Study Finds Young Adults Will Be Most Hard Hit by Insurance Costs
A study by Kurt Giesa and Chris Carlson found that the impact of the Affordable Care Act will disproportionately affect young adults and cause a dramatic spike in their cost of premiums. The study looked at the effects of the reforms on premiums for the nongroup market (individual policies). It found that premiums for people aged 21-29 with single coverage who are not eligible for premium assistance would increase by 42%. People aged 30-39 with single coverage who are not eligible for premium assistance would see an average increase in premiums of 31%. The study found that almost 4 million uninsured individuals aged 21-29 can expect to pay more out of pocket for single coverage than they otherwise would had the Affordable Care Act not become law.
Using data from the U.S. Census Bureau and the Congressional Budget Office, the two took into account a number of the new mandates found in the Affordable Care Act, including guaranteed issue, prohibition on varying premiums based on health status, and age band compression. Age band compression seeks to redistribute the costs of health care away from those who are actually the most risky (older individuals) to those with the least amount of risk (younger individuals) in order to reduce costs for those who are using the most services. This cross-subsidization is necessary in order to ensure that the cost of health care is spread out. This will hurt young adults as they are most likely healthier and have lower expected health care costs, and often qualify for preferred rates, which lead to very low premiums as they are not risky in the eyes of an insurance company.
What the study could not account for, however, is whether or not young adults will choose to participate in purchasing health care coverage as intended under the law. As was clarified by the Supreme Court, the law requires an individual to possess coverage OR to pay a tax. The tax for not having coverage is set so low that many young adults might rather pay that amount than the high cost of premiums for health insurance coverage. If this happens in large numbers, then the insurance risk pools are going to be unbalanced. The system relies upon the premium dollars of healthy young adults who require little to no health care ‘costs’ to subsidize older individuals who are much more likely to need and use health care dollars. The exact amounts remain unknown, but it seems clear from this study and from a number of other reports that the cost of insurance will continue to rise, despite the intent of the Affordable Care Act.
HSB 38 – Internal Revenue Code Coupling Bill Advances
Each year, the Department of Revenue proposes a bill to incorporate into Iowa income tax law, the federal income tax changes enacted by Congress in calendar year 2012. Many Iowans, CPA’s and tax preparers who want Iowa to couple with the federal changes quickly, so tax preparation can begin here in Iowa.
House Study Bill 38 or (HSB 38) passed out of subcommittee last week, and was moved out of the full House Ways and Means Committee in bipartisan fashion on January 28, with a vote of 24-0.
Some of the significant federal tax legislation enacted that affect the 2012 and 2013 tax year include the following:
- Deduction for up to $250 for out-of-pocket expenses for teachers.
- Tuition and fees deduction for higher education expenses.
- Election to deduct state sales/use tax in lieu of state income tax as an itemized deduction.
- Deduction for mortgage insurance premiums as deductible qualified residence interest.
- Nontaxable IRA transfers to eligible charities.
- Small businesses can now expense (instead of depreciate) the first $500,000 of equipment cost. This is labeled “Section 179 expensing.”
Some of the provisions that affect 2013 and subsequent tax years include the following:
- Provides for 50% bonus (accelerated) depreciation for assets acquired in 2013 only.
- Places a limitation on itemized deduction for high income taxpayers.
- Permanently extends the amounts ($3,000 for one child, $6,000 for two or more children) for the child and dependent care credit.
- Extends higher income thresholds and higher credits with families with three or more children for the earned income tax credit for five more years through 2017.
This bill will now move to the House floor for consideration. The fiscal impact in FY 13’ will be a -$25 million and -$35 million in FY 14’. As you visit or hear from CPA or tax preparers, you can tell them the House is moving quickly to provide certainty for taxpayer wanting to file their taxes.
Fiscal Cliff Deal Brings In More Revenue for Iowa, But …
With the state’s over-collection of tax dollars burning a hole in their pockets, legislative Democrats are looking for any way possible to quench their insatiable appetite for spending Iowans’ money. An ongoing example of this is their efforts to make it possible to spend the additional tax revenue to the state as a result of the deal in Washington over the “fiscal cliff”.
As the state’s Revenue Estimating Conference puts together their estimates for state tax collections, they are bound to apply current law in developing their projections. And last December, current federal law stated that the Bush era tax cuts would expire on December 31, 2012. With this, the REC projected revenue growth of 3.3 percent for 2013 and 3.4 percent for 2014.
The agreement reached in Washington over the New Year is projected to provide the state with more tax revenue. Initial estimates from the Department of Revenue show Iowa generating an additional $45.7 million in FY 2013 and $83.5 million in FY 2014. The vision of more tax dollars has driven some to push for the inclusion of this revenue into the REC estimate. Just one problem with that – the law doesn’t allow it.
When the Legislature developed the current budgeting system, they envisioned the state could face a situation where state revenue numbers would change after the REC estimate. Under Iowa Code section 8.22A(3), the Governor and the Legislature are required to use the REC estimate set by December 15 for the next year’s budget. If the REC meets and revises their estimate, the Governor and the Legislature are bound by the law to use the lower amount. If the REC raises their estimate, the December 15 number must still be used. If the REC lowers the estimate, then they must use the new number. Because of section 8.22A(3), the Legislature cannot change the revenue estimate to spend the additional money. While that’s bad news for the grow government crowd, it is good news for Iowa taxpayers.
Recap of Week Three
I’ve had another exciting week at the Capitol. In addition to the normal committees I am on, I’ve also been assigned to a few subcommittees. A bill (HF) or house study bill (HSB) has to pass out of a three member subcommittee to be considered by the committee as a whole before it goes to the House floor for debate.
First, I ran the subcommittee as chairman for HSB 42, which relates to the corn check off. Next, I chaired another subcommittee for HF 13 which deals with removing the straight party voting option from the election ballot. Iowa is one of only 15 states that still allows straight party voting in elections. Lastly, I was on the subcommittee for HF 3. The bill would give you an alternative in filing your Iowa income taxes. It would allow you to keep using the current system with no changes or give you the option of a flat 4.5 percent tax with no deductions. If you would like more information on these bills, you can visit the legislative web site at http://www.legis.iowa.gov. On the left side of the home page, there is a bill search. Type in the bill number you are inquiring about (ex. HF 13) and click submit. You will be able to see the whole bill in its current form. You can do this with all bills that are in the legislature or have been previously passed as well.
On Thursday General Timothy Orr gave his annual Condition of the Iowa National Guard address to a joint session of both the House and the Senate. The general reported the National Guard is in good shape and is confident about its future going forward. Monticello and Anamosa superintendents Chris Anderson and Brian Ney visited the Capitol. I had lunch with them and discussed educational issues.
This Saturday, February 2nd, I will be at the Delaware Country Farm Bureau forum in Manchester. The forum will run 10-11:30 am at the Delaware County Farm Bureau office. A list of all my forum dates throughout February and March can be seen on my website at www.heinforstatehouse.com by clicking on Forums for 2013. If you have any questions, comments or concerns about these topics or any others please feel free to contact me by e-mail at firstname.lastname@example.org or by phone at (515) 281-7330.
Rep. Lee Hein