House Republicans tout their American Health Care Act (AHCA) as a way to counteract premiums that are spiraling out of control under the Affordable Care Act (ACA) passed under the Obama administration. However, according to a recent analysis, older and low-income Americans would see their costs skyrocket if the new legislation passes the Senate.

According to the Center on Budget and Policy Priorities (CBPP), 60-year-olds at the federal poverty level would, on average, see individual-market premiums that exceed 45% of their income. Furthermore, in several states individuals in that same demographic would face premiums exceeding their income. (For more, see CBO: 14M to Lose Health Care by 2018 Under GOP Plan.)

The American Health Care Act Cuts Medicaid/Eliminates Cost-Sharing

The Republican bill is projected to lower premiums for younger workers, but according to the CBPP it does so at the expense of older and less affluent Americans. In particular, those without an employer-based plan who are just shy of Medicare eligibility, which occurs at age 65, could see their costs soar.

To a great degree that’s because the bill, which the House passed on May 4, would largely eliminate the ACA’s expansion of Medicaid. The legislation would convert it from an entitlement program to a grant program, which caps the amount of funds states receive for each enrollee.

According to the Congressional Budget Office, the bill’s passing would result in an $834 billion cut to federal Medicaid spending over 10 years. As a result, nine million fewer people would be able to sign up for the income-based program by 2020. And more than 14 million fewer individuals would receive assistance by 2026. Most of the consumers who signed onto Medicaid under the expansion currently pay no premiums for their coverage and have no deductibles, CBPP report author Tara Straw noted.

The AHCA, which still needs Senate approval before reaching President Trump’s desk, would provide tax breaks for those purchasing coverage on the individual market. However, those tax incentives are far less generous to older Americans than the income-based subsidies provided under the ACA. It would also do away with existing cost-sharing provisions that help defray out-of-pocket costs – including deductibles, co-payments and co-insurance – for those with limited means.

Additionally, the AHCA would eliminate the current requirement that insurers limit costs for seniors to three times the amount they charge younger customers. “Low-income adults – especially older people – would face out-of-pocket premiums (after accounting for their tax credits) too high for them to realistically afford coverage,” Straw said.

Near-Retirees Face Steep Hikes

For its analysis the CBPP looked at the 39 states using the federal Healthcare.gov website to enroll residents. Its findings are based on the average benchmark premium for each state. The report focused on the estimated premiums in states that choose not to seek a waiver of ACA protections, including the requirement to cover certain essential health benefits.

In 10 of those 39 states, the individual-market premium would exceed income for consumers at the federal poverty level. In more sparsely populated states the hike tends to be even more severe. The impact on lower-income 60-year-olds in Alaska is the most dramatic, with premiums that reach as high as 188% of wages. “The consequences for low-income adults with serious health needs in states that do waive these protections would be even more dire,” Straw wrote.

Figure 1. The AHCA would roll back the Medicaid expansion, pushing more low-income adults onto the individual market. Even when factoring in tax credits, 60-year-olds at the poverty level could see premiums that take up a large portion of their income. The numbers below are based on a poverty line of $12,600 for the 48 contiguous states, $15,750 in Alaska and $14,500 in Hawaii.

Source: Center on Budget and Policy Priorities

While the effects are less severe for low-income individuals who are middle-aged, the report suggests that the Medicaid rollback could make coverage unaffordable for them, as well. For example, in 14 states those who are at or below the poverty line would face premiums that consume half their paycheck.

The Bottom Line

Under the AHCA, some segments of the population could see their premiums start to fall. Nevertheless, because of cuts to Medicaid and the elimination of cost-sharing features from the ACA, many low-income adults who are not yet old enough for Medicare will likely see dramatically higher costs.

With the bill now in the Senate, the final shape of the legislation is still unknown. Low-income adults might consider using the balance of 2017 to talk to physicians about any emerging medical needs that should be handled in case their costs and access to care worsen next year. (For more, see American Health Care Act AKA ‘Trumpcare’ Explained.)

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