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The GOP's healthcare plan may be good for wealthy young people. But it comes at a cost.


The GOP's healthcare plan may be good for wealthy young people. But it comes at a cost.

WATCH | Many have described the GOP's plan to repeal and replace Obamacare as just one big tax credit for the rich, but it's not just older rich people. If you're young and well paid, the plan could benefit you too, but there are caveats. 

Younger people benefit

Under the GOP's plan, younger Americans would benefit more than older Americans for a couple of reasons. 

First, younger people are likely to have lower premiums because they are healthier and insurance companies want to encourage healthier people to get covered to expand the pool.

Second, under the GOP plan, patients get tax credits based on their age instead of their income. So for a young person who already has a lower rate, that tax credit will go further.

Especially rich young people

The non-partisan Congressional Budget Office estimated that under Obamacare, a 21-year-old who earns over $68,000 a year would pay over $5,000 in premiums in 2026, and they wouldn't get a tax credit. 

Under the GOP's American Health Care Act, the same 21-year-old would only pay on average $3,900 in premiums and receive a tax credit of $2,450, making their final annual cost for healthcare roughly $1,450.

What about people who don't earn that much? 

If you don't earn $68,000 annually, which is probably true for most millennials, your premium could still go down marginally. 

Under Obamacare, 21-year-old making $26,500 would pay about $1,700 in premiums after tax credits, according to the CBO. 

The same 21-year-old would get a smaller tax credit under the GOP plan but would still end up paying $1,450. 

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But it will cost your coverage

The CBO estimates under the GOP plan, while your premiums might go down, the amount of coverage you get would drop too. 

Incentivizing young patients to get covered 

The cost saving measures are all part of the GOP's effort to get more young people to get health insurance. 

"If health insurance is going to work it means that everyone has to be in the system in order to keep costs down because otherwise you would have just sicker people as part of the pool," said Colin Seeberger, strategic campaign adviser for Young Invincibles, a non-partisan non-profit that focuses on economic issues affecting young people. 

The millennial penalty

Part of that effort to incentivize young people to get covered is a provision in the GOP's plan that requires insurers to put a 30 percent surcharge for one year on premiums for people who go longer than two months without insurance. 

Seeberger said that surcharges will hurt millennials in particular because they tend to go without coverage more often. 

"Up to one in three young adults experience a gap in coverage each year," Seeberger said.

This happens for a number of reasons, young people switch jobs more often, they move to a different city, or they simply chose not to pay for insurance and save that money while they are healthy. 

"Younger adults are about 70 percent more likely to be subject that millennial penalty, really making health insurance that much more expensive,” Seeberger said. 

Cost to older poorer patients 

Critics of the Republican plan say that because tax credits are given based on age instead of income, wealthier people are reaping financial benefits at a cost to older, poorer people.

The CBO estimates that a 64-year-old who makes $26,000 a year would end up paying $1,700 in premiums after tax credits under Obamacare. Under the GOP's plan, they would pay a whopping $14,600 after tax credits. 

That's because the GOP's plan gives all 64-year-olds the same $4,900 tax credit regardless of income and insurance companies can charge older patients up to five times more for coverage.

Under Obamacare, insurers can only charge older patient three times more for coverage and tax credits are based on income. So a 64-year-old making just $26,500 a year would get a $13,600 tax credit under Obamacare.  

Changes to the bill 

House republicans this week offered some changes to the plan, mostly aimed at lowering costs for older patients. 

But there's no sign of any changes to the 30 percent surcharge yet. 

The House will vote on the bill on Thursday. If it passes, it gets sent off to the Senate where more changes can be made. 

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