July 2020 HealthWatch A Gift for 2020 Grads: Enhanced Premium Subsidies for Student Loan Debtors Peter Newell, Director, Health Insurance Project United Hospital Fund Graduates from the class of 2020—certificate holders, associate and bachelor’s degree recipients, and those completing graduate programs—face a daunting task as they set out in a terribly damaged economy. Over 2.8 million New Yorkers filed for unemployment insurance between March and June, 2020,1 and in April 2020, regional unemployment rates ranged from a low of 13.2% in Yates County to a high of 21.9% in Niagara County near Buffalo.2 Separately from this constrained economic environment, many of these new graduates are losing school- sponsored coverage upon graduation, will be aging off their parents’ policies soon, or might have lost coverage when a parent lost a job. And to top it off, after a brief grace period, student loan payments for most borrowers will start coming due this fall. This HealthWatch report explores a way to make health coverage more affordable for New Yorkers carrying student loan debt. Background Enhanced Premium Subsidy The explosion of student loan debt in Based on Student Loan Debt the U.S. has been well documented—as Under the ACA, tax credit eligibility have its consequences in terms of defaults determinations start with a consumer’s and disparate effects in lower-income modified adjusted gross income, based on communities.3 Total student debt nationally adjusted gross income figures from federal tax reached $1.64 trillion in January 2020.4 returns. Monthly premium payments for those Measured on a per capita basis for New York, with incomes between 200% and 400% of student loan debt jumped more than 300% the federal poverty level ($24,980 to $49,960 from $1,420 in 2003 to $6,180 in 2019, sixth- for an individual) are capped at a percentage highest in the nation.5 A 2016 report from the of their income, according to a sliding scale New York State Comptroller cited over 2.8 that ranges from 6.54% to 9.78%.13 APTCs, million student loan borrowers in New York,6 paid directly to health plans, make up the and a recent survey reported an average difference between the capped amount that the debt per New York borrower of $31,523.7 eligible consumer pays and the actual cost of Graduate students are forced to take on coverage. Basing the credits on a consumer’s much higher levels of debt, particularly when adjusted gross income makes sense, because pursuing careers in fine arts ($72,800), the it is universal and verifiable. But it’s also law ($145,000), or medicine ($246,000).8 something of a blunt instrument because it doesn’t take into account extraordinary Policymakers and analysts are addressing expenses—such as student loans. New York the runaway student debt problem in a State could provide a supplemental subsidy number of ways: for instance, proposing to to borrowers by allowing them to deduct the cancel student loan debt and establish free amount of their loan payments from their or reduced-cost post-secondary education,9 modified adjusted gross income. The reduced shining a light on abuses at for-profit income figure that would result from this institutions with low per-pupil spending deduction might reposition borrowers lower and high default rates,10 and improving the on the income scale, entitling them to deeper quality of information and services available subsidies through the operation of income- to students making choices on degrees and based premium caps. New York would loans.11 Another approach would be to look at then make up the difference by paying state the problem through the lens of a different but premium tax credits directly to health plans. overlapping financial issue: health insurance Table 1 (on next page) provides a look at how premiums. Many of New York’s estimated such a program might work for borrowers 410,000 uninsured between the ages of 19 and from a range of circumstances. 3412 with large monthly loan repayments are struggling to find money for health insurance To prepare these scenarios, federal data on premiums. One way to tackle this problem graduates’ median salaries (used as a proxy would be a state premium tax credit tied for income) and monthly loan payments to student debt repayments, supplementing were organized by types of institution and existing advance premium tax credits (APTCs) degree to create hypothetical purchasers of provided for qualified health plans under the coverage at different income levels and in Affordable Care Act. different geographic areas. Next, the “search for a plan” tool from the NY State of Health U N I TED H OSPITAL FUND | HEALT HWATCH: STUDENT LOA NS & HEA LTH INSU RA NC E PREMI U M S 2 Marketplace14 was used to calculate monthly show the smaller premium savings that would coverage costs for a silver-tier plan under accrue to two graduates with less loan debt current rules (“current premium”) and then and salaries that already make them eligible as if a state student loan-based subsidy was in for APTCs; they would see some savings place (“new premium”); the last two columns because the reduction in income would move show the dollar and percentage amount them to a lower premium cap. The second- change. In all scenarios shown, individuals highest reduction (Row D) would come to a with student loan debt would see lower graduate from a private institution with high premiums under a new state program, but the loan payments but a modest salary, such as a amount saved would depend on salaries and visual artist. Row E shows the benefits for a monthly loan payments. household with two different loan payments and moderate salaries. The final student (Row As shown in Row A, the biggest beneficiary of E), with a small loan payment and the lowest the program would be borrowers with salaries salary, would benefit from a lower cap; they that push them past the current ACA 400% could also shop for a $0-premium bronze- FPL limit for premium subsidies, combined level plan available at that income level, if with the higher monthly debt payments willing to take on the added risk from high typical of graduate students. Rows B and C deductibles. TABLE 1. HOW WOULD A STATE STUDENT LOAN SUBSIDY AFFECT HEALTH CARE PREMIUMS? Loan Change Income Current New School Degree Debt (Annual) Premium Premium $ Pct. (Monthly) A Columbia MPH $60,900 $800 $614 $402 $212 35% B CUNY Hunter BA Psychology $27,700 $130 $168 $149 $19 11% C SUNY Albany BA Economics $38,100 $222 $306 $276 $30 10% Rensselaer D Polytechnic BA Visual Arts $33,600 $259 $245 178 $57 24% Institute BA Teaching & $30,300 $226 & E SUNY Buffalo $431 $381 $50 12% BA Social Work & $25,386 $263 CUNY Assoc. F $26,400 $97 $152 $137 $15 10% Kingsborough Business Note: The couple in Row E has coverage as a couple; all others have individual coverage. Source: UHF analysis of United States Department of Education College Scorecard, https://collegescorecard.ed.gov, and NY State of Health “search for a plan” tool. U N I TED H OSPITAL FUND | HEALT HWATCH: STUDENT LOA NS & HEA LTH INSU RA NC E PREMI U M S 3 Discussion Since New York runs its own marketplace (New York State of Health) rather than relying Several policy and operational issues arise on the federal one, NYSOH could incorporate in consideration of a student loan-based the student debt subsidy into its current premium subsidy program, including whether processes, using loan documents to verify there should be a floor and a ceiling built eligibility and reconcile subsidy payments into the design. Because New York expanded at the close of the year. In 2016, NYSOH Medicaid eligibility and created a Basic undertook a similar though temporary effort Health Program (the Essential Plan) when to provide subsidies in addition to APTCs it implemented the ACA, lower-income to lower-income individuals purchasing students generally earning less than $24,000 through the marketplace, during the transition are eligible for free or $20/month coverage from the Family Health Plus program to the with little cost sharing. Because lower-income Essential Plan.17 Exchanges in California, borrowers might become eligible for the EP Massachusetts, and Vermont all supplement with the loan debt deduction, one policy APTCs for eligible enrollees through their decision would be whether to set a maximum respective enrollment, eligibility, and payment subsidy equal to the highest subsidy available systems. for a qualified health plan, or fully underwrite the cost of Essential Plan coverage. A second decision is whether to limit the program to Conclusion certain income or age groups, such as the 18- New York State faces daunting challenges to 34-year-olds who account for about 45% as a result of the destructive COVID-19 of outstanding student debt in New York. 15 pandemic and the economic damage that has The 35- to 54-year-old segment accounts for resulted from the shutdown needed to slow another 21% of student debt, but a portion the deadly curve; officials project a $13.3 probably represents parents who have taken billion drop in revenues compared to estimates on debt to help finance their children’s made when the budget was originally education. adopted.18 After digging out of this hole, state policymakers will be making choices among A targeted approach to young adults starting many competing needs, such as addressing out their careers—a valuable addition to the the health disparities laid bare in a crisis that individual market risk pool—would also claimed a disproportionate share of Black address some of the imbalance created by New and Brown lives, improving primary care and York’s pure community rating system, which supporting telehealth, and providing better does not allow premium variations based on coverage for undocumented New Yorkers. But age. As a result, the lowest unsubsidized 2020 a modest program targeted at New Yorkers silver premium for a 25-year old in New York with student loan debt would send a strong County is $619, compared to $359 in San message in difficult and uncertain times, and Francisco and $276 in Boston,16 cities in states could help young borrowers