Forget the Age-Tax, This Is What Seniors Should Really Worry About in Trumpcare

By Todd Campbell Markets Fool.com

Currently, an aspect of the ACA called community rating requires insurers to price their plans the same within a specific territory, regardless of a person's health. Under the American Health Care Act (AHCA), or Trumpcare, states will be able to waive community rating requirements, causing premiums for people with pre-existing conditions to climb if they have a lapse in their coverage. If that happens, it could force older Americans to scale back their insurance coverage or cancel their plans because they can't afford them.

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These changes to how insurers price plans sold to patients with pre-existing conditions could pose a bigger threat than the age-tax, a provision in Trumpcare that increases how much people must pay for insurance because they're older.

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According to the AARP, a non-profit group representing tens of millions of Americans over age 50, there are 25 million Americans aged 50 to 64 with pre-existing conditions that could see their premiums increase, so let's take a closer look.

Wait, what's the age-tax again?

Trumpcare provides insurers with greater flexibility when pricing plans sold to older Americans, who are likely to be more expensive to insure.

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Under Obamacare, insurers couldn't charge older Americans more than three times what they charge younger Americans. Under Trumpcare, they'll be able to charge older Americans five times more than younger Americans.

This change, plus Trumpcare's replacing of Obamacare subsidies with less generous tax credits for many seniors, acts like a tax on age, according to the AARP.

Pre-existing conditions could be a bigger deal-breaker

The AARP's research finds that 25 million Americans have pre-existing conditions that could expose them to higher premiums due to Trumpcare. Today, insurers can only price plans higher if patients are smokers, but if Trumpcare becomes law, patients whose insurance lapses could be subject to full medical underwriting that could price them out of insurance.

The AARP reports that about 6.1 million people between age 50 to 64 with pre-existing conditions buy their insurance in the individual market, and almost 3.2 million of them currently receive Obamacare subsidies that significantly reduce their monthly insurance premiums. According to the Centers for Medicaid and Medicare Services, the average cost of an insurance plan to someone receiving subsidies is about $100 per month.

If medical underwriting were allowed, then these older Americans may face premiums that are much more expensive.The AARP's number-crunchers considered the impacts of medical underwriting for people with pre-existing conditions, and they project that premiums could be as high as $25,700 per year, if a person gets coverage through a high-risk pool.

For perspective, the median income of a typical person aged 50 to 64 who buys their insurance through Obamacare is only $25,000, so clearly, big premiums increases due to pre-existing conditions could be budget-busters.

Looking forward

If a state gets a waiver that allows medical underwriting for people who have a gap in health insurance coverage, Trumpcare requires that state to establish high-risk insurance pools, however, federal funding for these high-risk pools could fall short of what's needed.

Trumpcare includes $130 billion in state funding spread out over about a decade, plus an additional $8 billion specifically for premiums assistance for people in high-risk pools, spread out over five years. In total, if all the federal money was used for high-risk pools, it would work out to $13.8 billion annually.However, the cost of high risk pools could easily exceed that amount. According toLarry Levitt, a senior vice president at Kaiser Family Foundation, "Even under pretty conservative estimates, a minimally adequate high-risk pool could cost $25 billion per year nationwide."

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