundable credits, which is great. And there will also be a cap, so high earners will be cut off from the benefits, leaving more money in the system for those who need it most.
But now comes the hard part. How much relief is available? Obamacare had a sliding scale of support depending on income and where you live, so the poorest people in the most expensive markets got the most support. Current proposals change the method of support, to have it depend on age. So now subsidies will range from $2,000 per year for someone young to $4,000 per year for older Americans. So the amount of subsidy you aer entitled to will change.
But the big question is whether the new credit will pay for adequate coverage. Having health insurance “available” to you is not the same as being able to afford it. And the difference will come down to money. If you can’t afford your health insurance, you won’t be able to get it. So if your subsidy decreases, you may only not be able to afford even the most basic plan. Or if you can find a plan, it may be one that has massive copays and deductibles that you won’t be able to afford anyway.
Some evidence is showing that the proposed subsidies will fall short of what were offered to many under Obamacare. This may mean that millions of people will have to pay more for their health insurance.
But the devil will be in the details.
There will be winners and losers in this push and pull of policy. But already you can get a sense of what might happen. If you look at this New York Times article, you will see that the potential winners will be those in the middle class who previously earned too much to get Obamacare support. The losers will be the poorest members of society, as well as those over 60 and people living in rural ares. Check out this interactive map put together by the Kaiser Family Foundation to see if you will win or lose with the new House plan.
So keep an eye on the discussions so you know how the new plan impacts you directly. Also know that the House policy is not set in stone, and will change. So make sure you know how the changes will impact you. Also listen for popular provisions that might get dropped to save money, including the right to stay on a parent’s plan and the right to insurance even with preexisting conditions.
And one final thing. Try to keep a bit of emergency cash on hand in case your employer dumps your insurance, or your health costs go up. It’s hard to tell where we’re going to end up. But for many of us, health insurance will get more expensive. So you need to start preparing yourself for that possibility…