Replacing Obamacare with A Means-Tested Tax Credit

HSAIn his joint address to Congress last Tuesday, President Trump promoted the idea of a tax credit to support people’s purchase of health care. This is in line with the approach taken by Secretary Tom Price when he was in Congress, and that of the House Republican leadership.

Some self-styled conservatives oppose a refundable tax credit because it would cost taxpayers a lot of money. That which we currently understand to be the Republican replacement bill would offer a tax credit to individuals based on age but not on income, if they do not get employer-based health benefits.

That may be changing to a means-tested tax credit in order to win the support of conservative Republican lawmakers. “Oh, the irony,” exclaims one journalist: Don’t those Republicans know Obamacare contains means-tested tax credits? It’s still Obamacare-Lite!

No, it would not be.

I have long supported a universal tax credit that everyone, even Warren Buffett or Bill Gates could claim. However, this would be “paid for” by eliminating the exclusion of employer-based benefits from workers’ taxable income and Medicaid, the joint state-federal welfare program.

Unfortunately, the business community resists any change to the former and Republican politicians seem incapable of considering Medicaid outside its current budget silo. (The proposal to change federal Medicaid financing in to a block grant or per capita grant comes close. To eliminate Medicaid as we know it, Republican politicians just need to understand tax credits due to individuals who do not claim them would be transferred to their states of residence to fund the safety net.)

So, a means-tested tax credit may be the best reform we get. Is it Obamacare-Lite? Not really, especially if the tax credit phased out at a flat rate. I previously estimated a claw-back of 13.5 percent within the same income bands Obamacare offers tax credits would be budget neutral relative to the status quo.

This would eliminate Obamacare’s significant marginal income-tax “cliffs” within those age bands, which limit work incentives. It would be a significant improvement to Obamacare.

Comments (89)

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  1. Jimbino says:

    Are these tax credits to be available for health care, or just for the insurance religion?

  2. Lee Benham says:

    John,

    Means tested tax credits will not work for the main reason they don’t work with The ACA.
    Transference of risk.. When people have to spend their own money on insurance they think differently than an employee who thinks their employer is paying for most of the plan. They don t care if the insurance costs as much as a pizza if they don’t see value in the insurance. They will buy the pizza instead. It has nothing to do with logic. It’s more of an IQ problem.. I have gotten several people’s insurance cost to under $10 a month just to have them say.” Why would I spend the $10 of i still have a $6000 deductible.?”

    In their minds They are not risking anything because they have nothing to lose.

    • Barry Carol says:

      “They are not risking anything because they have nothing to lose.”

      That attitude reminds me of the 1961 song by Ral Donner titled “You Don’t Know What You’ve Got Until You Lose It.”

      People are healthy until they aren’t and serious accidents can happen in an instant. Cancer diagnoses and heart issues are not unheard of among young people either. Maybe these young folks should think about the consequences of being wrong. In the meantime, enjoy the monthly pizza for the $10 freed up by not paying for health insurance.

  3. Bob Hertz says:

    I like the tax credits a lot, whether means-tested or available to all.
    The challenge I see is how to pay for them.

    Most of the Republican plans out there now are very eager to repeal the existing Obamacare taxes, especially those on persons making over $250,000 a year.

    If those taxes are gone, which takes $35 billion a year off the board, then one needs a new tax to finance the credits.

    This new tax is the old Cadillac tax on the largest employer paid insurance premiums.

    I do NOT think this tax will pass and even if it did pass, it will not produce the projected revenues.

    Therefore the responsible thing is to keep the existing ACA taxes. The Sessions Cassidy bills are honest about this item.

    • Barry Carol says:

      I support keeping the ACA taxes on income above $200K for a single person and $250K for a couple and I say that as someone who actually pays them. Unlike most people, I’m willing to subsidize lower income people who can’t afford coverage on their own even if it costs me and my wife money personally.

      I think age-based tax credits could be at least partly clawed back from higher income people with a variant of the IRMAA surcharge that Medicare uses to extract additional Part B and Part D premium payments from single people making over $85K per year and couples making over $170K per year using the tax return from two years prior to determine the income threshold.

      I still believe that there is a fundamental inconsistency between charging older folks up to five times as much as younger people to reflect the difference in actuarial risk but offering an age-based tax credit to subsidize their premium that’s worth only twice as much as what the younger person would get.

  4. Bart I says:

    This would be more interesting if the self-styled conservatives were named and their precise objections noted.

    I consider myself a conservative, at least in the dictionary sense of the word, and possibly the only conservative regular commenter here. The word usually implies a cautious approach to change. I’m also concerned about the design of the proposed tax credits, and whether they accomplish a stated purpose for the money or are simply largess intended to buy support for a reform proposal.

    Or worse, whether spending this money could cause actual harm at least in the short term, for example by disrupting employer-sponsored insurance before the alternative is fully in place and people are able to transition voluntarily.

    I’m also concerned about creating a new entitlement that will be hard to claw back in the future.

    If you want to win over these conservatives, one approach might be to detail why the tax credits are needed, what they are intended to accomplish, and to justify the amounts being proposed. The drafts being tossed around seem to have arbitrary figures based on age and dependent status, but I have seen no real explanation for the amounts.

