3-12-17 8:35 PM EDT | Email Article
By Anna Wilde Mathews and Dante Chinni 

The House Republican effort to overhaul the Affordable Care Act could hit many rural areas particularly hard, according to a new analysis, sharply increasing the cost for some residents buying their own insurance.

In extreme cases, the amount a consumer might owe for a plan could exceed that person's annual income. In Nebraska's Chase County, a 62-year-old currently earning about $18,000 a year could pay nearly $20,000 annually to get health-insurance coverage under the House GOP plan -- compared with about $760 a year that person would owe toward premiums under the ACA, an analysis by Oliver Wyman showed.

The consulting firm, a unit of Marsh & McLennan Cos. is the first to project what consumers could actually have to pay to get health plans under the House's blueprint. The analysis looked at the cost of a benchmark insurance plan at the "silver" level under both setups.

Among people who currently have ACA benchmark plans, Oliver Wyman found those who are older and have lower incomes would generally see their costs for similar coverage increase the most under the House bill. Some with higher wages, and certain younger consumers, would likely do better financially under the new regime. Both urban and rural 35-year-olds making about $54,000 a year, for instance, could on average save roughly $3,000 annually, the analysis showed.

In 2020, the House legislation would completely revamp the federal subsidies that currently help lower-income people afford insurance on the exchanges -- replacing them with flat-sum tax credits instead. While the ACA subsidies are pegged to a person's income and the costs of health plans in the geographic area where the recipient lives, the tax credits are based on age, with income limits.

The Oliver Wyman analysis highlights how rural areas, where individual insurance premiums are often higher, could see a major effect from the shift to flat-sum tax credits. Compounding that, rural populations are often older and poorer, so the proportion of those doing worse under the new subsidy setup may be higher.

Of the 100 counties where 62-year-olds earning around $36,000 would see the biggest jump in annual costs, 97 were rural. "It is disproportionately affecting the rural," said Dianna Welch, an actuary at Oliver Wyman.

The dynamic may present a political challenge for Republicans, because many rural regions strongly supported President Donald Trump.

A Wall Street Journal analysis of Oliver Wyman's data shows that 62-year-olds currently earning about $18,000 a year would see a bump in annual premiums of more than $10,000 in 41% of counties won by Mr. Trump last November, and in 28% of counties won by Hillary Clinton.

Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee, said the analysis didn't reflect all aspects of the House bill. "Our legislation eliminates the red tape, taxes, and mandates that have led to sky high premiums and a collapsing health care marketplace," he said in a statement.

Stephen Vasey, a retired teacher living in Heber, Ariz., and his wife currently pay about $3,200 a year for their exchange plan, and get a federal subsidy worth more than $30,000 that pays the rest of their premiums. Under the Republican proposal, a couple like them would get a flat $8,000 a year in tax credits, according to Oliver Wyman. Mr. Vasey will be eligible for Medicare before 2020, but his wife is younger.

"It would be a stretch," says Mr. Vasey. He might have to return to work or opt to begin receiving his Social Security benefits if the Republican approach becomes law, he said, and the couple would also consider a skimpier plan for Ms. Vasey, with bigger out-of-pocket costs.

The Oliver Wyman analysis, which used data from states and the federal Department of Health and Human Services, projected the cost of a benchmark plan at the "silver" level in 2020 in each county in the U.S. It compared the amounts that consumers at different income levels and ages would pay for those plans, after any federal subsidy they would receive under the current ACA regime or the tax credit envisioned in the Republican bill. It didn't include the impact of some other provisions in the bill, including ending enforcement of the ACA's coverage mandate and a new penalty for people who have a gap in coverage.

Countrywide, a rural 45-year-old making around $18,000 a year would pay about $2,291 a year more on average from his own wallet under the Republican bill than under the ACA, according to the analysis -- compared with a $1,588 increase for a 45-year-old urban resident. For 62-year-olds earning about $18,000, the average increases in cost under the Republican bill's setup were far greater: $9,075 for rural and $6,954 for urban consumers.

People with higher incomes could see their costs go down under the Republican proposal. For instance, a rural 62-year-old making about $54,000 would spend about $2,588 less per year for a plan on average under the Republican bill's subsidy structure, which gives tax credits to people at higher income levels than the ACA does. The urban 62-year-old at that income level would spend $2,856 less.

Rural regions' higher premiums are driven partly by a population that tends to be sicker and require costlier care, with higher rates of chronic conditions such as diabetes and heart disease, said April Todd, an executive at consulting firm Avalere Health, a unit of Inovalon Inc. Also, insurers often struggle to win price concessions from health-care providers who have few competitors, she said. "Given that they're the only hospital, you don't have a lot of negotiating leverage."

At Lexington Regional Health Center in Lexington, Neb., the Republican proposal could lead to a larger volume of unpaid bills, as patients lose coverage or aren't able to pay what they owe out-of-pocket for care, said Leslie Marsh, the rural hospital's CEO. The Republican proposal doesn't include the ACA's extra subsidies that help low-income consumers with deductibles and other such charges. The hospital is already operating at a loss, she said. "The takeaway for us is, it's going to be negative" Ms. Marsh said.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Dante Chinni at Dante.Chinni@wsj.com


(END) Dow Jones Newswires

March 12, 2017 20:35 ET (00:35 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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