After the U.S. House of Representatives passed the American Health Care Act -- better known as the AHCA or Trumpcare -- in May, all eyes turned to the U.S. Senate, which would be writing its own version of the bill. That Senate bill has arrived in the form of the Better Care Reconciliation Act, or BRCA.
While there are differences between the two, both the House and Senate versions of Trumpcare make fundamental changes to Obamacare, the current law of the land. While neither fully repeals Obamacare, both provide more flexibility to the states to roll back Obamacare protections, and both change the rules regarding how much older Americans can be charged for insurance relative to younger Americans.
While Obamacare capped premiums for older Americans at three times what younger people pay for a policy, Trumpcare would allow pre-Medicare adults to be charged up to five times what younger insureds pay. And while Trumpcare continues Obamacare's policy of providing tax credits for the purchase of insurance, the tax credits are less generous.
These changes, among other modifications to Obamacare, could make policies much more expensive for those who buy private insurance. In fact, one study conducted by Kaiser Family Foundation found that average premiums could rise as much as 74%.
How would Trumpcare affect premiums?
Kaiser Family Foundation estimated future premiums under Trumpcare based on the cost to buy the equivalent of a "silver" Obamacare policy. The silver plan is the most popular of Obamacare's four policy tiers. It covers an average of 70% of healthcare costs -- more than the bronze plan but less than the gold and platinum policies..
While the average enrollee is expected to pay 74% more on a comparable "silver" plan under Trumpcare, different groups of enrollees would not be affected uniformly. Older Americans and lower-income Americans would face the largest increase in premiums after a switch from Obamacare to the Senate version of Trumpcare, while some wealthier young people could actually see premium decreases.
Kaiser's estimated 2020 health insurance premiums show how much different groups of Americans would be affected by Trumpcare:
|Age||Forecast Premium Change if Income Is Less Than 200% of the Poverty Level||Forecast Premium Change if Income Is 200% of the Poverty Level or Higher|
While a 55- to 64-year-old with income below 200% of the poverty level would pay just $69 monthly for a silver plan in 2020 after Obamacare's premium tax was applied, that same pre-Medicare American would pay $272 after tax credits under Trumpcare. The difference: They'd owe $2,436 more in premiums each year.
Why would premiums rise so much?
Trumpcare changes many aspects of Obamacare, but one big reason for the dramatic rise in premiums is a change to the benchmark plan used to calculate the subsidy amount an insurance buyer receives.
Under Obamacare, tax credits equaled the difference between the actual premium costs of the second-cheapest silver plan in the insurance marketplace and a capped percentage of income. The second-cheapest silver plan was thus the "benchmark plan," or the metric by which tax credits were calculated.
Under the Senate's version of Trumpcare, the "benchmark" plan by which tax credits for premiums are calculated is a plan covering 58% of your expected costs. Because this less generous plan would have lower premium costs, the subsidy is, in turn, less generous. If you opt to buy a better plan under Trumpcare -- the equivalent of an Obamacare silver plan -- you would have to pay 100% of the price difference between the cheaper benchmark plan and the policy you'd prefer.
Trumpcare's future is uncertain, but if a version of the Senate bill passes, these changes mean you could pay higher premiums and end up responsible for covering a larger portion of your healthcare costs. Investing in a health savings account and exploring ways to cut costs with a high-deductible health plan could become essential to affording the care you require.