If you watch the news, listen to the radio, or open up your web browser, you have probably heard: the House Republicans have released their Obamacare replacement bill, The American Health Care Act (AHCA). After a brief Where’s Waldo escapade, the bill has seen the light of day, and not surprisingly, everyone is weighing in. Two House Committees have moved ahead with mark-ups, both of them voting to advance the bill out of committee earlier today.
We have already heard significant opposition and concern from provider and consumer groups across the country. The American Hospital Association (AHA), American Medical Association (AMA), American Nurses Association (ANA), and the AARP have all issued statements opposing the bill in its current form. At the heart of this opposition are concerns about the potential impact this bill would have on health insurance coverage and costs, particularly for the most vulnerable populations among us.
Let’s take a look at some of the most concerning provisions.
Author’s Note: Analyzing this bill will be a bit of a moving target. So, the key provisions outlined here reflect the original form of the AHCA, prior to any Committee mark-ups.
- No more individual mandate, enter continuous coverage provisions.
The ACA created the individual mandate. Come tax time, people must demonstrate that they had credible coverage the previous year or pay a penalty, equal to $695 per adult, or 2.5% of income, whichever is greater. There are a variety of exemptions, but if you do not meet one of those, you must pay it—no matter if you are healthy or sick. The goal here is to encourage healthy people to come into the risk pool. Interestingly, one exemption allows you to have a short coverage gap, freeing you from the mandate if you go without coverage for less than three months (i.e., you need at least one day of coverage in that third month to demonstrate creditable coverage).
The AHCA repeals the mandate and replaces it with a continuous coverage provision. In some ways, the continuous coverage provision shares some commonalities with the individual mandate—they both penalize you for not having coverage. In this model, if you go without creditable coverage for 63 days or more in the previous year, an insurance company can charge you premiums up to 30% higher when you sign up. Now, this only impacts people in the individual insurance market (i.e., if you went without coverage and then got a job with insurance, this provision would not apply). Importantly, this 30% penalty is a one year bump up—you can go back to regular premium rates the following year.
So, who does this hurt? Likely, it would impact people who need care more. If you have gone without insurance and then need to enroll, there is likely some reason (i.e., a health need) that is pushing you to sign up. In addition, because the penalty is based on a percentage of the premium, the penalty would be greater for people with higher premiums—namely older adults (see #2). One could also imagine people who struggle to afford their premiums in the first place might be at greater risk of having a lapse in coverage, again, burdening them further if and when they are able to enroll.
So, while the ACA individual mandate penalized anyone who stayed out of the market (healthy or sick), the AHCA continuous coverage provision penalizes people when they come into the market, right when they need care.
- If you’re older, you pay more.
In the ACA, insurers on the health insurance exchange can charge older adults premium rates that are no more than three times that of younger adults.
The AHCA increases that rate, allowing insurers to charge older adults premium rates that are up to five times those of younger adults.
So, older people may have to pay higher premiums than they would under the ACA.
- Out with the poor, in with the old?
Well, sort of. Both the ACA and the AHCA use advanceable, refundable premium tax credits to help with the purchase of health insurance. In other words, the government provides financial assistance to cover part of the cost of health insurance premiums for certain worthy populations.
Under the ACA, the premium tax credits are provided based on a sliding scale according to income. Because of their design, they are particularly beneficial to low-income, older adults, and also account for regional variation in the cost of insurance.
In the AHCA, starting in 2020, the premium tax credits are based on age, with older adults getting larger tax credits than younger adults. While earlier versions of this bill had no income cutoff, the AHCA starts to reduce the size of the credit after $75k. In general, compared to the ACA, this new approach would provide more assistance for higher income people, especially those between about $47k and $75k, and even above, while it would provide significantly less assistance for people below $47k.
Early analyses show how the proposed Republican approach would result in much lower premium tax credits for lower-income older adults. For a beautiful visual rendering of national data from the Kaiser Family Foundation, take a look at this NYTimes piece.
This critical difference is one of the primary ways that this bill threatens the progress toward more affordable and accessible health insurance coverage for our most vulnerable populations.
- Cost sharing subsidies are wiped away.
Cost sharing subsidies are an often under-discussed provision of the ACA. If you are enrolled in a silver plan through the health insurance exchanges, and your income is between 100 and 250% of the federal poverty level (FPL) (i.e., between $11,880 and $29,700 for an individual) you are eligible for reduced cost sharing. Note, this is different from the premium tax credits described earlier. This is to help lower your costs when you actually receive care—through lower copayments and deductibles.
In other words, the ACA requires that the plans offered in the health insurance exchanges must meet certain actuarial values. However, for this lower income population, insurance companies are required to offer more robust plans, with lower cost sharing amounts, and the federal government reimburses these insurance companies for providing these cost sharing reductions.
The AHCA repeals these cost sharing subsidies effective 2020. This undermines affordability of health care for this vulnerable population. Even with insurance, cost is often the primary reason that people delay or go without needed care, and taking away this financial support could be devastating.
- Turns Medicaid into per capita caps.
A lot of the bill is actually about reforming the Medicaid program. The bill transforms Medicaid to a per capita cap program, as we have discussed before. This approach aims to reduce federal funding that flows to states, but could also have serious and differential impacts on states based on how much they spend per person now.
The AHCA also freezes the Medicaid expansion effective in 2020, with the idea that enrollment would ultimately go down for this group as incomes fluctuate and individuals lose eligibility. Much of the growing concern related to the fate of the Medicaid expansion stems from the potential detrimental impact that its elimination could have on effectively tackling the opioid epidemic and providing behavioral health services.
- Eliminates taxes on the wealthy.
Now perhaps this provision doesn’t directly impact health care for older, sicker, poorer people—or does it?
The taxes that would be repealed include a 0.9% Medicare Hospital Insurance tax, and the Medicare tax on unearned income. Both of these taxes only apply to income for people above $200,000 ($250,000 per couple). The Joint Committee on Taxation (JCT) estimates that between 2018 and 2026, repealing these two taxes would reduce federal revenue by $275 billion.
In addition, the AHCA repeals taxes paid by insurers, drug companies, and the medical device industry. Again, the JCT suggests that repealing these taxes would cost the federal government $189 billion between 2017 and 2026.
The elimination of these taxes makes it that much more important to have the Congressional Budget Office score the bill so we can see what impact the AHCA would have on the federal budget. So far, the only place we would expect significant savings is through cuts to the Medicaid program. Combining tax cuts for the wealthy with cuts to health care for the poor is why many analysts and Obamacare advocates are calling this bill “reverse Robin Hood.”
This raises the question of what the underlying debate about health reform is all about. Hint: It is all about values. If health care is a right, something that the government should ensure everyone has access to, then the premium tax credits in the AHCA don’t make sense. On the other hand, if you believe health care is something reserved only for those of us who make prudent choices, (you know, like choosing between an iphone and health insurance), then perhaps the AHCA tax credits will serve their purpose after all.
Stay tuned for some deeper dives into specific provisions of the AHCA as this unfolds.