Under the American Health Care Act, there will be increased premiums for people eligible for Medicare, but it can be offset.
One of the reasons that the Affordable Care Act has seen health insurance premiums rise is because young healthy people have decided that it is cheaper to pay the penalty than purchase a health insurance plan. The ACA imposed a 3:1 limit on “age rating” – which restricted insurers from charging older adults more than 3 times what young people pay. However, under the American Health Care Act, the age rating will increase 5:1. This will cause rates for employer and individual coverage for older people to rise.
However, a mitigating factor to this new imposition will be the increased tax credits for older people. Eliminating subsidies based on income, the AHCA will now issue tax credits to help people afford coverage on their individual plans. This will range from $2,000 for those in their twenties and $4,000 for those in their early sixties.
Under the AHCA, tax credits would begin to phase out at $75,000 for individuals and $150,000 for households. They would be eliminated for individuals who earn more than $215,000 annually, and a household that makes more than $290,000.
Under the newly instated AHCA, we can only hope that this will encourage younger people to get insured to help decrease the premiums for everyone.
The 5:1 “age rating” for older people also applies to employer groups under 100 employees
One way to offset this is for employers to pay for their employees Part B Medicare Premiums and Supplements.
Employers with eligible Medicare employees should already be doing this, but generally aren’t.
While Medicare isn’t ACA compliant, if the ACA employer plan is being offered then it won’t affect the requirement that employers offer their health plan to 95%1 of the full-time employees to avoid the $2,000 per employee penalty.
Currently, Medicare is an “employer payment plan,” but can be integrated with group health coverage. To be compliant, the employee must be enrolled in Medicare Part A and B. Under the employer payment plan, the premiums are deductible under Section 1062 of the Internal Revenue Code. This payment is not taxable to the employee.
Let’s breakdown the numbers
$134 Premium for Medicare Part B (assuming no IRMAA)
$170 for the Medicare Supplement, Plan F in LA County for a 65-year-old
$30 for a typical Prescription Drug Plan
Total = Less than $400
Employers can increase benefits and cut the payments by two thirds by offering Medicare, and the employee will increase their benefits and decrease their cost sharing.
For every employee that enrolls in Medicare, employers can cut the premium by approximately two thirds while offering their employees less out of pockets costs. Benefits are a significant portion of an employer’s total compensation package. A $400/month expenditure per employee should drive down the costs of the oldest in the workforce below that of the youngest, thereby reversing the cost pyramid.
*BenefitPackages is not offering legal tax advice and we encourage you to seek counsel