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Republican Study Committee Health Plan Would Add Millions to Uninsured and Underinsured

The latest version of the Republican Study Committee’s (RSC) health plan would repeal all of health reform, eliminate the tax break for employer-sponsored insurance, and create a new tax deduction for health insurance.  As our analysis of the nearly identical RSC plan from 2013 explained, it would almost certainly add millions to the ranks of the uninsured and underinsured, relative to current law, and the biggest benefits of the new deduction would go to those who least need help affording coverage.

By repealing health reform, the plan would eliminate the Medicaid expansion and the marketplace subsidies, which make coverage affordable for low- and moderate-income individuals.  The estimated 16.4 million people who have gained coverage under health reform overall would therefore 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 RSC 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 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. 

Moreover, people who lose their jobs and have no earned income would receive no benefit.  And a single poor adult earning $10,000 would get no income tax benefit and a payroll tax benefit of about $574 a year — far below the cost of an adequate health insurance plan.  The deduction’s 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 difference in people’s premiums, even though the RSC plan would permit insurers to once again 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.

And, by eliminating the tax exclusion for employer-based coverage — which encourages employers to offer coverage — the RSC plan would likely disrupt coverage for many who rely on employer-based coverage today.

In short, the RSC plan would roll back all of health reform’s historic progress in expanding access to affordable health coverage and likely leave the nation worse off than before health reform.