SURPRISE!! Remember my state-by-state breakdown of the King v. Burwell 2015 tax hikes? DOUBLE IT for some.
I can't believe I forgot about this.
Last week I posted a series of 34 graphics demonstrating just how many people would lose their federal tax credits in the event of the Republican Party winning their King v. Burwell court case at the Supreme Court...along with how much of an unexpected tax hike they'd have to shell out in order to keep their coverage for the rest of 2015. The amount varies by state, but overall it averages just over $1,600 apiece.
This amount is based on a simple formula: These 6.5 million people are receiving an average of $272 in federal tax credits per month. Assuming the Supreme Court cuts off those credits starting in July, that's $272 x 6 months = $1,632 for the rest of this year. Simple.
HOWEVER, I forgot one very important thing, which I was reminded of today by Caroline Pearson of Avalere Health: The actual tax hike for some of those 6.5 million people will actually be twice as much.
Why? Because not everyone is taking their tax credits monthly. Some of those 6.5 million people are paying the full premium amount up front every month and then waiting until the following spring, when they file their taxes, to take the full tax credits for the year in one shot.
For THOSE people, if the Supreme Court rules their tax credits invalid, they're gonna be in for one hell of a rude awakening next spring when they file their taxes, expecting several thousand dollars on their refund, only to discover that they didn't just lose 6 months worth, but up to 12 month's worth. In theory, for example, someone in Alaska (average credit: $536/month) who plans on waiting until next spring to apply for a full year's worth of 2015 tax credits, expecting to receive a whopping $6,432 in their refund, would receive...nothing. Ouch.
I'm not gonna bother re-doing the state graphics, partly because the numbers already included on them are already unpleasant enough, but mainly because it would complicate things further; I have no idea how many in each state are taking the "all at once" option, nor do I know how the average subsidy for that subset compares to the average in each state.
The "good" news here is that the odds are that 1) most people are taking the credits month-to-month and 2) the ones doing it annually are likely at the higher-end income range anyway, meaning they probably are receiving a lower average subsidy (say, $20-$30/month instead of $300-$400 as some people are), which "mitigates" the damage slightly. Again, to use the Alaska example above, anyone whose income is low enough to qualify for a $536/month credit is highly unlikely to be able to afford to stick it out the whole year in order to receive it.
Still, this is yet another twist in the Ugly about to be unleashed on the country if the GOP gets their way in the next week or so.
UPDATE: Thanks to Louise Norris for calling this article from back in February to my attention:
As many as 6.6 million Americans signed up for health insurance since November 2014 through the Affordable Care Act marketplace. According to TurboTax, approximately 80 percent of people who qualify for a subsidy take it in the form of an advance premium tax credit, which directly lowers the cost of their monthly health insurance premium payments. The amount of the tax credit was paid directly to the insurance company by the government.
Assuming that this ended up being representative across all 34 states on the federal exchange and that it was representative for those who filed their taxes later on (the TurboTax quote is from February 10th), and assuming that this ratio holds true in 2016 as well...
...it suggests that around 20% of those whose credits are at risk, or roughly 1.3 million of them, would lose a full year of tax credits vs. just 5 or 6 months.
Again, presumably those 1.3 million would be those at the higher end of the income scale with lesser tax credit amounts, but still...