House Speaker Paul Ryan says he has a solution for making health insurance more affordable: refundable tax credits.
"We also think that a refundable tax credit is the smarter way to get people the ability to go buy insurance that they like, that they can afford. It`s better than the Obamacare subsidies," he told PBS' Charlie Rose last month. "A refundable tax credit means you get assistance regardless of your income tax liability to buy care."
Advanceable, refundable tax credits are a centerpiece of the Republican plan to replace Obamacare. They are prominently featured both in Ryan's 2016 policy paper, A Better Way, and in an outline given last week to Republican lawmakers.
Related: Three ways Republicans want to replace Obamacare
There's just one issue: Obamacare's subsidies are also advanceable, refundable tax credits. It's just that most people don't know that.
Obamacare's credits are paid directly to insurers, and it's likely the Republican ones would be too.
"They are in essence the same concept," said Linda Blumberg, senior fellow at the Urban Institute's Health Policy Center, who supports Obamacare.
But the two tax credits would differ in significant ways. Obamacare subsidies are based on income. They are designed to reduce the benchmark silver plan's premium to just under 10% of your income. The less you make, the more you get.
Obamacare's subsidies also take into account geographical differences in premiums so those living in areas with higher rates get larger subsidies. And folks who pick a less expensive plan than the benchmark can use the subsidy to further reduce their monthly charge. The Obama administration touted that more than 7 in 10 current enrollees could find a plan for $75 or less for 2017.
There's a limit to Obamacare's generosity, however. If you make above 400% of the poverty level -- $47,520 for an individual or $97,200 for a family of four -- you don't receive any assistance. This has led many middle class Americans to say Obamacare's premiums are unaffordable, especially after insurers hiked rates for 2017.
Related: Is Obamacare really affordable? Not for the middle class
The Republican plan, on the other hand, would tie tax credits to a person's age so everyone would qualify for something. It would also be adjusted based on family size.
The GOP argues that this would be easier to administer since the Internal Revenue Service wouldn't need to verify enrollees' income and then reconcile it with the subsidies they received. Also, it would eliminate incentives for people to work less so they could remain eligible for subsidies.
Also, the perception among some is that insurers are profiting off the Obamacare subsidies, said Yevgeniy Feyman, an adjunct fellow at the conservative Manhattan Institute. The Republican tax credits are more universal and would serve as an incentive to get Americans to buy coverage.
Neither A Better Way nor the outline distributed to House members specifies the size of the credits. Without that figure, it's hard to know how much it will help lower people's premiums. The plan authored by former Representative Tom Price, now the Health Secretary, would offer credits that range from $1,200 for those age 18 to 35 to $3,000 for those age 50 and up.
Experts say this would not be enough to make coverage affordable for certain people, particularly for older Americans, who face high premiums, and for lower-income enrollees, who now get very generous subsidies.
