Republicans hate Obamacare’s individual mandate. But their new replacement plan, which gets rid of that rule, could cost some Americans more money.
Financial penalties for not having health insurance coverage could be higher under the GOP’s proposed Obamacare replacement for many people than they would be under Obamacare itself, a new analysis finds.
The analysis from the Avalere Health consultancy also finds that proposed new penalties — to be imposed on uninsured people signing up for insurance after a two-month gap in coverage — would hit older people and those with lower incomes the hardest.
On the other hand, younger people and those who earn more money would face lower penalties under the new plan.
For example, a 50-year-old earning $47,520 annually would pay just $465 for being uninsured for six months under Obamacare.
But that same person but would be on the hook for up to $1,991 in penalties under the Republicans’ plan if they were uninsured for the same time period and then signed up for coverage, the analysis finds.
If that person ended up earning $118,800 the following year in income, and also had a six-month gap in coverage, their Obamacare penalty would be $2,414. But their fine under the GOP plan if they signed up for insurance could be as low as $1,006.
“The continuous coverage penalty” proposed by Republicans “functions much like today’s individual mandate, but it increases penalties for lower-income and older individuals, and it reduces penalties for younger and wealthier people,” said Caroline Pearson, senior vice president at Avalere.
Obamacare’s individual mandate currently requires most Americans to have some form of health coverage or face a potential tax penalty equal to the greater of $695 per adult, or 2.5 percent of household income.
Lower-income earners pay less in fines than those with higher incomes. And the fines are prorated based on the length of time a person is uninsured, with shorter gaps in coverage penalized at lower rates than longer gaps.
The plan proposed Monday by Republican leaders in Congress calls for ending that mandate, meaning that no one would pay a fine for lacking insurance. But the GOP’s plan would impose a penalty on people signing up for health insurance after being uninsured for 63 days or more.
That penalty would be 30 percent of the monthly premium of the insurance plan selected by that person, and would last for 12 months, beginning in 2018. The penalty would not be prorated, meaning that someone with a three-month gap in coverage would pay the same penalty as someone with a 12-month gap if they signed up for the same insurance plan.
Avalere, in a report on its analysis, noted that “the penalty would be higher for older people and lower for younger people” because the health insurance premiums of individual insurance plans are age-adjusted, with older customers paying more.