You might be asking yourself why a blog that focuses on financial literacy is wading into the dark waters of the raging healthcare debate. Well, the real question is, how could we ignore it? When a single market segment accounts for $3.2 trillion of annual spending, you can bet that trends in this sector will affect your bottom line.
The healthcare industry accounted for 17.5% of all US economic activity in 2015. Per person spending on healthcare in America reached approximately $9,900 that same year. In fact, Americans spend more per person on healthcare than any other country in the world. With healthcare inflation outpacing wage growth, it’s an expense that affects everyone’s checkbook.
Even though the House and Senate have two separate bills going through the process and a potential update of the Senate bill is on its way, this post will examine only the Senate’s current bill, known as Better Care Reconciliation Act (BCRA).
What Exactly Does The BCRA Do?
- The individual and employer mandates, enforced via tax penalties, are gone.
- Premium subsidies that assist lower income enrollees will have new standards. The CBO estimates that the government will spend $424 billion less on premium subsidies under the BCRA
- Subsidies weigh age more than income into consideration.
- The BRCA will cap the premium costs on seniors at 5x what younger enrollees pay from the current cap at 3x the cost.
- Reduces projected Medicaid expenditures by $772 billion by tying the growth in per-enrollee expenditures to inflation.
- Allows states to apply for waivers “to change the premium tax credits, the definition of essential health benefits, and certain other provisions of law affecting health insurance.”
The cumulative effects of the bill’s reforms amount to a $1.022 trillion in spending reductions and $701 billion in tax reductions over a 10-year period. The CBO estimates that 49 million Americans would be uninsured by 2026 if the BCRA becomes law– compared to 28 million by 2026 if Obamacare is left in tact.
Some Financial Effects of BCRA…
- The BCRA allows older, sicker enrollees to be charged more for the same plan; younger enrollees would theoretically have to share less of the burden within the insurance pool. The potential increase for senior premiums is approximately 66%. Though, Federal subsides, while higher for seniors, would still be significantly less than under Obamacare.
- The BCRA changes the way federal Medicaid assistance to the states is calculated and changes eligibility guidelines. The new guidelines are more restrictive, and the program will receive less funding. Therefore, CBO estimates that 15 million fewer enrollees would be covered through the program.
- Subsidies will be substantially lower for eligible enrollees, and the individual coverage mandate would be eliminated. The CBO estimates that 7 million fewer people would obtain coverage by 2026.
- According to the Brookings Institution, unsubsidized enrollees can also expect premiums to be 9% higher.
According to the CBO, the removal of the employer mandate is expected to prompt some businesses, who otherwise wouldn’t have provided healthcare to their employees, to stop offering coverage to some of their less profitable workers. Shoppers should also be aware that the new plans are expected to be far less generous than current plans. This is because the actual value, the percentage of cost expected to be covered by insurance when medical needs rise, has been lowered from 70% to 58%.
While the bill itself faces an up hill battle, we need to pay close attention to what will impact our money and health.