    A comment under the previous post crows about a young family with an insurance cost of $6000 gets a tax credit of $9000. A couple of the radical libertarians here are happy that the proposal will destroy employer-sponsored insurance within a couple of years. I don’t blame conservatives for viewing this critically.

    • Ron Greiner says:

      Bart, you are not a conservative, get real. You say, “A couple of the radical libertarians here are happy that the proposal will destroy employer-sponsored insurance within a couple of years. I don’t blame conservatives for viewing this critically.”

      Conservatives don’t want their daughter on employer-based insurance that is lost if she gets too sick to work.

      You just make money on that crap.

      • Bart I says:

        Ron, was it always your ambition to be an internet troll, or did you fall into the role accidentally?

        I’m not in the insurance business so I don’t make money on ESI. I’m happy I have it, because it seems to be the least-unstable option right now.

        I wouldn’t want my daughter on the STM crap you always tout if she becomes ill. I think you’re just bitter because ESM represents 80 percent of the potential market and you can’t figure out how to make money on it.

        • Ron Greiner says:

          Bart, you are at the NCPA who came up with the idea of tax-free HSAs and I enrolled the 1st HSA. Now you call me an internet troll. I was here long before you.

          2. I am correct that when a young woman gets too sick to work she loses her employer’s insurance which is deadly. That is not conservative Bart.

          3. I spent over $1 million adverting the tax-free MSA and if they wanted a dangerous group plan I walked away. I have NEVER sold a group plan in my life. So for you to say I can’t figure it out is stupid. I didn’t care about the money.

          4. I never sold a Short Term Medical in my life before Obamacare but now it is the perfect tool to take people to the next Open Enrollment.

          PLEASE Bart, with your great knowledge explain to Lee and me how we are selling crap. Good luck.

        • Bart I says:

          Ron, I called you a troll based on your rude comments, constant name-calling, and incessant baiting. How long you’ve been commenting here is irrelevant.

          Anyone who loses ESI and exhausts COBRA has the same access to Obamacare as your STM clients.

          Apologies to everyone else who had to read this.

          • Ron Greiner says:

            Bart, [you started it] my friend with, “A comment under the previous post crows about a young family with an insurance cost of $6000 gets a tax credit of $9000. A couple of the radical libertarians here are happy that the proposal will destroy employer-sponsored insurance within a couple of years. I don’t blame conservatives for viewing this critically.”

            Then you say, “I wouldn’t want my daughter on the STM crap you always tout if she becomes ill.”

            I asked why you called STM crap and you can’t, figures. I’m a professional bound by ethics with my license and you are a blogger with uninformed opinions.

            Now you say a woman with cancer and is too sick to work will just love paying $1,900 a month for over-priced COBRA instead of $400 a month for STM. I think you are wrong there too. When they call me they are crying.

            With Republican health care reform your dangerous over-priced employer-based health insurance will slam your beautiful daughter onto COBRA until she goes to the much more expensive HIGH RISK POOL, smart thinking dad.

            Bart, your apologies are not required we are used to people PRETENDING they know what they are talking about here at the NCPA blog.

          • Bart I says:

            [you started it] my friend with, “A comment under the previous post crows about a young family with an insurance cost of $6000 gets a tax credit of $9000. A couple of the radical libertarians here are happy that the proposal will destroy employer-sponsored insurance within a couple of years. I don’t blame conservatives for viewing this critically.”

            Was that untrue? I’m not sure which part you object to, since you didn’t specify in your original flames. Though I suppose “populist” might fit better than libertarian.

            I work for a large-ish tech company, and according box 12b my health benefits were valued at $7400-something. That works out to around $620 per month for a decent plan, not $1900. It’s my understanding that employers can only tack on a few percent for COBRA, but you tell me since you’re the expert.

            For that couple of hundred a month I can stay on Cal-COBRA for three years, and don’t need to worry about getting dumped onto the exchanges if I can’t renew my STM.

            It was my understanding that job termination is a qualifying event, so your client with the $1900/month COBRA could skip the COBRA and to directly to Obamacare. But maybe I’m wrong about that as well, you tell me.

            But if that’s the case, the only reason to use STM is that it’s cheaper than Obamacare or the plan is less narrow. In either case your complaint should be with Obamacare not ESI.

            Ultimately anything could be called crap that relies on Obamacare as a fallback plan. I suppose that includes all of the above.

  5. Lee Benham says:

    Another reason income based vs age based are drastically different is how the Insurance market will adapt. Age based tax credits allow for individuals to migrate from employer based insurance to individual personal portable insurance regardless of income levels. Income based tax credits will still allow the higher income individuals to utilize employer based benefits that come with greater tax advantages. This will slow the migration from employer based plans to personal probable individual plans. This allows the imbedded costs of insurance in our products and services that has been the boat anchor of our economy for the last 30 years to last a few years longer.
    Just when the politicians have a great idea they do everything they can to screw it up.

    • Ron Greiner says:

      Lee you say, “This allows the embedded costs of insurance in our products and services that has been the boat anchor of our economy for the last 30 years to last a few years longer.”

      People will do anything to keep their current money coming no matter what might be better for our country.

      This is health insurance which is more than billions and billions it is trillions and trillions!

