insurance

Winners and Losers of the Republican Health Care Act

Young adults with insurance would get big tax credits. Lower-income elderly people would suffer. Health Savings Accounts would get a big boost.

Will you be a “winner” or a “loser” under Trumpcare? Your age, health and income level could provide clues.

Let’s take a closer look at the bill narrowly passed by House Republicans on May 4 that’s intended to replace the Affordable Care Act (ACA), aka Obamacare. The bill now heads to the Senate (which is widely expected to make significant changes) for a vote.

It’s too early to say what the Senate will do to alter the measure. But there are already indications of some clear winners and losers.

Younger people, specifically those ages 20- 29 who have their own insurance, would receive a $700 to $4,000 tax credit, depending on their incomes, according to a study of the House measure sponsored by AARP.

Those earning less than $20,000 per year would feel the most financial pain, according to a different study, as the tax credits are likely to fall far short of the subsidies under the ACA. The result: Lower-income elderly Americans are likely to see the biggest increase in costs.

Here are some specifics buried in the proposed bill.

  • The bill eliminates IRS fines mandated by the ACA for individuals who don’t have insurance. Enforcement of this provision was at best problematic, and those who don’t have insurance are generally people who simply can’t afford it.
  • The bill creates so called high-risk pools for people with pre-existing conditions. While some would argue that higher-risk people should naturally pay more than those who are healthy, there is a deep flaw in the argument. Most significant, it “punishes” people for aging, as the probability of having a pre-existing condition rises as you get older. Separately, many of the so called pre-existing conditions have nothing to do with a healthy lifestyle or something that can be controlled. Type 1 diabetes, mental disorders, cancer, etc. potentially all fall under the pre-existing category.
  • It stops the expansion of Medicaid and adds a “work” requirement. Unfortunately, the bill fails to address problems with the Medicaid and Medicare system and does not provide any solutions. The reality is that many people who are on Medicaid and Medicare need the coverage. They have no choice. From a taxpayer’s perspective this cuts costs (for now), and while it may not be reflected in your paycheck today, it could reduce the necessity for higher taxes down the road … unless Congress decides to spend more money. Care to bet?
  • The bill repeals the ACA tax of 0.9% on couples making more than $250,000 and repeals the 3.8% tax on investment income. Pretty straightforward – if you earn more than $250,000 per year and/or have investment income this is a “win” for you. If not, no impact on you.
  • The bill also increases the contribution limits for Health Savings Accounts (HSAs) – this one is GREAT!!! Health Savings Accounts are one of the best savings accounts available to just about every American. Generally, contributions are tax deductible, growth is tax deferred and in most cases withdrawals are tax free. What’s better than that?

The bill is a mixed bag — and a work very much still in development.

About the Author

Oliver Pursche, Investment Adviser Representative

CEO, Bruderman Asset Management

Oliver Pursche is the Chief Market Strategist for Bruderman Asset Management, an SEC-registered investment advisory firm with over $1 billion in assets under management and an additional $400 million under advisement through its affiliated broker dealer, Bruderman Brothers, LLC. Pursche is a recognized authority on global affairs and investment policy, as well as a regular contributor on CNBC, Bloomberg and Fox Business. Additionally, he is a monthly contributing columnist for Forbes and Kiplinger.com, a member of the Harvard Business Review Advisory Council and a monthly participant of the NY Federal Reserve Bank Business Leaders Survey, and the author of "Immigrants: The Economic Force at our Door."

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