Connecting state and local government leaders

What Does the GOP’s Obamacare Replacement Bill Mean for Tax Credits?

Speaker Paul Ryan.

Speaker Paul Ryan.


Connecting state and local government leaders

The new system will be based predominantly on age, with some limits on the assistance available to wealthier Americans.

WASHINGTON — U.S. House Republicans on Monday revealed their long-awaited proposal to replace the Affordable Care Act.

As suspected—given the contents of leaked drafts of the bill—tax credits will be a major feature of the plan.

These credits serve as a way to subsidize the purchase of health insurance for people who don’t get their coverage through their employer. This mechanism is roughly analogous to the current “tax subsidies” of the ACA—a point that some hardline conservatives in Congress have raised as a key objection to the replacement plan, calling it “Obamacare Lite.”

Both the ACA and the replacement plan use these refundable tax credits, but the credit amounts and the structure of the credits themselves vary significantly.

The tax credits under the ACA are higher for people with lower incomes than people in higher-income brackets. The ACA as it stands provides no tax credit whatsoever for people with incomes that are 400 percent of the poverty level. The ACA also bases tax credit levels on the cost of available plans in the area in which the individual lives.

Rather than income, refundable tax credits under the American Health Care Act are based mostly on age. The bill released today, would offer tax credits based on age that start at $2,000 for people under the age of 30, and rise to $4,000 for Americans over the age of 60.

As was anticipated, a change has been added to the tax credit stipulations that somewhat limits the amount of assistance available to wealthier Americans. According to the GOP plan, those whose income is less than $75,000—the figure is $150,000 for joint filers— are eligible for full credits. The amount of assistance a person may receive, however, decreases by $100 for every $1,000 income higher than those thresholds. And, unlike the ACA, the GOP's American Health Care Act does not take regional differences in premium costs into account in its tax credit calculations. 

Under this plan, credits for a single family are capped at $14,000. 

So, what might this mean for the average American?

According to research published by the Kaiser Family Foundation, people who are older, lower-income or live in high-premium areas—Alaska and Arizona, for example—benefit more under the ACA than they would under the GOP plan.

But, on the other hand, people who live in relatively low-premium areas—Massachusetts, Washington, New Hampshire—who are higher income and younger stand to benefit from from the AHCA.

KFF has created a county-level interactive map tool that estimates the credits consumers could expect to receive under the ACA in 2020, compared to what they would receive under the GOP proposal.

The tool takes income age and location into account to give an idea of how an individual’s tax credit prospects might be under the Republican plan. Try it for yourself.

Editor’s Note: This article has been updated to include a more recent version of the Kaiser Family Foundation infographic. 

Quinn Libson is a Staff Correspondent for Government Executive's Route Fifty based in Washington, D.C.

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