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New RSC Health Plan Would Do Little to Help Millions Losing Coverage

The Republican Study Committee (RSC) health plan issued today would undo the nation’s historic progress in expanding health coverage under the Affordable Care Act (ACA) by entirely repealing the ACA and leaving many millions of Americans who’d lose their health coverage uninsured.

The plan would repeal all of the ACA by January 1, 2018, including the Medicaid expansion and the marketplace subsidies, which make coverage affordable for low- and moderate-income individuals. The estimated 20 million people who’ve gained coverage under health reform would lose it. And the millions expected to gain coverage under health reform in the future would remain uninsured.

In place of the Medicaid expansion and subsidies, the plan would offer a standard tax deduction of $7,500 for individuals and $20,500 for married couples, applicable to both income and payroll taxes, to people who buy coverage on their own or through their employer. But, as our analysis of the RSC’s nearly identical 2015 health plan explained, this would do little to help most uninsured people gain coverage.

Here's why. Before health reform, at least 90 percent of the uninsured were in the 0, 10, or 15 percent income tax bracket; half had incomes below the poverty line and thus likely owed no federal income tax. So the overwhelming majority of the uninsured would get an income tax benefit of no more than 15 cents for every $1 they deduct (most would get less), along with a payroll tax benefit of 7.65 cents per dollar earned. These amounts aren’t enough to make coverage — other than flimsy coverage — affordable.

People who lose their jobs and have no earned income would get nothing from the deduction. The biggest benefits would go to people in the top income tax brackets, who least need help affording health insurance and are the most likely to already have it.

Also, the deduction wouldn’t account for differences in people’s premiums, even though the plan would let insurers charge much higher premiums based on health status (assuming people with pre-existing conditions could buy coverage at all) and charge older people and women much more than younger people and men.

Moreover, the plan would eliminate the tax exclusion for employer contributions to the cost of their workers’ health insurance, which encourages employers to offer coverage. As our earlier analysis found, this would likely cause many employers — particularly small and medium-size firms — to drop coverage. It would also drive up premiums for employers that still provide coverage and have older and sicker workforces. Many workers who rely on employer-based coverage today, especially those in poorer health, would likely end up uninsured, on top of those who’d lose coverage due to health reform’s repeal.