How Trumpcare Could Change Your Healthcare Spending
As the American Health Care Act, also known as Trumpcare or the AHCA, works its way slowly and painfully through the Senate, it's wise to consider how each of the major sections would affect your costs for healthcare and healthcare coverage. Many of these sections will change or disappear during the Senate negotiation process, but others will likely remain essentially unchanged. As the bill stands today, most young, healthy enrollees will end up paying less for healthcare than they do under Obamacare, also known as the Affordable Care Act or ACA, while older, health-challenged enrollees will likely pay more.
Essential health benefits
The AHCA bill allows states to waive health insurance coverage requirements for "essential health benefits." These benefits include emergency services, hospitalization costs, maternity care, and prescription drug coverage. If this section passes, your state may choose to allow health insurers to skip covering these costs, meaning you'd have to pay for them out of pocket. This could affect people with coverage through their employers as well, since employer-provided health insurance plans could also drop coverage for waived essential health benefits. Thus, everyone would likely see an increase in healthcare costs in states that implement the waiver.
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Medicaid reduction
The AHCA bill cuts Medicaid in two different ways. First, it rolls back the Medicaid expansion provided by Obamacare, freezing the expanded Medicaid program by the year 2020. Second, it changes Medicaid from an entitlement program to a grant program, which means people who qualify for Medicaid won't necessarily get it thanks to limited funding at the state level. All in all, federal Medicaid spending will be cut by about $840 billion. This won't affect you now if you're not on Medicaid, but it could certainly affect you in the future if you develop a need for the program.
Replacement of the premium tax credit
The ACA's premium tax credit is need-based; lower-income taxpayers are eligible for a bigger credit. The credit is only available for taxpayers with an annual income of 400% of the federal poverty line or less (for single taxpayers, 400% of the federal poverty line is around $50,000). Trumpcare replaces this credit with a new premium tax credit based largely on age -- the new credit is a flat amount of $2,000 for taxpayers aged 30 and under, climbing to a maximum of $4,000 for taxpayers aged 60 and up. This version of the premium tax credit has a much higher income limit; it phases out beginning at $75,000 annual income for single taxpayers. This change to the premium tax credit will benefit higher income taxpayers, but will be significantly lower than the existing credit for lower income ones.
Increased premium ratios for older enrollees
The AHCA bill allows states to waive the requirement that health insurance premiums for older enrollees be no more than three times the premiums for younger ones. It recommends that states instead set a maximum of five times the premiums for young people. And some states may choose to waive the cap on senior premiums entirely, leading to even higher health insurance premiums for seniors. This rule would lead to much, much higher premiums for seniors under the age of 65 in states that choose to waive the requirement. Younger enrollees may see a slight reduction in premiums as a result, but there's no guarantee that rates will drop.
Pre-existing condition waiver
With the pre-existing condition waiver, the AHCA bill gives states the ability to allow health insurance providers to deny coverage or charge higher premiums for enrollees with pre-existing conditions. States that choose to waive this requirement must set up high-risk pools that allow such patients to get funding for their healthcare; the bill provides $138 billion to fund these high-risk pools. Unfortunately, a recent study found that $138 billion would only provide enough coverage for about 600,000 individuals; since there are 2.2 million individuals in the healthcare system currently suffering from pre-existing conditions, the majority would end up without healthcare coverage.
Planning for healthcare expenses
If you see a strong possibility that your healthcare costs will increase, you may need to save proactively in order to finance your future healthcare needs. A health savings account may be the best option -- it will give you a tax benefit as well as setting aside funds for potential expenses. Check with your health insurance provider to see if your current plan is HSA-enabled, and consider switching to such a plan if it's not.
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