  6. Ron Greiner says:

    Ha ha ha lucky we the people have some time to HIGH PRESSURE these goofy politicians into doing what is right. We just need ONE knowledgeable person on FOX News and this whole damn thing goes haywire.

    Do we know anybody that can get on FOX News and inform the masses?

  7. Jimbino says:

    Where’s Milton Friedman when we need him on Fox? How about John Stossel?

    • Allan says:

      Jimbino, Milton Friedman is dead and Stossel at least till a few weeks ago was on the Fox business channel. Friedman, though dead, is all over the Internet and now one can even view the show originally on PBS Free to Choose where Friedman in different hours talks about diferent parts of our economy.

      Nowhere does Friedman say health insurance should not exist. Nowhere does he make some of the wild claims you make. He was soft spoken, direct and knowledgeable.

  8. Ron Greiner says:

    Jimbino, Milton Friedman says, “Anytime you stop doing something stupid, that’s smart.” He was talking about Social Security.

    NO, Stossel has had the chance and can’t think of a word to say. We need someone who understands insurance not some current talking head.

  9. Bob Hertz says:

    I hate to be a party pooper, but the proposals for tax credits that I have read all state that no credits will be available to anyone who is even eligible for an employer plan.

    I do not like this, part because it does not fix the family glitch.

    But unless things change soon, the migration from employer plans will not occur.

    • Barry Carol says:

      It shouldn’t be hard to fix the family glitch. Does anyone know roughly how many people, including children, are affected by that issue? There should also be some benchmark that defines AFFORDABLE access to ESI. With those two fixes, I support making people eligible for affordable ESI ineligible for age-based tax credits.

      • Allan says:

        It’s not hard to fix anything as long as you throw a lot of money around and dump our Constitutional Republic down the drain.

  10. Lee Benham says:

    Barry,

    You are correct, the Family glitch is easy to fix.
    however name a fix that will not hasten the migration to individual plans.

    That’s why it hasn’t been fixed yet.

    Very few employers pay any portion of dependent coverage. As soon as the glitch is fixed dependents will jump at a chance to get tax credits.

    None of the proposals I’ve seen say access they are have been carful worded to say have. Now define have.

    • Allan says:

      That is right Lee, but Barry likes the idea behind employer sponsored healthcare. Therefore he has to figure out a way to spend money yet force the people to remain in the employers company store.

  11. Barry Carol says:

    Lee, from what I’ve read, there are roughly 40 million people, excluding illegal immigrants, who do not currently get their health insurance through an employer, Medicare or Medicaid. If you assume a median age of about 40 and an average age-based tax credit of $3,000, it implies that it would cost $120 billion per year to provide these tax credits on a refundable basis, including for those who currently don’t make enough to owe income taxes or very little income taxes. It’s highly unlikely that there will be any changes to the ESI tax preference except possibly a modest version of the ACA’s Cadillac tax which lobbyists will probably beat back.

    We will need to keep the ACA taxes and find additional revenue if we expect to pay for this new entitlement or just let the deficit increase further which I don’t think would be wise.

    If we go back to underwriting, we will need another large pot of money to finance high risk pools that actually work for the people who need them. The bottom line is that it will cost a ton of money to square this circle.

  12. Bob Hertz says:

    Thanks for your comments, Barry and Lee.
    I am fascinated to see what level of tax credits will be in the new bill from Paul Ryan. $120 billion is an accurate number if the credits go to everyone without employer coverage. The new Cadillac tax will be lucky to raise one tenth of that. I doubt that Ryan can endorse that much deficit spending.

    Lee, I do not quite agree with your inference that employers stood in the way of fixing the family glitch. I think that Republicans stood in the way, because fixing the glitch would make the ACA more popular — and therefore it had to be opposed.

    Here is the Urban Institute’s take on the cost of fixing the glitch — about $8 billion a year. The Republicans were dead set against many such fixes to the ACA.

    “Our proposed approach is as follows. If at least one family member has an employer offer for family
    coverage, the minimum direct cost of which exceeds the employer-sponsored insurance affordability
    threshold (8.5 percent of income under our modified policy), the family members would be eligible for
    financial assistance through the marketplace. Contributions that the worker makes to the employer’s
    plan for single coverage would count against the amount the family members would be required to
    contribute for marketplace coverage. For example, if the worker contributed 4.0 percent of family
    income for a single policy through his employer but family coverage would cost 12 percent of his family
    income, the family members (the worker’s spouse and children) could be eligible for financial assistance
    if they obtain their coverage through the marketplace. Given their income, if the family would otherwise
    be expected to contribute 7.0 percent of their income for marketplace coverage, this amount would be
    reduced by the 4.0 percent the worker was paying for single employer-based coverage, and the family
    would pay the additional 3.0 percent for family coverage through the marketplace.
    Eliminating the family glitch alone through revisions of existing regulations does not require
    additional revenues to be raised because, if properly interpreted originally, any associated costs would
    be incorporated in the ACA’s baseline. However, because we are proposing to enhance the tax credits
    and cost-sharing reductions through the marketplace, there would be an additional cost. In addition,
    even though a regulatory change would incorporate the costs into the baseline, fixing this problem
    would increase federal spending relative to the current level; as a consequence, we provide an estimate
    of both the cost associated with correcting the problem within the context of current law and the
    marginal cost of doing so with our proposed, enhanced financial assistance. We estimate that the base
    ADDRESSING UNDERINVESTMENT IN THE AFFORDABLE CARE AC T 2 1
    increase in spending of addressing the problem through changes in regulation would be $78 billion over
    10 years; an additional $39 billion over 10 years is needed to adjust for our proposed improvements to
    the premium tax credits and cost-sharing reductions.”

