The AHCA and ACA: How do tax credits compare?

Among the provisions introduced by the American Health Care Act (AHCA) is a new tax credit structure for Americans who purchase individual health insurance. 

Specifically, the AHCA would give advanceable, refundable tax credits to individuals that purchase state-approved health insurance. This is similar to the premium tax credits or subsidies currently awarded to individuals that purchase coverage through the Affordable Care Act (ACA) marketplaces and meet certain household income criteria. But the eligibility criteria and credit amounts would change under the AHCA. 

Here’s how the AHCA’s proposed tax credits compare to those available under the ACA:

Who is eligible for the credit?

To be eligible for a credit under the ACA, an individual’s household income must be between 133 percent and 400 percent of the federal poverty level (FPL). An individual is disqualified from receiving a credit if he or she is eligible for Medicare, Medicaid, or is offered affordable, minimum value coverage from their employer

Similarly, the AHCA extends tax credits to any individual that doesn’t have access to government health insurance programs (i.e., Medicaid or Medicare) or an offer from any employer.

How is the credit amount determined?

Under the ACA, the credit amount is based on household size and income, and is applied on a sliding scale--the lower an individual’s household income, the larger the credit amount available (and vice versa). 

However, under the AHCA, credits are adjusted by age rather than by household income. They’re broken down as follows:

  • Under age 30: $2,000
  • Between 30 and 39: $2,500
  • Between 40 and 49: $3,000
  • Between 50 and 59: $3,500
  • Over age 60: $4,000

The credits increase with family size but are capped at $14,000. They would grow over time by an adjusted consumer price index, and be fully available to Americans making $75,000 per year or less ($150,000 for joint filers). The credit phases out by $100 for every $1,000 in income higher than those thresholds.

The practical implications of these differences can be seen in the table below. Lower income families make out better under ACA credits, while higher income families would benefit from the AHCA credits.

Credit Comparison Chart with Varying Income Levels

(*ACA Credit amounts were determined using the Kaiser Family Foundation 2017 Subsidy Calculator)

Varying Income Chart

Depending on your political persuasion, eligibility and distribution of tax credits can either be a point of contention or a benefit of the proposed law. Already the AHCA has drawn some criticism for favoring wealthy Americans. We’ll have to wait to see how Republicans respond.