House Republicans released their plan in March to repeal and replace the Patient Protection and Affordable Care Act (PPACA) also known as Obamacare. The original bill got through the required committees but failed to gain enough support to be brought to the floor for a vote.
GOP leadership spent weeks working with conservatives and moderates to reconcile differences and create the bill that passed the U.S. House of Representatives Thursday.
Things will likely change once the Senate creates their version of the bill so take everything here with a grain of salt.
Titled The American Health Care Act (AHCA) as it is today, can be seen in its entirety HERE, but because ACA was a series of amendments to other law, understanding these new changes would require applying these proposed amendments to The Social Security Act, Internal Revenue Code of 1986, and The Public Health Service Act. Because that’s as fun to get through as the “terms of service agreements” for smartphone apps, I’ll distil it down to the basics.
Taxes, Fees, and Subsidies
Basically, the GOP plan will rescind all Obamacare taxes, fees and subsidies and enact a new entitlement in the form of a tax credit for low and middle-income families of between $2,000 and $14,000 per year.
The premium subsidies are now a system of tax credits. The credits would rise with customers’ ages and, like the subsidies, could be used toward premium costs.
There is additionally a subsidy, the Patient and State Stability Fund (Title XXII), funded by federal taxpayers and given as a block grant to states who get approved, so that states may help “through the provision of financial assistance, high-risk individuals who do not have access to health insurance coverage offered through an employer enroll in health insurance coverage in the individual market in the State.”
This federal-to-state grant may be used by states to stabilize premiums, reduce the cost-of-care for patients who have a “high rate of utilization of health services,” promote participation in the health care market, preventative services, payments to providers, and the subsidization of out-of-pocket costs.
The 20% tax increase on Health Savings Accounts (HSAs) and Medical Savings Accounts (MSAs) is rescinded. The HSA tax will return to 10% and the Archer MSA tax to 15%.
The Stability Fund will be allotted $15 billion in 2018 and 2019 but will drop to $10 billion in 2020 and beyond.
The GOP plan will dismantle taxes on tanning facilities, prescription drugs, over-the-counter medications, health-insurance premiums, medical devices and higher earning individuals.
The new plan will immediately remove the Obamacare penalty (individual mandate) that Americans were forced to pay if they did not have Obamacare-approved insurance during the previous year.
AHCA has a provision that intends to prevent the acquisition of insurance when it’s needed and dropping coverage after the medical event is over. This gaming of the health insurance markets makes it impossible to control costs and results in higher premiums for those that keep coverage year-round.
The provision, named “Encouraging Continuous Health Care Coverage,” describes a 30% increase in premium cost for a covered person who did not have coverage for a continuous 63-day period during the last plan year.
The republican bill will make it illegal for insurers to deny coverage, increase premiums, or put a lifetime cap on patients with pre-existing conditions as long as they maintain coverage.
The Stability Fund provides money to the states to deal with expenses associated with high-risk patients. Changes in the passed version add an additional $8 billion to the fund.
The bill allows insurers to charge up to 5x more for people with pre-existing than otherwise healthy persons. Money from the stability fund can be used to ease the burden.
Any plan that provides coverage for abortions, other than when necessary to save the life of the mother or pregnancies resulting from rape or incest, will not be considered eligible health insurance for the purpose of subsidies and premium penalty calculation.
AHCA also blocks federal payments to Planned Parenthood for a year.
The expansion of Medicaid under Obamacare will be rolled back and tuned ultimately ending in 2020. Calling it the “modernization of Medicaid,” House Speaker Paul Ryan said that “By modernizing and strengthening the program, our reforms will empower states to create plans to best meet the specific needs of their citizens. It will put Medicaid on It will put Medicaid on financial footing so it can do what it was designed to—protect the most vulnerable.”
Waivers to the states
Individual states may now get waivers allowing states to charge older custromers higher premiums than younger ones with no restrictions.
Waivers will also be available to allow states to opt out of the “essential benefits” coverage which required even young, single men to have maternity coverage in their plans.
A waiver can be obtained to allow health insurers to charge higher premiums for those with pre-existing conditions, but only if their coverage lapses for 63 days consecutively. This waiver requires that the state set up high-risk pools to help defray the costs of the higher premiums and will be partially funded by the stabilization fund.
The So-What of it all…
The GOP bill is replacing entitlements with other entitlements. While the ACA subsidy and Medicaid expansion are slated to go away in the future, a new tax credit and a state grant will arise before those others are gone.
As a tax credit, anyone that does not owe taxes will receive a tax refund even after having paid zero into the system.
AHCA does return a great deal of power to the states on how they will distribute the funds, but the states will have to submit a health care program to the federal government in order to receive the grant.
With pre-existing conditions being covered without the ability of insurers to charge more for covering the risk, an imbalance is obvious. The Stability Fund may help with some of that, but the increased costs will likely end up largely covered through taxpayer-funded subsidies or higher insurance premiums.
The ultra-long timeline for reversing the Medicaid expansion is of concern. January 2020 is the current expiration date which is an obviously political choice – after the 2020 presidential and congressional elections. With a date that far in the future and obvious self-preservation a motivation, it is unlikely that the ending of Medicaid expansion will ever occur.
If the Medicaid expansion is never reigned-in, will the new tax credits and Stability Fund subsidies also get shut down? Don’t bet on it.