  13. Lee Benham says:

    Bob,

    I never said employers stood in the way. they don’t have a clue what is going on.

    Insurance companies do not want to end the Employer based cash cow. Individual insurance is way more labor intensive that the group market. Insurance companies love the fact that a company employee can enroll hundreds of insureds.

    Please explain how any fix of the family glitch will not adversely effect ESI.

    • Barry Carol says:

      The family glitch is what it is. Fixing it shouldn’t affect ESI because family members either weren’t offered coverage before or the required employee contribution was prohibitively expensive so many of them didn’t take it. The employee who can get ESI for a reasonable contribution will not be eligible for an age-based tax credit in all likelihood. Family members would be if the glitch is fixed.

  14. Allan says:

    The fight is on about employer sponsored health benefits a fight that reminds us of the company store. Amazingly Milton Friedman wrote about this reproduced @ http://miltonfriedman.hoover.org/friedman_images/Collections/2016c21/WSJ_02_03_1993.pdf

    “The company town has been revived in one major area: medical care. It is taken for granted that workers should receive their pay partly in kind, in the form of medical care provided by the employer. How come? Why single out medical care? Surely food is no less essential to life than medical care. Why is it not at least as logical for workers to be required to buy their food at the company store as to be required to buy their medical care at the company store?

    The revival of the company store has less to do with logic than with pure chance. It is a wonderful example of how one bad government policy leads to another.”

    (WW2)“Wage and price controls ended but the tax-exemption of medical care provided by employers did not, which explains the survival of the company store in this area. That survival is unquestionably a major reason for the present crisis in medical care.”

    “ As the country grew and the isolated company town became far less common, reformers had their way and the payment of wages in cash became the norm.”

    He discsussed the solutions, but the socialists like control and what better control than controlling the healthcare of most working adults? The socialists like gulag’s and the company store so we can’t look towards them for solutions.

    • Ron Greiner says:

      I was born one mornin’ when the sun didn’t shine
      I picked up my shovel and I walked to the mine
      I loaded sixteen tons of number 9 coal
      And the store boss said “Well, a-bless my soul”

      You load sixteen tons, what do you get?
      Another day older and deeper in debt
      Saint Peter, don’t you call me ’cause I can’t go
      I owe my soul to the company store

      I was born one mornin’, it was drizzlin’ rain
      Fightin’ and trouble are my middle name
      I was raised in the canebrake by an ol’ mama lion
      Cain’t no-a high-toned woman make me walk the line

      You load sixteen tons, what do you get?
      Another day older and deeper in debt
      Saint Peter, don’t you call me ’cause I can’t go
      I owe my soul to the company store

        • Jimbino says:

          Allan,

          Friedman wrote extensively about health insurance, as here:

          http://www.liberatehealthcare.com/models/MFriedman_hc.htm

          You claim, “Nowhere does Friedman say health insurance should not exist.”

          No economic libertarian will maintain that something should not exist, but rather that no gummint has the right to force religion, superstition or self-insurance on anyone.

          • Allan says:

            “No economic libertarian will maintain that something should not exist, but rather that no gummint has the right to force religion, superstition or self-insurance on anyone.”

            That is exactly right. I’ll bet Milton Friedman carrieed a lot of insurance.

            However, your claims over and over again were quite different than this one. You even called insurance a religion. But, insurance has enhanced trade throughout the ages and is a prudent thing to buy under certain conditions.

            • Ron Greiner says:

              That is right Allan. It wasn’t religion that forced those merchant ship owners in the pea-picking-past to buy insurance it was “The World of Pirates” that they lived in.

              Also, a good insurance salesman pumping the benefits. I heard it was like taking candy from a baby, a blind baby.

              • Allan says:

                Thanks Ron. Let me add a bit from Jimbino’s citation. It tells us a bit of how Milton Friedman felt about insurance.

                “We generally rely on insurance to protect us against events that are highly unlikely to occur but that involve large losses if they do occur—major catastrophes, not minor, regularly recurring expenses. We insure our houses against loss from fire, not against the cost of having to cut the lawn. We insure our cars against liability to others or major damage, not against having to pay for gasoline.”

                Nowhere does Milton Friedman call insurance ‘religion’.

                But he does talk about how healthcare insurance would have developed. “If the tax exemption for employer-provided medical care and Medicare and Medicaid had never been enacted, the insurance market for medical care would probably have developed as other insurance markets have. The typical form of medical insurance would have been catastrophic insurance (i.e., insurance with a very high deductible).”

                …And he talks about how much ESI has cost the nation, “One clue is my estimate that if the pre–World War II system had continued—that is, if tax exemption and Medicare and Medicaid had never been enacted—expenditures on medical care would have amounted to less than half the current level, which would have put us near the bottom of the OECD list rather than at the top.”

