What GOP Health Care Means for Your Wallet

Here are some elements of the current Republican health plan that might directly affect your wallet.

Will you be better or worse off if Republicans pass their version of health care reform? That’s the burning question for most Americans as they watch the arm wrestling going on in Washington, D.C. As with the health care debate itself, there are no easy answers.

The bill being debated right now, the American Health Care Act working its way through the House of Representatives, offers strong hints about what health insurance will look like when designed by Republicans. In general, young, successful, healthy people will pay less, but many other groups will pay more — or not have health insurance at all.

The Congressional Budget Office chimed in on Monday with a much-anticipated report saying the Republican plan would lead to 14 million fewer Americans having insurance than under Obamacare in 2018. Other estimates have pegged the number at 10 million (S&P Global Ratings) to 15 million (Brookings). The CBO also noted premiums may be 10% lower by 2026 than under Obamacare.

Obamacare 101

Before we get into the details, some perspective is necessary. While Obamacare did have provisions that dealt with the overall health insurance market, it was mainly aimed at the uninsured, and most of its provisions dealt with the mechanisms needed to get those Americans coverage. Much of the Republican plan deals with changing that market.

In total, about 22 million consumers are insured by what most folks call Obamacare – some 8 million via state exchanges, and another 14 million through expansion of traditional Medicaid, according to The Heritage Foundation. Nearly all of them enjoy some kind of government subsidy.

The Obamacare exchanges, which tend to dominate headlines, are in reality a small portion of the health care insurance market. Many Americans get insurance through their employers. There are another 10 million or so who directly buy their own insurance in the private market, outside the Obamacare exchanges. And 15 million get coverage through small-employer plans, according to Heritage.

Because the health insurance market has these very distinct elements, discussion about health care coverage can be confusing. Take the individual mandate and its associated tax penalty for those who don’t get insurance, which is incredibly unpopular with conservatives. It obviously doesn’t directly impact those who already get insurance at work. Also, the large premium increases that Obamacare exchange consumers experienced last year, which were indeed painful, only directly impacted the consumers getting Obamacare subsidies.

On the other hand, anything that happens to one end of the health insurance market is bound to have impacts on the rest of the market. Those who purchased individual plans directly — not on the exchanges — saw increases that were in line with Obamacare increases, leading to a lot of sticker shock.

Other popular Obamacare provisions, like a list of minimum coverage requirements or the elimination of pre-existing condition rejections, naturally led to increased health insurance premiums for all. Bottomline: Even if you aren’t using Obamacare exchange insurance, any changes to health care coverage will impact you. (If you’re looking for an Obamacare refresher, we’ve got one here.)

What’s in the Current Republican Health Care Plan?

Here are some elements that might directly affect your wallet.

1. Mandates Gone, But Not Really

Mandates, which conservatives impulsively dislike, are gone. Individuals will not face a tax penalty if they fail to get insurance, as they do under Obamacare. The House GOP plan does have a similar provision, however. Consumers who let their insurance lapse but then decide to get it later will pay a 30% surcharge. So while Americans are free to forgo insurance, that becomes a lifetime commitment — at least in order to avoid something that’s an awful lot like the old Obamacare penalty.

Employer mandates are gone, too. Under Obamacare, firms with more than 50 full-time employees must offer insurance. That requirement would be removed by the Republican plan. Depending on your perspective, that will either lower costs for business owners or hurt small business workers who might lose coverage they receive at work.

2. Subsidies Gone, But Not Really

Some say Obamacare helped middle-class and poor insurance shoppers afford high premiums with monthly subsidies. The subsidies, which could cover most of the monthly payment, were determined by a complex calculation involving income and regional costs. (Health care is more expensive in states like Alaska.)

The income cap for getting aid is about $48,000. With the Republican plan, subsidies are being “replaced” by tax credits and would be far more widely available. Families with incomes up to $150,000 would be eligible for as much as $4,000 toward health care costs. The tax credit amount, which will not be adjusted for geography, will likely be less than the Obamacare subsidy in most cases. The new tax credit would be $1,700 less on average than under Obamacare, according to the Kaiser Family Foundation.

A word about the Republican tax credit. It will be “advanceable,” meaning consumers can use the money as they pay their premiums, rather than wait until the end of the year when the money might be returned as a tax refund. If that sounds a lot like the way Obamacare’s subsidies work, that’s because they are essentially the same thing.

Health Savings Accounts

Republicans have long liked the idea of Health Savings Accounts, so the GOP proposals dramatically increases their limits. Consumers with high-deductible plans can twin these with health savings accounts, which are a little bit like 401(k) plans. HSAs let consumers put aside their own pre-tax income, invest it and use it for any health care cost. Supporters think HSAs support consumer choice; opponents are worried about health care funds being placed at risk in the stock market.

Right now, HSAs are capped at around $3,400 for individuals. The GOP plan would increase that limit. It would also lower penalties for the health care equivalent of early withdrawal – spending the money on non-health care costs. HSAs act a bit like a second IRA, because the money can ultimately be used for retirement, so this is a very good thing for workers who already max out other retirement plan options. It doesn’t help other groups who aren’t that lucky, however.

