A late-breaking attempt to repeal and replace the Affordable Care Act (ACA) threatens to weaken critical federal consumer protections and raise costs for older Americans ages 50-64 who purchase health insurance coverage in the individual market. Tucked into the sweeping legislation known as the Graham-Cassidy bill are provisions allowing states to receive waivers from crucial consumer protections. Such waivers could allow insurance companies to increase costs for older consumers based on their health, preexisting conditions, and age–potentially putting health coverage out of financial reach for millions.
People with Preexisting Conditions Could Face Significantly Higher Premiums
Current law prohibits health insurance companies from denying people coverage or charging higher rates based on a person’s health. Under the Graham-Cassidy bill, however, states could obtain a waiver to allow insurers to vary premiums based on people’s health or preexisting condition. This means that consumers with a health condition such as diabetes, cancer, or heart disease could face significantly higher premiums.
This would hit older adults hard: 40 percent of 50- to 64-year olds have a preexisting condition. Prior to the ACA, most states allowed insurers to charge higher premiums based on preexisting conditions. That meant consumers with preexisting conditions were often unable to purchase affordable coverage. The Graham-Cassidy bill would force consumers to, once again, worry about whether their health status will keep them from being able to afford coverage or the care they need.
Less Coverage and Higher Costs for Older Adults and People with Preexisting Conditions
The Graham-Cassidy bill would also allow states to waive current law requirements that health insurance plans cover 10 categories of services (known as Essential Health Benefits). Similar to earlier proposals, states could eliminate some or all of the required benefits. Without these requirements, insurers could choose to exclude or limit important health benefits such as hospital care, prescription drugs, and mental health or substance abuse treatment. For people with health concerns and preexisting conditions, finding adequate, affordable coverage with the benefits they need would very likely become challenging and expensive.
These waivers may also allow states to weaken or eliminate the ACA’s prohibition against dollar limits on benefits people may get in a year or over their lifetime. Such annual and lifetime caps were unfortunately common practice prior to the ACA—forcing some consumers into medical bankruptcy when they got sick. Weakening these key protections is a step backwards for consumers.
Insurance Companies May be Allowed to Discriminate Against Older Americans
Under the ACA, insurers cannot charge older adults more than three times what they charge others for the same coverage (known as 3:1 age rating). Under Graham-Cassidy, however, states may be able to waive this critical protection for older adults. Older adults living in states that have waived that protection would face significantly higher rates simply on the basis of age– potentially as high as five, six or more times what they charge others for the same coverage, depending on the state.
In short, the Graham-Cassidy bill is harmful for older adults and people with preexisting conditions. It would undermine critical consumer protections, making health insurance coverage unaffordable and denying people with health conditions the care they need.
The just-released Senate bill, Better Care Reconciliation Act (BCRA), is very bad news for older adults. The bill reduces financial assistance (premium tax credits and cost-sharing subsidies) and changes rules on how much premiums can vary by age (age-rating). As a result, people ages 50 to 64 would have to pay thousands of dollars more in premiums to buy health insurance in the individual (non-group) market.
Here are four ways the bill would increase the cost of health insurance for older adults ages 50-64:
#1: Older adults would pay five times more than other adults.
The bill would allow insurers to charge people 50 and older up to five times more than younger adults (as opposed to up to three times more under current law) – known as 5:1 age-rating. We estimate that this change alone would increase older adults’ premiums by over $4,000 a year on average across all states.¹
But the bill does even more to make coverage unaffordable.
#2: Many older adults would no longer qualify for premium assistance and would have to pay significantly more.
Starting in 2020, the bill would eliminate premium tax credits for people who earn between 350 percent and 400 percent of the federal poverty level (FPL), which corresponds to incomes between $42,210 and $48,420 in 2017.
When the bill is in effect, a 60-year-old earning $45,000 would have to pay $11,800 more a year in premiums than they would under current law just to keep the same level of coverage he or she has today (Table 1). Their premium under BCRA would be $16,133 a year – over a third of their annual income and more than three and a half times what they would pay under current law. The impact of this change would be even worse in some states, especially in rural areas and parts of the country where health care costs are high (see Table 2 for premium increases in all states). In West Virginia, for instance, that same 60-year-old would end up paying $22,530 a year, which is nearly $18,200 more than what they would pay under current law. In Alaska, a 60-year-old who loses eligibility for this assistance would pay $37,700 a year for the same coverage – a whopping $31,600 more a year than under current law.
#3: Older adults eligible for premium assistance would receive much less financial help.
The BCRA significantly reduces premium tax credits for people that still qualify for financial assistance; consequently, millions of older adults would pay a lot more under the bill. Current law protects people with lower and moderate incomes by capping their premium payments. The Senate bill would increase the cap for older people and require them to contribute more of their income. In addition, under current law, the amount by which a person’s premiums are reduced (the tax credit) is based on the price of a silver plan. Under the Senate bill, tax credits would be based on the price of a bronze plan. Don’t be fooled by the technical nature of this change – it has huge implications. Since bronze plans costs less (because they cover less) than silver plans, this means that tax credits under the BCRA would be far smaller than under current law.
As a result, even those qualifying for tax credits would face higher premiums. A 60-year-old earning $40,000 would have to pay $4,500 more in 2020, –an increase from $4,000 under current law to over $8,500–, just to keep the same level of coverage.
#4: Older adults with lower incomes would no longer receive critical cost-sharing reductions to afford their care.
And finally, the bill eliminates subsidies that nearly 70 percent of 50-to-64-year-olds with premium tax credits receive. These subsidies, known as federal cost-sharing reductions, are available to people with incomes at or below $31,250 a year. They help them pay for out-of-pocket costs like deductibles, coinsurance, and co-pays. Eliminating these cost-sharing reductions means that a person earning $20,000 a year could face up to $4,500 more in out-of-pocket bills. This increase would be in addition to the increase in premiums they would face!
Here is the bottom line: Under the Senate’s Better Care Reconciliation Act, all older adults would face significantly higher costs for individual coverage.
Lina Walker is vice president at the AARP Public Policy Institute, working on health care issues.
Claire Noel-Miller is a senior strategic policy adviser for the AARP Public Policy Institute, where she provides expertise in quantitative research methods applied to a variety of health policy issues related to older adults.
Jane Sung is a senior strategic policy adviser with AARP’s Public Policy Institute, where she focuses on health insurance coverage among adults age 50 and older, private health insurance market reforms, retiree coverage, Medicare supplemental insurance and Medicare Advantage.
Olivia Dean is a policy analyst with the AARP Public Policy Institute. Her work focuses on a wide variety of health-related issues, with an emphasis on public health, health disparities, and healthy behavior.
¹Calculations by AARP Public Policy Institute, based on premium data from the Kaiser Family Foundation. Estimated premium increases are for 2020 if people keep their current silver level of coverage.