          • Bart I says:

            Interestingly, Jimbino’s link contained this:

            A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.

            The idea of “providing every family in the United States with catastrophic insurance” is not something I would have expected from Friedman.

            • Jimbino says:

              Nowhere does Friedman countenance forcing a USSA citizen to carry insurance that covers injury to himself. Such would be akin to slavery.

            • Allan says:

              Bart, at one time or another Milton Friedman said it was worth it to bend principles a little if one is guaranteed a very substantial move in the right direction.

            • Bart I says:

              In this case I suspect he’s mainly tossing out ideas in order to illustrate some principles.

              Personally, I wouldn’t take it as a strong endorsement of any particular plan any more than I would construe General Relativity as endorsement of a nuclear power plant design.

    • Bart I says:

      Laszewski called it “mind boggling” and he’s generally sounded optimistic about something being passed.

  15. Bob Hertz says:

    More details on the Republican plan surfaced late yesterday.
    ..
    The Cadillac tax will be dropped. Instead, the new tax credits will be ‘paid for’ by greater cuts in Medicaid.

    (raiding one entitlement to pay for another….a technique also favored by Democrats)

    The CBO is supposed to estimate on whether this adds to the deficit…..but the bill is supposed to get to the floor of the House very soon, and not wait for the CBO.

    • Ron Greiner says:

      Bob, correction, The Cadillac tax is postponed again. This ENTITLEMENT reform being delayed is a technique favored by Democrats. BUT, it won’t help Employer-based health insurance because it is DOOMED. DOOMED I tell you.

  16. Lee Benham says:

    I could be wrong but this is how I read it so far.

    It appears to me Minimum loss rations still apply
    guarantee issue still applies
    it still picks winners and losers just at higher income levels
    still has the family glitch
    will still have open enrolment periods.

    Sorry I don’t see this stabilizing the individual market I see it creating even more problems

    • Ron Greiner says:

      This is a losing attempt to keep the TITANIC sinking ship of employer-based health insurance afloat a few more years, it won’t work.

      1. All small employer groups throw in the towel first. Offering expensive employer-based insurance is STEALING $10,000 of Trump tax-credits for a 40-year-old couple with 2 children.

      2. Life insurance with living benefits explodes coupled with STM, or 2 wink wink, until open enrollment with no medical questions.

      3. HSAs explode.

      4. Employers will stop offering dependent coverage because now their is no mandate. GLITCH GONE!

      5. Insurance companies will refuse to get into health insurance because of the dying alcoholic needing an $800,000 liver so less competition.

      Ha ha ha didn’t those DC wizards think of these things?

  17. Lee Benham says:

    Because there are no minimum benefits mandated some insurance companies will get into the market.
    Because the excess can be put into the HSA accounts and the deposits can be as high as the max out of pocket. Healthy people will look for 10 even 20 thousand dollar out of pocket plans to maximize their HSA accounts. When they get sick they will switch on the next open enrolment date to a lower deductible non HSA plan.
    Insureds will still only need to get from open enrollment to the next open enrollment.
    How much risk will people need to cover to accomplish the goal?
    My first thoughts are why an insurance company would want to play in this market unless they had very large deductibles. I can see $25,000 or even $50,000 deductible plans being offered in the future.

    • Barry Carol says:

      Lee, with all due respect, I predict there will be provisions in the final bill to mitigate the obvious gaming of the system that you refer to. Sure people might be able to buy very high deductible plans or plans with skimpy benefits and maximize the money they can deposit into their HSA. There will be no mandate to purchase coverage and no penalty for not buying insurance. However, I think there will be a continuous coverage rule and a minimum creditable coverage rule that will probably define creditable coverage as an actuarial value of 60% (Bronze level) or at least 50%. People who fall short of the minimum creditable coverage criteria will pay a significant premium surcharge when they try to buy a more comprehensive plan on a guaranteed issue basis after they get sick. I’ve seen references to a 30% surcharge in early drafts and it could wind up higher than that. How long the surcharge lasts is open to question but Medicare imposes its surcharge forever which I think is appropriate under the circumstances.

      I also predict that the ACA exchange plans will evolve into explicit high risk pools and we will probably have to give people subsidies on top of the age-based tax credits to ensure that their out-of-pocket premium payment doesn’t exceed 10% of income with a sliding scale ceiling down to close to zero for those with income just above the Medicaid eligibility level. I think the biggest single challenge, by far, will be finding a way to pay for high risk pools for the people who need them. It could turn out to be crazy expensive to do that but hey, young healthy people will be able to buy cheap coverage and maybe even have money left over to deposit into their HSA. Bully for them.

      • Ron Greiner says:

        Barry, go read the bill, it says exactly what you “predict”. It’s a 30% surcharge for 1 year, period. I don’t think Lee is correct on $25,000 deductibles and HSAs. My eyes were tired so I might be wrong.

        It says individual insurance with no mention of deductibles so someone could have a $25,000 deductible and get tax credits to pay for it.

        You will hate this but creditable coverage has always included STM.

        Guaranteed Issue and High Risk Pools, too strange.

  18. Bob Hertz says:

    Not a huge deal, but some employer groups will ‘stay put.’
    If the decision maker at the firm is older, which is often teh case, their group plan may be far more favorable to them than going into the individual market.

