STATEMENT: Repeal of ACA Individual Mandate in Senate Tax Bill Offsets Tax Cut for Many PA Families

Increase in health care premiums will mean any tax cut for middle-income Pennsylvania is washed out; wealthy and corporations reap the benefits.

Marc Stier, Director of the Pennsylvania Budget and Policy Center, released the following statement on the announcement that the U.S. Senate GOP will include a repeal of the Affordable Care Act individual mandate in their tax bill:

"The decision by the Senate Finance Committee to include repeal of the ACA’s individual mandate in the tax cut plan removes whatever is left of the veil on the true intentions of the Republican policy proposal. Republicans in Congress repeatedly claim that their plan aims to benefit the middle class. But this recent decision to repeal the individual mandate and save $300 billion in federal spending deeply harms middle class families in order to provide tax cuts for the very rich. Middle class Pennsylvanians who purchase insurance on the individual marketplace are likely to find that their whole tax cut is eaten up by the higher health insurance premiums created by the end of the individual mandate.  

"The Congressional Budget Office (CBO) estimates that individual market premiums would increase by 10 percent if the mandate is repealed. That would translate into premium increases of hundreds of dollars per year for about 7 million mostly middle-income, unsubsidized individual market consumers, with premiums increasing by over $1,000 for many older people.

"Our rough estimate of the impact in our state is that in 2019 the almost 100,000 Pennsylvanians whose incomes are too high to receive a subsidy to purchase insurance in the ACA marketplace will see premiums increase by $876 per year. This is larger than the $820 projected yearly average tax cut for the Pennsylvanians in the income classes most likely to purchase insurance on the marketplace. Similar increases will be found in the premiums for individual insurance purchased outside the ACA marketplace. (We project that the average tax cut to the top 1% of Pennsylvanians will be $36,470.)

"In addition to premium increases, CBO estimates that the number of Americans without health insurance would increase by 13 million if the individual mandate were repealed. Those estimates are largely consistent with prior analyses from RAND, the Urban Institute, and Lewin. In Pennsylvania, the drop in the insured population could reach up to 500,000 people.

"Pepople who are uninsured lack access to preventive care, are less likely to receive needed care, have worse health outcomes, and can face financial ruin if they do get sick and seek treatment. Moreover, many of those who go uninsured ultimately will get sick and need care, but they will be unable to pay for it, leaving that care to be paid for (involuntarily) by other participants in the health care system."

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Notes: Our projection of tax cuts under the Senate bill comes from the Institute on Tax and Economic Policy.The $820 average cut is what ITEP projects for Pennsylvanians in the 40th to 80th percentile, the income group most likely to be purchasing unsubsidized insurance on the marketplace. Our estimates of the increased cost of the number of Pennsylvanians who secure unsubsidized health insurance on the marketplace and of the cost of premiums for that insurance is based on 2017 CMS data. We estimate projected cost of insurance premiums in 2019 by taking into account the already announced 31% premium increases for 2018. (The large premium increase in 2018 was necessary because of the Trump administration’s decision to end cost-sharing subsidies.) We add an additional 5% for the likely premium increase necessary in 2019 prior to the additional premium cost made necessary by ending the insurance mandate. These estimates are rough because we can’t exactly match the family characteristics of those who purchase unsubsidized insurance on the market place with the family characteristics of all Pennsylvanians in 40th to 80th percentile. Results for individual families will, of course, vary a great deal. But the evidence points to the truth of our basic point — for those who purchase insurance on the individual marketplace, a large part of the tax cut promised to middle class families in the Senate tax cut bill will be eaten up by higher health insurance premiums.

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