Analysis of Clinton’s Proposed Health Reforms at http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2016/sep/eibner_clinton
The Commonwealth Fund contracted with the Rand Corporation to analyze the Clinton and Trump proposed health reforms. They recently analyzed four main proposals by Secretary Clinton to improve the functioning of the Affordable Care Act (ACA): 1) tax credits for individuals whose out of pocket spending exceeds 5% of income, 2) reductions in the maximum premium contribution from 9.66% to 8.5%, 3) capping families premium contributions at 8.5%, and 4) the public option for individuals in the Exchanges. This requires an understanding of how the Affordable Care Act works so each needs a little more explanation.
First the refundable tax credits for private insurance. The ACA put a cap on how much out of pocket exposure (copays, co-insurance and deductibles) a health plan could impose on its subscribers: $6250 for an individual and $12,500 for a family. The ACA also put a cap on the amount of employee cost sharing at 40% of the premiums for individual or family coverage; in other words the employer has to pay at least 60% if the employer offers coverage. Finally, the ACA set five levels of coverage: catastrophic (50% of expected medical expenses), bronze (60% of expected medical expenses), silver (70%), gold (80%) and platinum (90%).
The refundable tax credits help families and individuals with private insurance whose actual out of pocket expenses for premiums, copays and deductibles exceeds 5% of their individual or family incomes. The tax credits would be available to over 177 million Americans with private coverage and would help another 9.6 million uninsured Americans get coverage. It would help reduce American’s out of pocket spending by up to 1/3rd and cost about $90 billion.
Second, the reductions in maximum premium contributions from 9.66% to 8.5%. The ACA pays refundable tax credits to help individuals and families with the costs of individual coverage. The premium assistance is calculated on a sliding fee scale beginning at 2% of income and increasing to 9.66% of income. Thus families with the lowest incomes (138% of the Federal Poverty Level or $33,534 for a family of four) get the most assistance and family responsibility steadily increases to 9.66% of income at 400% of FPL ($97,200 for a family of four).
The Clinton proposal would reduce the top bracket by 12% from 9.66% to 8.5% and all the other brackets by comparable amounts (e.g. the lowest bracket would be reduced from 2% to 1.77% of FPL). This would increase the levels of premium assistance for all purchasing individual coverage through the Exchanges. Rand calculates that 1.7 million more Americans would purchase Exchange coverage and about 13 million Americans covered through Exchanges would pay less (12% less) for their individual coverage due to this proposal. The cost is $3.5 billion.
Third, fixing the family glitch. The ACA permits employees with premiums through their employer that exceed 9.5% of their income to access coverage through the Exchanges. This allows an employee who cannot afford coverage through their job to use the Refundable Tax Credits in the Exchanges. The test is whether the employee’s self only premiums exceed 9.5% of the family’s income; it includes the entire family’s income but does not include the costs of the entire family’s health coverage.
The Clinton proposal has two components: 1) it would compare the entire family’s income to the entire family’s health insurance premiums and 2) it would reduce the affordability threshold from 9.66% to 8.5%. It would help 2.8 million uninsured Americans get Exchange coverage and reduce premiums for about 5 million Americans. The cost is $10 billion.
Fourth, offering the public option. Under the ACA, the Exchanges offer private individual insurance. The public option proposed by Secretary Clinton refers to an additional offering of Medicare-like coverage. This option would reimburse providers at Medicare rates and have lower administrative costs than typical private individual insurance. It would help 0.5 million Americans get coverage and might reduce the costs of Exchange’s individual coverage for 20 million Americans. Those individuals switching to the public option could save 17% of their annual health costs. It would reduce the costs to the federal government by $0.6 billion.
Impacts In Combination. Rand estimates that in combination, the Clinton proposals would insure 10 million more Americans, would improve affordability of coverage by about $700 annually for most individuals between 138 and 400% of the federal poverty level. The annual cost to the federal government would be $88 billion. In other words, the policies are synergistic when combined; they cost less and achieve more than if enacted in isolation.
Prepared by: Lucien Wulsin