    If I was 60 years old and the new individual premium was $1,200 a month, then even with a $4,000 tax credit this would not be attractive to me. I am keeping my group coverage that costs $800 a month and the business can pay all of the premium.

    Since insurers can now charge 60 year olds what they really cost, the new premium might be more than $1,200 a month.

    • Ron Greiner says:

      Sure Bob, If this old guy is paying $800 a month then the 30-year-old guy is too. Nice boss. The family for the young guy is $20,000 a year on employer-based insurance and they are throwing away his $9,000 in tax credits.

      Hope that this client of yours doesn’t meet one of my agents telling him to drop his cost for insurance to ZERO!

      If the employer is spending all of that money on the young guy why doesn’t he deposit the money into his employee’s HSA instead of giving it to the insurance company, never seen again?

      You are just dreaming Bob.

      • Barry Carol says:

        Aren’t small groups experience rated? If the young, healthy folks could just take their tax credits and leave, presumably with a higher salary than before, the premium for the remaining employees would be astronomical. I don’t think it works for the employer or the older employees whether they are sick or not.

        • Allan says:

          That points to the demise of the new company store. What a pleasant thought.

          • Ron Greiner says:

            Allan, I told Dr. Lee Hieb that you called employer-based insurance “The Company Store” and she said, “NO way.” The company store had some competition. Employer-based health insurance is more like the plantation and slaves!

            She is the past President of the Association of American Physicians and Surgeons (AAPS) and is the only doctor in Hillary the Movie.

            • Ron Greiner says:

              Allan, peak at DonaldTrumpHSA.com

            • Allan says:

              With all due respect to the fine doctor and the AAPS both of which have done a wonderful job, Dr. Heib is wrong. Slaves could not leave their place of employ unless they were sold. Those working for the Company Store, however, were free to leave though debtors prison might have been their next lodging. Would Dr. Heib yield and consider a compromise and say employer sponsored healthcare is the modern equivalent of indentured servants since it can create job lock?

              • Ron Greiner says:

                I’m sure she said much more than I wrote. Her last article:

                The first thing, is to understand what real insurance is. Real insurance (think your house or car) is owned by the individual. It is therefore portable. It is purchased early in life when you are healthy, and the insurance is therefore affordable. It is for catastrophic illnesses only – not for every little sniffle or outpatient test. By paying cash for outpatient tests and doctors visits, and by removing outpatient care from the nightmarish Medicare regulations, fees for services will drop to free-market, competitive levels. And, by paying premiums throughout your life, your insurance company in a truly competitive market – not in a government monopoly market – will offer affordable rates for seniors by investing premiums over their lifetime. Actuaries, not government toadies, will determine rates.

                She is from Iowa and my daughter was born in Iowa and I don’t argue with Iowa women. I would argue with Dr. Hieb before I would my daughter, she is tough.

                • Barry Carol says:

                  Car insurance is actually more expensive for young people because they have more accidents.

                  As for health insurance, how come prior to 1965 when Medicare became law, half of all seniors lacked health insurance because they couldn’t afford it or couldn’t buy it at any price? Sometimes markets fail.

                  • Lee Benham says:

                    Well we had better get young people some tax credits to offset the outrageous premiums on their auto insurance.

                    • Ron Greiner says:

                      Come on Lee, you new PC guy.

                    • Allan says:

                      Right. …And why should young woman pay less than young men just because young men race and have more accidents, We have got to make things equal or Santa Claus won’t come again.

                  • Lee Benham says:

                    Policies fail, markets adapt

                  • Allan says:

                    Barry, prior to 1965 a lot of people didn’t have health insurance, but the number people carrying it including seniors was growing. Medicare killed a growing private market. Additionally there were alternatives to Medicare to help those that were in need, but those people generous with other people’s money didn’t think of the economics involved and saddled the young working families with a debt that paid for senior healthcare even when those young families couldn’t pay for their own. For many Medicare has become a Robin Hood in reverse.

                    There was no monopoly or restraint of trade and there was no significant market place failure, but we have to reconcile that with the fact that you call prepaid medical care health insurance. Where healthcare is concerned you are a die hard collectivist and thus stretch the phrase marketplace failure to your own desires in argument. You believe in the “Nirvana Fallacy” thinking that government actions have no imperfections and the minor imperfections of the free marketplace are reasons for government takeover. The problem is that government action is loaded with imperfections and is the biggest cause of market failures. Not to recognize that demonstrates a good deal of naiveté.

                    • Barry Carol says:

                      Programs like Medicare, Medicaid and Social Security don’t just happen out of the blue. They happen to solve a problem deemed serious enough to require government / taxpayer money to resolve. If the problems weren’t serious, those programs never would have gotten the votes needed to pass the House and Senate. Whether you or I call it a market failure or not is little more than semantics.

                      For the record, I have no problem with high deductible health insurance. I’ve always viewed relatively inexpensive medical care as in the same category as oil changes and tires for cars. While I don’t see a need for prepaid health care, I do see a need to subsidize people who can’t afford even high deductible health insurance on their own.

                    • Ron Greiner says:

                      Barry, you are always WRONG. JFK tried to get Medicare passed and it was rejected, period.

