As we have pointed out previously, because it repeals the individual mandate, the Senate tax cut proposal will not only lead to 13 million fewer people having health insurance in the United States, but it will lead to much higher premiums for many who do purchase health insurance on the individual market. The CBO’s estimate was that premiums nationwide would increase by 10%.
Last week we presented a very rough estimate of the impact of repeal of the mandate on the average cost of health insurance premiums in Pennsylvania and suggested that the average increase in premiums is likely to be higher than the average savings in taxes under the Senate plan.
New research from the Commonwealth Fund provides more detailed information on the increase in premiums for Pennsylvanians at different ages. And their work reinforces our conclusion. In 2019, much of the benefit of the tax cut to middle class Americans is eliminated — and totally overwhelmed for older Americans in the middle 20th income group — by increased insurance premiums on the individual market. In 2027 the added cost of insurance premiums overwhelms the small individual tax cuts that remain for all ages in any income group in which people purchase individual health insurance.
There is no way to directly estimate the cost of changes in insurance or taxes for individuals. So, like our own work, the Commonwealth Fund study looks at the projected increase in insurance premiums and compares them to the average change in taxes for the income classes in which people are most likely to be purchasing insurance on the marketplace.
The first table presents the Commonwealth Fund’s estimates of the premium increases resulting from ending the individual mandate for Pennsylvanians at ages 27, 40, and 60 in both 2019 and 2027. They range from $424 to $1,099 in 2019 and $627 to $1,623 in 2027.
|
Additional Insurance Premiums for Lowest Cost Silver Plan Due to Repeal of the Individual Mandate |
||
|
|
2019 |
2027 |
|
27 year old |
$424 |
$627 |
|
40 year old |
$517 |
$764 |
|
60 year old |
$1,099 |
$1,623 |
The second table integrates the analysis of the impact of the Senate bill on taxes provide by the Institute on Tax and Economic Policy (ITEP) with the Commonwealth Fund’s analysis of the impact of repealing the individual mandate on insurance premiums. We have highlighted in yellow the circumstances in which the entire tax cut is overwhelmed by premium increases and a group of Pennsylvanians are thus made worse off by the Senate bill.
It shows us that in 2019, for those who purchase individual health insurance, the tax cut under the Senate bill is substantially eroded at all ages and income groups and especially for those who are older or have lower incomes. The value of the tax cut is much reduced by 32% to 89%. Moreover, for a 60 year old in the middle 20% income group, the impact of the health insurance premium increase not only eliminates the benefits of a tax cut, but costs them an additional $409.
Things are even worse in 2027 because tax cuts for individuals expire while health insurance premiums remain 10% higher than they would be if the individual mandate were not repealed. At that point, people who purchase individual health insurance in every income group will be in worse shape. Even for in the fourth 20% or in the next 15%, who still see some tax cut, the value of the small tax cut is swamped by the increased cost of health insurance premiums.
In sum, the Commonwealth Fund report confirms our earlier analysis. The tax cuts proposed in the Senate bill do little to help middle class Americans. But for those middle class Americans who purchase insurance on the individual market, the combination of higher insurance premiums and small tax cuts is a financial disaster.