We explained how HSAs work earlier this year.

How Older Americans Lose

Older Obamacare consumers will almost certainly see their premiums rise under the GOP plan. Obamacare allows insurers to charge older consumers up to three times more than younger consumers. With the GOP health care bill, that jumps to a factor of five. This would likely lower costs for young buyers and raise it for older buyers.

Taxes May Be Lower, But Who Will Pay? 

The other politically attractive element of Obamacare is that it allows Republicans to say they’ve repealed most of the new taxes associated with it, not just the individual mandate penalty but other taxes that are unpopular with businesses, like a medical device tax. The tanning salon tax would disappear, too.

That raises an obvious question, however: Who pays? Either a whole bunch of people have to lose coverage, or money to pay for it has to be found somewhere. There simply is no way to repeal taxes but keep giving consumers coverage without exploding the deficit.

The Big Picture

It’s important to note that, Paul Ryan’s protestations aside, the American Health Care Act really is just a first offer in a negotiation that is sure to take many twists and turns. That means none of the specifics in this story are carved in stone. Still, when Republicans in the Senate have their say, you can expect these same concepts to come up over and over again — mandate elimination, tax credits, swelling the ranks of the uninsured.

Will your wallet win or lose when the final version is signed? Time will tell.

Are you concerned how your budget or even your credit score will be affected GOP health care reform? Share your thoughts with us in the comments section below. 

Image: FatCamera

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Are Democrats or Republicans Better With Money?

fiscal_policies_of_hillary_clinton_and_donald_trump

With America being greatly divided these days — be it red versus blue states, Democrats or Republicans, etc. — it’s easy to get caught up in the fray. Americans will argue and try to differentiate themselves in just about every way. Do you believe in the concept of working together toward a common good? You might be labeled a Socialist. Do you think people should take responsibility for their own lives, health, and finances? You’re a right-wing extremist, in some people’s eyes.

But when it comes to finances and money specifically, one political party is typically associated with fiscal responsibility more than any other: the Republican Party. Responsible spending has been a mantra of the Republicans and conservative party for a long time, and when a lot of people file into the voting booth, money and taxation are on their minds.

So, does that hold true? Are Republicans and red states truly more fiscally conservative than their blue state counterparts? Thanks to some data gathered by LendingTree, we have a better idea.

Red vs. Blue States: An Analysis

“Given this year’s polarizing election cycle with financial and socioeconomic topics, such as minimum wage and education costs being at the front of many discussions, LendingTree decided to compare how different candidate and party supporters really were financially,” a LendingTree press release says. “LendingTree conducted the survey online via SurveyMonkey and polled a nationally representative sample of respondents ages 18 and up. A total of 1,616 completed responses were collected between June 9th, 2016 and June 14th, 2016.”

From the results, LendingTree found that over half of each party’s voting base suffers from a “financial superiority bias,” though Republicans were more likely to say they are financially or economically more knowledgeable. Republicans were also more likely to say that they were financially responsible. But when LendingTree looked at the red and blue state divide and corresponding personal finance habits, there were some interesting swings.

Residents of Republican-leaning states generally had bad credit scores. In fact, of the 50 states, the bottom 10 in terms of credit scores were red. On the other hand, red states generally were better at curbing credit card debt. But, Democratic voters were twice as likely than Republican voters to say that they were “financially happy.”

Democrats or Republicans: Party of Fiscal Responsibility?

From this study, it appears that no specific party can really accurately claim any sort of financial superiority, as blue states tend to be happier and have better credit scores, but red states have better general personal finance habits. Of course, you should read the entire study yourself to get a better gauge of the data, as we’re just looking at the general findings and trends.

But the data does match up, in some ways, to other measures of financial superiority. For example, when you look at which states tend to rely more on the federal government for funding and financial backing, red states are at the top. This, as noted, contrasts with the red state values of small government and financial responsibility. But, you also have to take into account the specific cases of each state. Some of those red states are largely rural, are home to Indian reservations, or lie on the border — all things that require additional federal funding.

The point, though, is that the divisiveness surrounding fiscal responsibility doesn’t really make a lot of sense, especially when you crunch the numbers and find that members of both parties struggle. Monetary issues, like the national debt and growing deficit, were a much bigger issue during the 2012 campaign cycle than they are this time around, which might shed some light on the fact that politicians from both parties know that fighting about being fiscally responsible is losing its appeal.

The last two presidents — Barack Obama and George W. Bush — have seen the national debt and budget deficit soar, after all. So, if there is a point or underlying theme to LendingTree’s findings, it’s that as a whole, neither party appears to be all that fiscally responsible, and slugging it out over other issues may yield more of an opportunity to sway voters.

[Editor’s Note: You can monitor your financial goals, like building a good credit score, each month on Credit.com.]

This article originally appeared on The Cheat Sheet.  

Image: EdStock, 2008 Getty Images

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