If the Republican proposal to replace Obamacare becomes law, 24 million people will stop having health insurance over the next 10 years, according to a much anticipated report from the Congressional Budget Office and Joint Committee on Taxation. Though some would choose to stop paying for insurance, the majority would no longer be able to afford it. About 14 million of those would lose their insurance in 2018, the report said, with that number expanding as the Medicaid expansion disappears and subsidies that help pay for premiums are reduced for most people beginning in 2020.
Make no mistake: This new law will profoundly change the face of health care in this country. Today, about 29 million Americans don't have health insurance, or roughly 10 percent of the below-65 population. (Those over 65 are covered by Medicare.) If the Republican Obamacare replacement, called the American Health Care Act, becomes law, in 2026 that number will rise to 52 million, according to the report. That's about 19 percent of those below 65.
In other words, the new law would almost double the proportion of the population not covered by insurance. At the same time, it would have a meaningful effect on the budget, creating a net savings of $337 billion over 10 years, according to the report. Outlays, principally for Medicaid and subsidies, would be reduced by $1.2 trillion over the decade. But that would be offset by $0.9 trillion in lower tax revenue as the new law eliminates Obamacare's increase in Medicare-related taxes for wealthy taxpayers and an income investment tax increase for the wealthy, and removes fees imposed on health insurers.
As an employer, you should pay especially close attention to the new law if your employees include:
Most employers don't offer health insurance to contract workers even if they do provide it to full-fledged employees. If the new law passes, many of the 14 million to fall off the insurance rolls next year will be self-employed people, such as contractors. That's because the "individual mandate" requiring them to carry insurance or pay a penalty will disappear. In 2020, subsidies that help people with low to middle incomes will also be phased out, replaced by age-based tax credits that will pay less in most cases. Meanwhile, at least in the short run, premiums will likely rise. That means some of your contractors who currently pay for their own health insurance may not be able to afford it as the law takes effect.
2. Young people
The new law is a mixed bag for young, healthy people, who often choose to go without health insurance. Young people with low or middle incomes will see a sharp reduction in their health insurance tax credits and may no longer be able to afford insurance, especially if they live in expensive areas such as most urban centers.
This will be especially true for any young employees who have not bought insurance or have allowed it to lapse. Insurance companies would be mandated by the new law to charge 30 percent extra to people who've gone without insurance for more than two months during the previous year. Make sure your young employees are aware of this, because that penalty could easily mean they're priced out of the insurance market if they let their coverage lapse for too long.
On the other hand, because the law allows insurers to charge premiums to 60-year-olds up to five times higher than those for 21-year-olds (except where states establish a different requirement), it's possible that premiums for younger people will go down after next year. Under Obamacare, insurers can only charge older people three times as much as younger ones. Additionally, young people earning between about $50,000 and $75,000 (depending on deductions) will get a $2,000 tax credit for insurance under the Republican plan where they got nothing under Obamacare. That may motivate some who have not had insurance in the past to get it.
3. 50- to 64-year-olds
This is where the American Health Care Act may run into the most trouble, because groups representing older people, most notably AARP, have come out strongly against what some are calling the "age tax" that would allow insurers to charge older people five times as much as younger people, unless their states enact different laws.
Because tax credits under the Republican law are strictly age-based, older people who earn less than $75,000 (or $150,000 per household) would receive tax credits of $4,000. But premiums for this age group will likely rise sharply once insurers can charge them more--probably much more than $4,000 a year. And because Obamacare limits the percentage of income anyone has to spend for insurance, it mostly insulates older Americans against sharp price increases, whereas the new law would not.
If you have people in this age group working for you who don't have insurance through your company, it might be smart for someone in HR to sit down with them and help them think through how to pay for insurance if the American Health Care Act becomes law. People in this age group typically need a lot more health care than their younger colleagues, even if they're generally healthy. Without insurance, they may not be able to afford the care they need.