                      Then Dallas happened and lying LBJ said that Medicare was the dying wish of LBJ and nobody was going to STOP JFK’s dying wish. Learn real history Barry.

                    • Allan says:

                      “Programs like Medicare, Medicaid and Social Security don’t just happen out of the blue.”

                      They sure do when collectivists are in control.

                      Your logic is why Cuba had to live with Fidel Castro for almost 65 years and now is living with his brother. There must have been a need you say.

                      As far as semantics is concerned they are the forests the collectivists hide in.

        • Bob Hertz says:

          Group with under 50 employees are community rated.
          However, if a large number of small employers began losing their younger employees, the rate effect that you describe would show up eventually.

          • Barry Carol says:

            Aren’t the small groups also experience rated too? How many lives are currently insured by small groups of 50 or fewer and 100 or fewer as compared to the individual market which never covered more than 20 million lives or so?

            Small groups are where the market opportunity for the individual market exists as lots of small employers never offered health insurance. I don’t see the status quo changing for the larger groups, especially 500 or more employees, anytime soon. Most of those are self-funded or on what are, in effect, cost plus contracts. Aren’t they?

            Of course, there is still the issue of adequately funding high risk pools overhanging the whole effort to replace the ACA. Come to a reasonable agreement on that and the rest should be comparatively easy but high risk pools will cost a lot of money to do right. That’s the main problem. Subsidies beyond age-based tax credits for lower income people who make too much to qualify for Medicaid will also be a tough problem to resolve. If both of those issues were easy to resolve, we would have done it a long time ago and there never would have been a need for the ACA in the first place.

            • Barry Carol says:

              Get real Ron. Over 150 million people get their health insurance through an employer. I have never seen any quantification from you or anyone else as to how many people lose employer coverage in any given year because they get too sick to work. In the meantime, employers pay lots of costly bills for sick employees and family members including premature babies who often rack up seven figure healthcare bills. Employers who provide health insurance to their retirees continue to provide it after those employees get sick as well. Over a 40 year career with four different employers, I’ve seen employees get sick with cancer, heart disease and HIV/AIDS but I never saw one lose their health insurance before they died.

              The more significant problem with employer coverage is getting laid off and not being able to afford the COBRA premium. Of course, people with individual market coverage who lose their source of income face the same problem. Maybe you only sell policies to wealthy doctors who can afford to continue to pay their health insurance premium, mortgage payment and all other living costs out of savings and investments but most people can’t do that. What good is a guaranteed renewable individual market policy if you can’t afford to pay the premium anymore because you lost your source of income?

              The getting too sick to work meme that you constantly rail against could be easily fixed by changing the law to make COBRA last indefinitely. As long as you can pay the full cost of employer coverage, you can keep it forever. Of course, only 2% of eligible people pick up COBRA now because they either can’t afford the premium or consider themselves healthy enough to take the risk of remaining uninsured or maybe they can qualify for a STM plan and buy that instead.

              • Barry Carol says:

                When I needed COBRA for my wife, it was $437 per month for comprehensive coverage. How can anyone who has cancer or is otherwise too sick to work by coverage for $475 per month? It doesn’t make any sense and the large employer average for family coverage is about $1,500 per month. Your $1,900 figure is probably another one of your loony cherry picked extreme numbers that applies to very few people if any.

                Separately, why don’t you learn some civility stop the name calling and ad hominem attack against anyone who disagrees with you. I try my best to be polite to you and everyone else here. It would be nice if you extended the same courtesy to me and to them.

                • Ron Greiner says:

                  Barry, notice Bob never says you are correct that people are not losing their insurance. That is a LIE that you keep saying. Bob knows 100% of employees who are not satisfying the ELIGIBILITY requirement of 30-hour-per week are terminated. Even the owner’s brother would be terminated if they were not working the required amount.

                  I’m not “cherry picking” the $1,900 a month for family coverage. That is the amount for Pasco schools, Iowa State University, University of Iowa, State of Iowa Employees, I could go on and on.

                  YOU liberals always say I’m “cherry picking” but then can’t take it when I expose your LIES.

                  Barry you ask, “I have never seen any quantification from you or anyone else as to how many people lose employer coverage in any given year because they get too sick to work?”

                  ANSWER: 100%

              • Barry Carol says:

                100% of HOW MANY? 100, 1,000, 10,000

                • Ron Greiner says:

                  I don’t know but I will guess at 100 million since 1948. That seems to small to me. I asked John how many but he won’t report. Nobody wants to report that number including Kaiser, ha ha.

                  It’s the world of propaganda. It is worse in America in 2017 than NAZI Germany in 1938. This health insurance thing is trillions and trillions of dollars.

              • Barry Carol says:

                100% is not an answer. I’m asking about numbers of people out of the 150 million with employer coverage. Maybe it’s only 100 or 1,000 or some other tiny number in any given year. I don’t know and apparently you don’t either.

              • Allan says:

                “Over a 40 year career with four different employers, I’ve seen employees get sick with cancer, heart disease and HIV/AIDS but I never saw one lose their health insurance before they died.”

                Barry, you are an intelligent white collar guy sought after and highly paid. You and those you work with are treated differently than the vast majority of the population.

