Death by 1,000 cuts: Trump's #NBPP2020 would also hack away at your tax credits as well

Here's another wonky-but-important negative change which Trump's HHS Dept. is planning on making to the ACA exchanges starting in 2020:

We propose a premium adjustment percentage of 1.2969721275 for the 2020 benefit year, including a proposed change to the premium measure for calculating the premium adjustment percentage. Under §156.130(e), we propose to use average per enrollee private health insurance premiums (excluding Medigap and property and casualty insurance), instead of employer-sponsored insurance premiums, which were used in the calculation for previous benefit years, for purposes of calculating the premium adjustment percentage for the 2020 benefit year. The annual premium adjustment percentage sets the rate of increase for several parameters detailed in the PPACA, including: the annual limitation on cost sharing (defined at §156.130(a)), the required contribution percentage used to determine eligibility for certain exemptions under section 5000A of the Code (defined at §155.605(d)(2)), and the employer shared responsibility payments under sections 4980H(a) and 4980H(b) of the Code.

Here's what this seeming gobbledygook means, as explained by Matt Fiedler of the Brookings Institute:

The indexing provisions of the new payment notice are technical, but important. They would reduce the premium tax credit for all who receive it. Would also increase allowable out-of-pocket maximum (incl. in group coverage) and increase the employer mandate penalty. More below.

— Matt Fiedler (@MattAFiedler) January 17, 2019

Starting with premium tax credit, a refresher: people eligible for the PTC pay a sliding-scale percentage of their income toward the second-lowest-cost silver plan. Fed gov’t pays the rest.

— Matt Fiedler (@MattAFiedler) January 17, 2019

Statute directs that these income percentages change over time based on how much “premium growth” exceeds “income growth.” HHS is proposing to change how it (and Treasury) measure “premium growth.”

— Matt Fiedler (@MattAFiedler) January 17, 2019

Specifically, HHS wants to use private premiums per enrollee rather than employer-sponsored premiums per enrollee for “premium growth.”

Result: The indexing factor for 2020 would rise ~2.5%, so tax credit recipients will pay a larger share of income toward coverage.

— Matt Fiedler (@MattAFiedler) January 17, 2019

In dollar terms, single person at 300% of FPL would lose $92/year in PTC; family of four at 300% of FPL would lose $189/year in PTC. Smaller effects at lower income levels and larger effects at higher income levels.

— Matt Fiedler (@MattAFiedler) January 17, 2019

On the surface, this may not sound too bad; $92/year for a single person is only $7.60 per month; $189 for a family of four is only $4 per person per month. The problem is that the APTC formula needs to be strengthened, not weakened...this change, like practically everything else the Trump Administration does, goes exactly in the wrong direction. But that's not all...

In the aggregate, CMS Actuary estimates proposed change would result in $900m less in tax credit payments and 100,000 fewer Marketplace enrollees in 2020.

— Matt Fiedler (@MattAFiedler) January 17, 2019

The same index also controls required out-of-pocket maximum in group and nongroup coverage. Single person out-of-pocket maximums could go up to $8,200 for 2020, rather than $8,000. Family out-of-pocket maximums could go up to $16,400, rather than $16,000.

— Matt Fiedler (@MattAFiedler) January 17, 2019

That's an extra $200/year hit for a single adult, or an extra $400 for a family. Assuming they hit that max, the single person is now paying a total of $292 more and the family is paying $589 more for the year. This may seem like nickel & dime stuff, but it adds up quickly, especially when you aren't particularly wealthy.

Even more disturbing to me is the spin that Trump's HHS Dept. takes on these changes:

  • A decrease in federal PTC spending of $900 million in 2020 and 2021, and $1 billion in 2022 and 2023, due to an increase in the PTC applicable percentage and a decline in Exchange enrollment of approximately 100,000 individuals in benefit year 2020, based on an assumption that the Department of the Treasury and the IRS will adopt the use of the same premium measure proposed for the calculation of the premium adjustment percentage in this rule for purposes of calculating the indexing of the PTC applicable percentage and the required contribution percentage under section 36B of the Code. We anticipate that enrollment may decline by 100,000 individuals in benefit year 2020, and enrollment would remain lower by 100,000 individuals in each year between 2020 and 2023 than it would if there were no proposed change in premium measure for the premium adjustment percentage for the 2020 benefit year.

Yes, that's right...Trump's HHS is cheering on the idea of saving $900 million by kicking 100,000 people off their healthcare coverage. It's really that simple. Obviously they could save far more than that by simply scrapping the ACA altogether and kicking over 20 million people off their coverage, but they already tried that, so...

But it was really this bullet point which made my jaw drop the most:

  • Increased Employer Shared Responsibility Payments of $100 million each year between 2020 and 2023. Some of the 100,000 individuals estimated to not enroll in Exchange coverage as a result of the proposed change in the measure of premium growth used to calculate the premium adjustment percentage may purchase short-term, limited-duration insurance, though a majority is likely to become uninsured. Either transition may result in greater exposure to health care costs, which previous research suggests reduces utilization of health care services. Economic distortions may be reduced, and economic efficiency and social benefits improved, because these individuals will be bearing a larger share of the costs of their own health care consumption, potentially reducing spending on health care services that are personally only marginally valued but that imposes costs on the federal government through subsidies. In addition, to the extent that this proposed rule reduces federal outlays and thereby reduces the need to collect taxes in the future, the distortionary effects of taxation on the economy may be reduced. However, the increased number of uninsured may increase federal and state uncompensated care costs. We seek feedback from stakeholders about these impacts and the magnitude of these changes.

Let me translate that for you: "Offering skimpier subsidies will force 100,000 Americans to drop their healthcare coverage. Some will have no choice but to go with junk plans, but most of them will be completely SOL with no coverage whatsoever. This means they won't be able to afford to go to the doctor, and that's a good thing because some of them will suffer and die instead of getting treated, which means the government won't have to spend anything on them. It's not all cream & sugar, though, because some of them will manage to crawl to the hospital, which will be stuck with the ER bill to keep them breathing, and the feds or state will have to reimburse the hospital for the bill."

Ah, Trump Administration, is it a wonder you're so beloved?