NY proposal suggests factoring student debt payments in to ACA subsidies
Recent grads would be allowed to deduct loan debt from their income under ACA calculations, lowering their monthly premiums.
Amid a pandemic-stricken nation struggling to find ways to reopen, massive unemployment and employees lucky enough to have jobs hanging onto them as tightly as possible, New York health care strategists are floating a plan to offer health insurance tax credits assistance to loan-saddled college graduates who have no overage or fear of losing what they do have.
As envisioned in a new report released last week by the United Hospital Fund, recent college graduates could be allowed to deduct the monthly costs of their student loan payments from their total adjusted income as calculated under the Affordable Care Act.
Related: Student loans still worry borrowers in coronavirus crisis
Reducing that figure could mean the borrowers are eligible for lower premiums and additional subsidies under the ACA.
The Healthwatch report, “A Gift for 2020 Grads: Enhanced Premium Subsidies for Student Loan Debtors,” noted that more than 2.8 million New Yorkers filed for unemployment insurance between March and June, and in some areas unemployment is at almost 22%.
Student loan debt in the Empire State is the sixth highest in the country at $6,810 per capita; in 2016, the report said, there were more than 2.8 million student loan borrowers.
“On top of diminished job prospects, many new graduates are losing school-sponsored health coverage, will be aging off their parents’ policies, or might have lost coverage when a parent lost a job,” the report said, adding to the estimated 410,000 uninsured New Yorkers between 19 and 34.
Because New York maintains its own marketplace, New York State of Health, it can roll the student debt calculations into its formula for pricing health care plans without having to rely on the federal plans other states rely on.
The report was authored by Peter Newell, director of UHF’s Health Insurance Project, said the program could offer some assistance to recent graduates struggling to ensure access to care and still pay their bills.
“This modest program targeted at New Yorkers with student loan debt would send a strong message in difficult and uncertain times, helping young borrowers stay current with their insurance payments and stay healthy by enrolling in coverage,” said Newell in a statement announcing the proposal.
ACA guidelines set tax credits based on a consumer’s modified adjusted gross income. Individuals making between 200% and 400% of the federal poverty level ($24,980 to $49,960 for an individual) are eligible for credits ranging from 6.54% to 9.78% paid to health plans to help defray the total cost of coverage.
The UHF report envisions multiple scenarios for borrowers depending on their debt and the health care plans they select, although anyone carrying student debt would see some relief.
“The biggest beneficiaries would be borrowers with salaries that push them past the current ACA ceiling for subsidies, combined with high monthly debt payments,” the report said.
As an example it cited a post-graduate earning $60,900 a year, too high for a ACA tax credit, but paying $800 a month in loan debt; such an individual could see his monthly insurance premium cut by 35%
Lower-paid workers eligible for ACA subsidies and carrying less debt would also see reduced premiums, but not as much.
“New York State faces daunting challenges from the COVID-19 pandemic and the resulting economic damage,” said Newell. “State policymakers will have to make choices among many competing and dire needs, but a targeted approach to young adults starting out their careers — a valuable addition to the individual market risk pool — should be on the table, and could soon prove its worth.”
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