But the GOP’s plan could benefit younger consumers in general and particularly those in lower-priced markets of Southern California. Under current law, a 27-year-old in Los Angeles making $40,000 doesn’t get any ACA subsidy because the cost of coverage is low for someone of her income. She has to pay her entire premium.
But under the House plan, she would qualify for a flat $2,000 tax credit based entirely on her age.
The GOP plan would begin to phase out age-based tax credits when an individual’s annual income reached $75,000. The upper limit under the ACA is 400 percent of the federal poverty level or about $47,000 for an individual and more than $97,000 for a family of four.
Cynthia Cox, associate director of health reform and private insurance at the Kaiser Family Foundation, said any replacement plan for the ACA will create “winners and losers.”
She said “the people likely to gain under the ACA replacement are those who are younger, higher income and live in lower-cost areas. That might be millennials living in Los Angeles.”
But she said the added costs imposed on consumers in other markets could be enormous. “For a person living in Santa Cruz or another high-cost area, that is a big chunk of their income to come up with,” she said.
California has long had a north-south divide on medical costs. Health policy experts say the lack of competition in Northern California helps explain why health insurance premiums are, on average, about 25 percent higher compared to the southern part of the state.
For 2017, rates in the Covered California exchange rose by 13.2 percent, on average, statewide. But premiums in the Santa Cruz-Monterey area jumped by nearly 29 percent.
Peter Lee, executive director of Covered California, said ignoring income and location in issuing tax credits may force thousands of people to drop coverage.
“The wide variations in the health-care system across California could result in consumers in some areas being priced out of coverage,” Lee said. “The analysis of some early proposals also underscores the importance of providing financial help that is directly tied to a consumer’s income.”
Cox said some Republicans are purposely ignoring those geographic differences because they don’t want to reward higher-priced areas with more generous taxpayer subsidies. The hope is that lower tax credits could put pressure on insurers or medical providers to charge less.
Lanhee Chen, a conservative health-policy expert and a fellow at Stanford University’s Hoover Institution, said the House Republicans’ tax-credit proposal would simplify the process and have a “positive impact on bringing down health costs over the long run.”
But even some critics of Obamacare think Republicans will have to alter their approach and account for differences in health costs within states and across the country.
“The impact will not be uniform and many parts of the country will be big losers — and not just the high-cost big cities that are traditionally Democratic areas,” said Robert Laszewski, a Virginia-based health care consultant and frequent critic of the ACA. “Many of the highest cost places are Republican strongholds. Geographic rating is as basic to health insurance 101 as anything.”
