New York could make health insurance more affordable for people with student loan debt if it allows them to deduct their student loan payments from the ACA's tax credit calculation when they seek coverage on the state marketplace, the not-for-profit United Hospital Fund said in a report Thursday.
Experts worry that recent graduates are losing health coverage because they're entering a tightening job market and losing school-sponsored insurance at the same time. Without the ability to secure coverage through an employer, many young adults could forgo insurance. That's especially true for graduates who are too old to be covered by their parent's insurance or whose parents recently lost their jobs.
It "makes good sense" to encourage people to buy health coverage, especially if it reduces the burden of student debt for recent graduates, Dr. Clif Knight, senior vice president of education for the American Academy of Family Physicians, said in an email.
The plan could help borrowers qualify for larger federal subsidies and lower premiums by repositioning them lower on the income scale, the report said. Professionals like physicians and nurse practitioners stand to benefit the most because they often carry sizeable debts, which can be challenging to manage, especially early in their careers when salaries are lowest.
"A targeted approach to young adults starting out their careers—a valuable addition to the individual market risk pool—would also address some of the imbalance created by New York's pure community rating system, which does not allow premium variations based on age," the report said.
While the federal government granted temporary relief for borrowers by pausing student loan payments, "paying for health insurance will be even more difficult once student loan payments for most borrowers start coming due this fall," UHP said in a statement.
"One way to tackle this problem would be a state premium tax credit tied to student debt repayments, supplementing existing advance premium tax credits—APTCs—provided for qualified health plans under the Affordable Care Act," the report said.
The ACA caps monthly premiums for people with incomes between 200% and 400%—$24,980 to $49,960 for an individual—of the federal poverty level based on a percentage of their adjusted gross income. APTCs go directly to insurers to make up the difference between the consumer's discounted premium and the cost of supplying coverage.
"Basing the credits on a consumer's adjusted gross income makes sense because it is universal and verifiable. But it's also something of a blunt instrument because it doesn't take into account extraordinary expenses—such as student loans," UHP wrote in its report.
If borrowers could subtract student loan payments from their adjusted gross income, it would be as if they had a lower income and make them more likely to qualify for subsidies. According to the report, a person with a Master of Public Health earning about $61,000 could see their insurance premiums fall 35% if the state adopted the policy.
