GOP senators are trying to strike a balance that’s proving difficult: lowering healthcare insurance premiums for young adults while shielding older people from massive price hikes.
At issue is an ObamaCare provision that essentially caps how much insurers can charge older people for premiums.
Republicans want to raise that cap, saying it vastly undercharges older people for their healthcare services, creating higher costs for younger, healthier adults.
But the GOP’s attempt to rectify that imbalance in the American Health Care Act (AHCA) threatens to make premiums unaffordable for some low-income, older adults, according to the Congressional Budget Office. That’s an issue the Senate is trying to fix as it revises the healthcare legislation passed by the House.
A provision in ObamaCare — known as "age band rating" — says insurers can only charge older people three times as much as younger adults for insurance coverage.
Republicans and insurers argue that because older people generally use more healthcare, they should have to pay at least five times more for coverage. Lowering the costs for younger people, they say, will result in more people obtaining coverage and ultimately decrease premiums for everyone.
“There are a lot of states that had 5-to-1 or 4-to-1 [ratings] in the past so you can engage more younger individuals in the market. If you’re going to get young and healthy into [the market], you can’t charge them more as they enter into it,” said Sen. James Lankford (R-Okla.).
“But to do that, you have to be able to find a way to guard seniors.”
GOP senators got their first look at a broad outline of a healthcare plan this week, which was drafted by staff over the Memorial Day recess.
Many aspects of the plan are still unresolved, including how to handle the age rating bands. But an option, said Sen. Mike Rounds (R-S.D.), is to set the ratio at 5:1 and let states apply for waivers to raise or lower that number.
“State by state, if they want to do that and do some experimentation on their own, I think that’s probably not a bad idea,” Rounds said.
“I think it’s important to do. I think a waiver program is very, very important if you want to have innovation in the health insurance markets.”
The House-passed American Health Care Act (AHCA) had a similar setup, though a later amendment only allowed states to get a waiver if they wanted to raise the ratio higher than 5:1.
Rounds said Congress needs to ensure an adequate transition period when moving away from the ObamaCare structure to the 5:1 ratio.
“The challenge for us is that now folks in the older categories, in the 60-year-old categories, from there until the time they hit Medicare, they’re worried about a change from a 1:3 ratio to a 1:5 ratio and what that would to do increase their costs,” he said.
“We have to be able to recognize that in a transition period so they don’t get hurt.”
The Council for Affordable Health Coverage (CAHC), an alliance of industry groups, has discussed a proposal with Senate offices that would tweak the tax credit in the AHCA to make subsidies higher for both younger and older enrollees, with additional assistance for low-income people.
It also recommends converting ObamaCare’s cost-sharing reduction payments, which reimburse insurers for giving low-income people discounted deductibles and copays, into accounts that eligible individuals have access to.
“No matter what the Senate does, if they want to keep the 5:1 age rating structure in the AHCA, which it appears they do, then they will have to modify the subsidy structure in some way to help lower-income, older enrollees afford coverage,” said CAHC Executive Director Katie Allen, who previously worked for two members of the GOP Doctors Caucus.
“At the same time, they have to ensure that subsidy levels for younger enrollees are sufficient to spur greater enrollment that we see today under the ACA — the lack of younger enrollees in exchanges today is a key factor in growing premiums.”
The AHCA tax credits range from $2,000 to $4,000 and would be based on age, not income. Younger people would get smaller credits and older people would get larger ones. The credits would phase out for individuals earning more than $75,000 and end completely for those making $95,000 or more. The threshold goes up to $115,000 for people 60 years or older.
Sen. John ThuneJohn Randolph ThuneSchumer sets Monday showdown on debt ceiling-government funding bill Congress facing shutdown, debt crisis with no plan B GOP warns McConnell won't blink on debt cliff MORE (R-S.D.) has spearheaded an effort to cut off eligibility sooner for higher incomes and make credits larger, tying them age and income while giving older people more support.
The House bill put in placeholder language to give the Senate money to work with for the credits — about $85 billion over 10 years.
“We’re still trying to put something together, and then have to get CBO on that to figure out how much that stuff costs and how we can design it in a way that fits in the fiscal space we have to work with,” Thune told reporters recently.
It's unclear if that amount will be enough, or if the Senate will have to pour more money into it.
Republicans will also have to deal with the unpopularity of raising healthcare costs for old people, going up against powerful lobbies like AARP, which has been on the warpath against the GOP bill.
The group recently aired ads targeting GOP senators in Alaska, Arizona, Colorado and Nevada over what they call the "age tax."
"Premiums for older people could jump to five times the amount insurers charge younger consumers, from the limit of three times the younger consumers’ rate under the current law, the Affordable Care Act (ACA)," the AARP wrote in a brief last month.
"Such a change would significantly increase financial burdens on millions of older adults, but the shift in costs would do little to get more young consumers to enroll."