Have the recent Affordable Care Act regulatory changes signed by President Trump alarmed you? If you are watching the news readers on TV, you may be forgiven for being needlessly concerned.
The Truth and the Details
The truth is that President Trump has not taken away the Affordable Care Act (ACA) healthcare subsidy. Let’s look at the details. Individuals and families buying their own health insurance policies will still receive advance premium tax credits (APTC) otherwise known as a premium subsidy to reduce the premium they must pay for the policy they choose. APTC are based on the household income of the insurance applicants and are paid out on a reducing sliding scale for those with household income between 138% and 400% of the Federal Poverty Level (FPL) of household income.
Let’s look at some examples of who is eligible for APTC for 2017: Singles with incomes between $16,400 and $47,550; Couples with incomes between $22,100 and $64,100; and Families of four with incomes between $33,600 and $97,200. The APTC is sent to the insurance company to reduce the amount you have to pay. For those in the lower end of the bracket, the APTC may cover as much as 80% of the premium.
But, APTC is not the only subsidy you may receive to help you afford your health care. You can also qualify for Cost Share Reductions (CSR), which reduce the deductibles and out of pocket costs on the Silver polices purchased by those with incomes between 138% and 250% of FPL. A standard Silver plan is designed to pay on average 70% of the applicant’s expected health care costs. There are three levels of Silver plans with CSR which pay 73%, 87%, and 94% of expected health care costs. An applicant just above the minimum qualifying level of 138% of income, which is $16,400 of income will typically qualify for a plan with a deductible as low as $100 and an out-of-pocket maximum as low as $500.
What About the Executive Order?
So where does President Trump and his recent Executive Order come in? His order states that the Obama administration was incorrect in awarding money direct to insurance companies to fund the cost of the CSR’s. The issue is on appeal from a court ruling backing President Trump. As of now, and most likely for all of 2018, the CSR’s will still be applied to qualifying policies purchased for 2018. The insurance companies of Michigan have filed two sets of 2018 premium rates, higher rates assuming they will not receive money from the Feds and a lower set of rates if the Trump administration changes course and decides to provide the CSR funding to the insurance industry. With Open Enrollment starting Nov. 1st, it is almost certain insurance companies will be charging the higher rates.
So, to sum up, none of the subsidies are being taken away by President Trump. Instead, what is happening is the CSR costs are being spread among all the applicants for ACA plans and not by a direct payment from the federal government. As of this writing, Congress is working on a bill that would restore the direct funding from the government. If this happens, it is possible that insurance companies will use the lower rates. Whether or not it becomes law, those applicants that qualify for the CSR will continue to enjoy that benefit.
The ACA still faces some affordability issues, however for those with moderate to severe health issues it continues to be a valuable life raft. No applicant can be denied coverage or charged more based on pre-existing medical conditions. Even though applicants will see large premium increases for 2018, those receiving the APTC, (roughly 2/3 of applicants), will get APTC that increases proportionally to the premium increase. So it may not be as dire as many predict.
Those qualifying for CSR’s will continue to be able to purchase policies with very low deductibles and out of pocket maximums.