In 2010, 8.9 million of the 60 million Americans between aged 50 and 64 did not have health insurance. For many of these older Americans in their pre-Medicare years, their lack of coverage did not result from a lack of trying: More than one in every five applications submitted for insurance by Americans aged 50 to 64.6 was rejected by health insurers. And many of those who were offered coverage couldn't afford the high premiums they were given.
The Affordable Care Act, aka Obamacare, was designed to help these uninsured older Americans, among other groups. Obamacare prohibited insurers from denying coverage for pre-existing conditions and did not allow them to charge their oldest customers more than three times what the youngest customers in the market paid. Thanks to these changes, the uninsured rate among pre-Medicare Americans dropped by nearly half.
Now, however, the Affordable Care Act is on life support, and the American Health Care Act may soon replace it. The AHCA, aka Trumpcare, recently passed the House, and although the Senate will likely amend the reform bill, the current proposal does not look great for older Americans. In fact, the AARP has called the new law a "bitter pill for older Americans" and a "giveaway to insurers and drug companies."
The AHCA could change insurance regulations in four key ways that would hit pre-Medicare Americans hard.
1. Changing the age rating to a 5:1 ratio
Older Americans typically require more healthcare than younger Americans. The average healthcare spending for a 64-year-old is 4.8 times the average spending for a 21-year-old -- and insurers charge older Americans higher premiums because of it. But Obamacare limits how much higher older Americans' premiums could be. Under Obamacare, a 3:1 limit on "age rating" was implemented, which meant an insurer could charge an older person no more than three times the costs paid by a younger person in the same community.
Trumpcare would change this to a maximum 5:1 ratio, although it would allow states to set lower limits. Before the ACA, 42 states set the maximum "age rating" at 5:1, so if this AHCA provision passes, many states would likely go back to allowing insurers to charge older Americans five times the premiums of younger insureds. This change could mean an average annual premium increase of $3,192, or 22%, for adults aged 60 and older and an increase of $1,524, or 13%, for adults ages 50 to 59, according to an analysis conducted by AARP.
2. Relaxing protections for pre-existing conditions
Before Obamacare, health insurance sold to individuals (as opposed to employer-provided group coverage) was medically underwritten. This meant insurers determined whether to offer a policy -- and at what cost -- based on a person's health status. People with pre-existing conditions ranging from cancer to asthma could find themselves uninsurable, paying high premiums, or insured by a policy that excluded their specific health issue.
The ACA put an end to this practice by requiring insurers to price based on community ratings, not medical underwriting. Under community ratings, insurers must charge the same premium to everyone in the same age group and community. Because ACA also prohibited insurers from denying coverage based on health status, sick people were no longer precluded from buying individual insurance coverage.
Trumpcare, like Obamacare, mandates that insurance be available to everyone. However, the current bill allows states to apply for waivers exempting insurers from community ratings. The result: Insurers would still have to issue policies to sick people, but they could charge much more. The left-leaning Center for American Progress estimates there will be premium surcharges of $4,340 for asthma patients; $5,600 for diabetics; and $142,650 for cancer patients. States that request waivers must create high-risk pools for those priced out of private insurance, but the AARP estimates that premiums among these high-risk pools will average $25,700 per year.
These changes impact everyone, but pre-Medicare Americans are much more likely to have pre-existing conditions. Anywhere from 48% to 86% of Americans aged 55 to 64 have pre-existing conditions that could affect coverage, compared with 21%-58% of Americans aged 35 to 44. (The ranges are broad because there are different definitions of pre-existing conditions, and the Centers for Medicaid and Medicare Services factored all of them into its estimates.)
3. Changing Medicaid
Trumpcare could affect not only individuals who obtain private individual insurance, but also Medicaid recipients. Obamcare provided federal funding so states could expand Medicaid to those earning 133% of the poverty level. Under Trumpcare, starting in 2020, federal Medicaid funding would no longer be provided on an unlimited basis to states based on the actual costs of providing coverage to enrollees. Instead, states would receive funding based on a per-capita cap, which means federal funding would rise at a specified growth rate, rather than based on actual increases in Medicaid spending. As the Kaiser Family Foundation explains, this could lead to a funding shortfall if federal contributions do not keep pace with expenditures.
This sounds like a technical change, but it's much more. Under Trumpcare, the federal government would pay $880 billion less for Medicaid over the next 10 years, which is a 25% cut. Changing federal funding rules shifts more responsibility to states, which may cut benefits or change eligibility in response to shortfalls.
This is not just a problem for low-income Americans. In fiscal year 2016, Medicaid paid $43.8 billion to nursing facilities and $61.8 billion to home healthcare and personal care aides. Medicaid is one of the leading sources of nursing-home and home health aide payments in the United States, because Medicare, Medigap, and private insurers do not cover custodial care. Even middle-class and wealthy families rely on Medicaid to pay for nursing care, and there are entire industries based on helping higher-earners qualify while protecting their assets.
If Medicaid is cut and states change benefits in a way that affects long-term care coverage, Americans aged 50 to 64 could find themselves facing disaster if they need care and Medicaid no longer foots the bill.
4. Changing the way tax credits are calculated
Both Obamacare and Trumpcare provide tax credits to families to help cover costs of insurance premiums. The ACA's credits were calculated based on insurance costs, family income, and age. Trumpcare's credits, however, are based only on age and do not take into account other factors (though credits are capped for high earners). Trumpcare would provide credits ranging from $2,000 to $14,000.
Unfortunately, if credits were no longer linked to insurance costs, most pre-Medicare Americans would get a reduced credit under Trumpcare. 60-year-olds with income of $20,000 would lose an average of $5,550 in tax credits under Trumpcare, while 60-year-olds with a $50,000 income would get an average tax credit that is $1,530 lower than the credit provided under Obamacare, according to the Kaiser Family Foundation.
Between lower tax credits and higher premiums, pre-Medicare Americans may struggle to afford care on the individual market. However, Trumpcare is not yet in its final form, and modifications are likely, so older Americans should voice support for any changes that help ensure they won't get priced out of coverage.