                I disagree with you, but you are NOT slimy or stupid. You bring a lot to the table even though some of your ideas, I believe, lack merit. Perhaps you base too many of your ideas on anecdotes that appear more frequently in your population, but don’t appear in the vastly greater general population.

            • Bart I says:

              Aren’t the small groups also experience rated too?

              From past experience in California, small groups here are community rated but age-banded (I don’t know what ratio).

              There is also a limit on experience rating– there is something like a maximum 10 percent spread on what an insurer can charge employers. I recall reading Texas has something similar. I don’t know about states other than CA and TX.

  19. PLM says:

    Means and age adjusted tax credit is a little better than obamacare. So what. Not good enough for me. Under the “little better, but politicians are happy, republican alternative,” if I work for a company that provides health care I get a great tax break. Under the “little better trumpcare,” I get no tax break if my company does not provide health insurance. But good news. All I have to do to rectify this problem is ask my employer to cut my salary by 70%. I then qualify for means and age adjusted tax credits. Can wait to tell my wife the great news. She will be so happy. Yea, Republicans. Poverty for all.

    • Ron Greiner says:

      PLM, you liberal minimum wage bloggers in support of Obamacare are really bad. This is a goofy argument and under Obamacare you would have to tell your wife your employer has got to cut your wages by 70% to get those stingy income-based tax credits.

      Under Obamacare you and your wife get NOTHING if your MAGI is $65,000 a year. Under President Trump’s plan you get credits even if you are earning $200,000 a year. Come on PLM, how much are you earning to get down to $225,000 and get some of those Republican tax credits?

      • PLM says:

        I’m a hardcore conservative. I support age adjusted refundable tax credits applied to the individual. I support portable health insurance with an HSA that wraps around the deductible. I also strongly support deregulating the supply side of the equation.

        If you want to means test the credit, then apply to all plans. This I could support, in conjunction with lowering marginal tax rates and increasing the standard deduction. But it makes no sense to provide a generous tax break to employer sponsored plans, but exclude tax break for plans outside of employment. You end up with overly generous plans that bid up the cost of health insurance to individuals who cannot access generous tax breaks.

        I will make a prediction. As more and more employers move towards high deductible plans, fewer employees will want employer sponsored health insurance. They will want portability, because employee churn is high. Imagine if in january you spend $2000 in the deductible. In Feb you are fired but immediately find a new job that provides insurance. You have to start your deductible all over again.

    • Bart I says:

      if I work for a company that provides health care I get a great tax break.

      PLM, you may not be getting as great a tax break as you think. If you’re healthy, most of that tax break is offset by the larger premium you’re paying to support sicker employees.

      I’ve been arguing that most of the tax exclusion goes toward what amounts to a large risk pool. High cost employees end up heavily subsidized, while those that are healthy with low costs aren’t really any better off than if they had purchased pre-ACA individually-underwritten insurance.

  20. Yancey Ward says:

    Did you all you guys die the last couple of days? With the outline now public, I really did expect a blog entry by yesterday afternoon at the latest, but still nothing this morning?

  21. Barry Carol says:

    Ron, at the start of the 89th Congress in 1965, Democrats held a 290 – 145 seat majority in the House and 68 – 32 in the Senate. With LBJ elected president by a landslide over Goldwater in 1964, the ingredients were all there to pass much of his agenda through the congress which is exactly what happened.

    Current republicans don’t have close to those majorities, especially in the senate (52-48). Elections have consequences and how much you win them by also has consequences.

    • Lee Benham says:

      Elections have consequences and how much you win them by also has consequences.

      wasn’t the same thing said at fort Sumter?

  22. Lee Benham says:

    After carful consideration and reading of the bill I have come to the following conclusion.

    https://www.youtube.com/watch?v=cf4C9ssuPjE

  23. Doc Steve says:

    Somehow coupling $195,000 tax cuts for the wealthiest in the same bill does not sit well with me, but then I cannot afford to buy any politicians.

  24. Bart I says:

    I listened to Rep. Jim Jordan (R-OH) objections to the refundable tax credit on Fox News Sunday yesterday. Paraphrased, his statement was he had no problem with tax credits, but he did have a problem with tax credits for people with no tax liability.

    But any healthy person who purchases Obamacare/Trumpcare compliant coverage is incurring a hidden tax liability– the portion of premium in excess of his own underwriting costs and overhead. If the tax credit were sized to compensate for this cost and no more, it might be harder for Jordan and others to object.

    One proxy for what Obamacare/Trumpcare policies would cost in a healthy market is the current small company plans. These are modified community rated, but age adjusted. Another might be off-exchange compliant plans, if the markets are healthy enough and there are enough participating insurers in a given region.

    A decent proxy for underwriting costs might be STM. It would be interesting to see the difference between the above non-underwritten plans and STM for various age levels and geographic regions, and how the result compares to the Ryan plan tax credit amounts.

    One way to think of the Ryan plan credits is to split them into a 5-to-1 age adjusted component and a fixed component. So the 5:1 part ranges from $500 to $2500 per year, and the fixed part is a flat $1500.

    I suspect the variable part would need to be higher to bring net Trumpcare costs down to something close to STM.

    But the fixed part seems excessive to me. $500 would be more reasonable– my own employer contributes a maximum of $600 to my HSA.

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