What’s Next with ACA: Will the Individual Health Insurance Subsidy Survive?

Posted On: February 17, 2017 | By: Abigail Cutler

As the new administration takes its place in history and its detractors in both political parties grouse about minor issues, most Americans want to know what is next with the Affordable Care Act (ACA).

Here’s what I know. The individual mandate is under attack.  First, it CANNOT survive as it exists now.  Insurers are paying out more in claims than they are taking in in premiums, and they are leaving the marketplace in many U.S. counties. Young insureds are not opting for these plans, leaving insurers with older and less healthy insureds.  This creates anti-selection, a/k/a “the death spiral.

The clearest message coming out of Washington about replacing ACA is: 1) the Republicans, who control 2 of the 3 branches of government will repeal ACA 2) Insurance companies will be permitted to sell their individual and group plans across state lines, thus heightening competition and 3) block grants of funds will be provided to individual states to fund in part Medicaid.

The topic that very few pundits and spinners are debating in the public forum is “What Happens with the Subsidies” provided to marketplace policyholders who fall below the income threshold of 400% of the poverty level ($97,000 for a family of four.) Effectively these subsides, which are paid by private employers via health insurance taxes, are another form of entitlement.  Senator Rand Paul of Kentucky has clearly stated that the conservative members of Congress have zero appetite for more entitlements.

However, without the subsidies, most insureds will drop their coverage, making the pool of insureds even less desirable.

President Trump has promised to reveal the replacement for ACA the week of February 20. The replacement will have to settle the issue of the subsidies.

Too many conservative members of Congress and other pundits, ACA Marketplace subsidies translate to another entitlement. It is highly unlikely that the subsidies would survive an Obamacare Repeal and Replace agenda.

Now members of Congress are talking about a premium tax credit to replace the subsidies.  How that would work is very vexing.  As reported by some sources, more than 50% of Americans pay no income taxes.  If there is a tax credit given to replace the subsidies, would that apply then to only people who pay taxes or would those who pay no taxes actually get a check from the Feds once they paid their Marketplace premiums?  Stay tuned.