The Trump Administration’s recent policy actions will likely lead to millions more people uninsured and higher federal expenditures according to the Urban Institute.
How does that happen?
It is a matter of the advanced premium tax credit (APTC) subsidy design.
Let’s work our way through a toy model. We will assume a single insurer in the state so there is no risk adjustment problems. We will assume perfect foresight on expenses. We will assume that only a single Benchmark Silver plan is offered. Premiums are equal to 125% of claims to cover an 80% MLR for admin and profit. We will assume that everyone in the pool is single and makes $30,000 per year which means their expected monthly personal premium is $200 and the APTC picks up the difference between $200 and the actual premium.
Yes, none of these assumptions are particularly strong but this is a simplified toy model.
We’ll start simple and then build to complex.