After the House Ways and Means Committee voted this week to give insurers a $400 million tax break in the GOP’s Affordable Care Act repeal legislation, at least one industry executive was not impressed.
“I would gladly trade that tax break for a fair bill that provided insurance for everyone,” said Dr. Mario Molina, CEO of Molina Healthcare, which covers nearly 5 million people through its marketplace, Medicare and Medicaid health plans.
“This is a bad bill,” Molina said.
In Washington on Thursday for a conference on the troubled individual insurance market, Molina had some harsh criticism for the GOP legislation, dubbed “The American Health Care Act.”
I would gladly trade that tax break for a fair bill that provided insurance for everyone. This is a bad bill.
Dr. Mario Molina, CEO of Molina Healthcare
He said the bill doesn’t provide enough support for low-income people to afford individual coverage and it would destabilize the individual marketplace by scrapping the ACA’s individual mandate. That, he said, would lead to premium hikes and fewer people with coverage.
“Millions of people are going to lose their health insurance coverage over the next few years as a result of this bill,” Molina said in an interview with McClatchy. “And that’s the story they’re not telling people.
“So, yes it’s true tomorrow you’re not going to lose your coverage. But wait a year. Wait five years,” he said. “We don’t believe that these tax credits are going to be sufficient so that low-income people will be able to afford to purchase health insurance.”
For example, Molina said, imagine the price hikes an average plan member in California might face under the GOP proposal:
Yes, it’s true tomorrow you’re not going to lose your coverage. But wait a year. Wait five years.
Mario Molina of Molina Healthcare
Molina’s Silver coverage plan – which covers 70 percent of medical expenses – costs $4,300 per year California where the average plan member is 41-yrs-old. That plan member would get $3,000 a year in tax credits to help pay for coverage under the GOP proposal.
“That’s going to leave a $1,300 gap, which means you’re going to have to pay $110 per month for your insurance,” Molina said. Add to that the loss of the ACA’s cost-sharing reductions, which helps low-income enrollees pay for deductibles and copayments and “that’s another 10 percent ($430) they’re going to have to pick up,” Molina said. “So now you’re talking about $1,700 out of pocket.”
“If you’re only making about $22,000 a year, which puts you at 200 percent of the federal poverty limit, I think you’re going to look at that and say ‘I just can’t afford it,’” Molina said. “That’s almost ten percent of my income.”
Under the Affordable Care Act, the tax credits are based on income and the cost of coverage, but generally, the lower one’s income, the larger tax credit they receive to help pay for marketplace coverage.
Under the GOP plan, marketplace enrollees receive tax credit based more on age.
The leaner tax credits and the repeal of the ACA’s individual mandate means that lower-income people who need more assistance to purchase coverage, will simply do without insurance since the ACA would no longer require them to have coverage.
And that, Molina said, is a problem.
“Insurers will raise their prices because they’re going to be worried that people will only sign up when they need insurance,” Molina said.
Molina’s concerns reflect those of many in the health insurance industry.
The industry trade group, America’s Health Insurance Plans, this week told House Republican leaders in a letter that it fears the GOP’s new funding plan for Medicaid “could result in unnecessary disruptions in the coverage and care beneficiaries depend on.”
“For example, Medicaid health plans are at the forefront of providing coverage for and access to behavioral health services and treatment for opioid use disorders, and insufficient funding could jeopardize the progress being made on these important public health fronts,” wrote Marilyn Tavenner, president and CEO of the trade group, which has been largely supportive of the Republican plan otherwise.
The GOP legislation would cut federal funding for Medicaid by basing each state’s allotment on how much they have historically spent for coverage.
S &P Global this week projected the Republican bill would cause 2 million to 4 million people to lose individual coverage, and another four to six million to lose Medicaid coverage from 2020 to 2024.
As calls grow for GOP lawmakers to expand coverage under their proposal, lawmakers will be hard pressed to find new revenue sources because the GOP legislation repeals all the Obamacare taxes that funded the health law’s expanded Medicaid and marketplace coverage.
If the GOP does try to raise more money in their legislation to beef up coverage, “the most likely candidate” would be to cap the individual tax exclusion for job-based health coverage, said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget.
Under current law, premiums paid by employees for job-based health insurance aren’t taxed as income, which reduces the amount of payroll taxes and income taxes they owe. The Congressional Budget Office estimated the exclusion cost about $250 billion in lost tax revenue in 2013.
“That exclusion is the single largest tax break in the code,” Goldwein said. “It’s existence drives up health care cost growth” because it provides no disincentive for people to spend more for coverage.
Earlier drafts of the Republican repeal legislation called for capping the amount of the tax exclusion on higher cost health coverage. But that provision was removed from the final GOP repeal legislation following opposition from employer groups.