stay current with with active state exchanges that allow rates to their payments and stay healthy by enrolling vary based on age by a factor of 2:1. With a in coverage. student loan debt subsidy, young borrowers would see a reduction in premiums, and Acknowledgment older enrollees would not be burdened with premium increases, as a result. This work was made possible through the support of The New York Community Trust. U N I TED H OSPITAL FUND | HEALT HWATCH: STUDENT LOA NS & HEA LTH INSU RA NC E PREMI U M S 4 Endnotes 1 United States Department of Labor Employment and Training Division. Weekly Claims Reports. https://oui.doleta.gov/unemploy/claims_arch.asp 2 New York State Department of Labor, Division of Research and Statistics. Employed, Unemployed, and Rate of Unemployment by Place of Residence for New York State and Major Labor Areas. April 2020. https://www.labor.ny.gov/stats/pressreleases/prtbur.pdf 3 Office of the New York State Comptroller. September 2016. Student Loan Debt in New York State https://www.osc.state.ny.us/sites/default/files/reports/documents/pdf/2018-12/education- loan-debt-2016.pdf; Federal Reserve Bank of New York, Research and Statistics Group and New York City Department of Consumer Affairs. December 2017. Student Loan Borrowing Across NYC Neighborhoods. https://www.newyorkfed.org/medialibrary/media/outreach- and-education/community-development/credit-conditions/student-loan-borrowing-nyc- neighborhoods.pdf; NYC Department of Consumer Affairs. December 2018. Student Loan Debt Distress Across NYC Neighborhoods, Identifying Indications of Vulnerability. November 2018. https://www1.nyc.gov/assets/dca/downloads/pdf/partners/Research-StudentLoanDebtDi stressAcrossNYCNeighborhoods.pdf 4 Federal Reserve Statistical Release. G.19. Consumer Credit January 2020. March 6, 2020. Board of Governors of the Federal Reserve. https://www.federalreserve.gov/releases/g19/ current/g19.pdf 5 State Level Household Debt Statistics 2003-2019. Federal Reserve Bank of New York, February 2020. New York Fed Consumer Credit Panel/Equifax Citation: State Level Household Debt Statistics 2003-2018, Federal Reserve Bank of New York, February 2020. NY Federal Reserve, Center for Microeconomic Data. https://www.newyorkfed.org/microeconomics/databank 6 Office of the New York State Comptroller. September 2016. Student Loan Debt in New York State https://www.osc.state.ny.us/sites/default/files/reports/documents/pdf/2018-12/education- loan-debt-2016.pdf 7 Lendedu. Student Loan Debt by School by State. 2019. https://lendedu.com/student-loan- debt-by-school-by-state-2018/#NY 8 Lane R. December 16, 2019. What Is the Average Student Loan Debt for Graduate School. Nerdwallet. https://www.nerdwallet.com/blog/loans/student-loans/average-student-loan- debt-graduate-school/; Trends in Student Loan Debt for Graduate School Completers. U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics. https://nces.ed.gov/programs/coe/indicator_tub.asp 9 Warren E. April 27, 2019. I’m calling for something truly transformational. Universal free public college and cancellation of student loan debt. Medium. Election 2020. https://medium. com/@teamwarren/im-calling-for-something-truly-transformational-universal-free-public- college-and-cancellation-of-a246cd0f910f; State of New York. Tuition-free Degree Programs: the Excelsior Scholarship 10 Cao Y. March 23, 2018. Grading New York’s Colleges. The Century Foundation. https:// production-tcf.imgix.net/app/uploads/2018/03/26094105/grading-new-yorks-colleges.pdf 11 New York City Department of Consumer Affairs. NYC Financial Empowerment Centers. https://www1.nyc.gov/site/dca/consumers/Student-Loans-In-Person-Help.page 12 American Community Survey. 2018 1-yr estimates. Health Insurance Coverage Status by Sex and Age. Table B27001. 13 KFF. January 2020. Explaining Health Care Reform: Questions About Health Insurance Subsidies. Henry J. Kaiser Family Foundation. https://www.kff.org/health-reform/issue-brief/ explaining-health-care-reform-questions-about-health/ U N I TED H OSPITAL FUND | HEALT HWATCH: STUDENT LOA NS & HEA LTH INSU RA NC E PREMI U M S 5 14 NY State of Health Marketplace. https://nystateofhealth.ny.gov/individual/ 15 Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve banks of Philadelphia and Minneapolis and accessed by the Consumer Credit Explorer. https://www.philadelphiafed.org/eqfx/webstat/index 16CoveredCA. https://apply.coveredca.com/lw-shopandcompare/; Massachusetts Health Connector. https://mahealthconnector.optum.com/individual/ 17 Newell P and Thaper N. New York’s Temporary Premium Subsidies: Meeting Immediate Goals and Yielding Useful Lessons. June 2016. United Hospital Fund. https://uhfnyc.org/publications/ publication/new-yorks-temporary-premium-subsidies-meeting-immediate-goals-and- yielding-useful-lessons/ 18 State of New York. Division of the Budget. FY 2121 Enacted Budget Financial Plan. https:// www.budget.ny.gov/pubs/press/2020/fy21-enacted-fp-released.html U N I TED H OSPITAL FUND | HEALT HWATCH: STUDENT LOA NS & HEA LTH INSU RA NC E PREMI U M S 6