Yet another stupid feature of the GOP's Basement Bill...
In addition to all of the other horrific details which are oozing out of the House Republican's "Basement Bill" to replace the ACA, something else has been nagging at me for a few days now, but I couldn't quite put my finger on it until today.
The issue was sort of coalescing in my brain all afternoon, but it was a couple of other folks who laid it out first:
If you widen the age rating bands for health insurance and then scale the tax credit based on age, haven't you kind of done nothing?
— Josh Barro (@jbarro) March 2, 2017
@jbarro Belated response: I've thought the same thing and asked this question. No persuasive answers.
— Margot Sanger-Katz (@sangerkatz) March 3, 2017
@sangerkatz Drat. You both beat me to the punch. If they want 5:1 bands, shouldn’t 60+ subsidies be $10,000?
— ☪️ Charles Gaba ✡️ (@charles_gaba) March 3, 2017
(I should note that I've found Josh Barro pretty offensive for awhile now, but he does raise a valid point here, and it happens to be exactly what's been bugging me.
One of the many things the GOP can't stand about the Affordable Care Act is that in addition to not allowing insurance carriers to charge people higher premiums for having pre-existing conditions, for being female and so on, it also limits how much they can vary rates by age to a 3:1 "age band". In other words, a 64-year old enrollee can only be charge 3x as much as an 18-year old. Prior to the ACA, I don't believe there was any legal limit on this nationally (there might have been in some states?), but I believe 5:1 or 6:1 was fairly standard.
Well, one of the many changes included in the GOP draft bill is:
Change the age band for cost of coverage: The ACA says premiums for elderly people can be no more than three times the cost of those for young people. The new plan would change that to five times.
Now, you can argue whether this is a positive or negative thing overall; it really depends on how the rates are handled. Let's say you have a policy which currently costs $500/month for an 18-year old and $1,500/month for a 64-year old. If you change that to 5:1, does that mean the top end stays at $1,500 while the lower end drops down to $300? If so, that's awesome! The older enrollee isn't any worse off, while the younger one saves 40%!
Unfortunately, I strongly suspect that it'd actually be the other way around: Perhaps $400/month for the younger enrollee (still a 20% savings!)...but $2,000 for the older one (a 33% increase...ouch).
In any event, that still leaves the other half of the equation...the tax credits. If a 64-year old can be charged 5 times as much as an 18-year old for the same policy....shouldn't he also receive 5 times as high of a tax credit to help pay for it?
Instead, they only get twice as much ($2,000 for an 18-year old, $4,000 for a 64-year old)...which is why the Kaiser Family Foundation's comparison table looks the way it does. In the second scenario above, the 18-year old would end up paying $2,800 per year...while the 64-year old pays $20,000. That's not 3x as much or even 5x as much...it's 7.14x as much.
Of course, I suppose Paul Ryan's solution to this would be to slash the starting credit down to just $800...