Health Law Checkup

By Terry Roman

On February 24, a Republican draft reconciliation bill was leaked to Politico.  While it hasn’t been introduced or acknowledged by House Republicans it provides the most comprehensive look so far at how House Republicans plan to change the Affordable Care Act (ACA).

First, what does it not do. The bill does not repeal the ACA, but it replaces substantial portions of it.  It does repeal particular sections of the ACA, such as its taxes, the individual mandate, Medicaid expansion and subsidies.  Most of the ACA’s insurance reforms remain in place, such as the requirements that health plans:

• cover preexisting conditions
• not impose lifetime or annual limits
• no health status underwriting
• cover adult children up to age 26
• not discriminate on the basis of race, nationality, disability or sex
• cap annual and lifetime out-of-pocket expenditures

Now, here are some of the key provisions in the draft legislation:

• Under the ACA, people get subsides to help pay insurance premiums based on their income. The House bill replaces subsidies with tax credits that vary based on age. A person under 30 would be eligible for a $2,000 tax credit while a person over 60 would be eligible for a $4,000 credit.  If you don’t earn enough income to pay taxes, the credit comes to you as a payment.
• The ACA requires that insurance plans offer 10 essential health benefits, such as maternity care, mental health care, and prescription drug coverage. The House plan would allow states to determine for themselves what essential health benefits insurers in their state must provide starting with plan year 2020. Obviously, more generous coverage is more expensive and you would expect that states will likely let insurers offer skimpier plans.  Premiums would be allowed to vary by a 5 to 1 ratio, rather than 3 to 1 as under the ACA.
• There is no individual mandate requiring people to have health insurance in the leaked House plan. But to encourage people to be insured before they get sick, the proposal imposes penalties on those who don’t continuously have health insurance. If you have a lapse in coverage for at least 63 continuous days an insurer enrolling you in a new plan can charge you up to 30 percent more than the standard premium price for one year.
• The bill would extend indefinitely ACA non-compliant individual and small group plans that were “grandfathered.” It also appears to allow insurers to offer these plans to new enrollees and not just to renew them for current enrollees.
• The House Republican plan would phase down and eliminate ACA’s Medicaid expansion for low-income adults in 2020. States would retain the option to maintain a larger Medicaid program, but the federal government would only fund around 60 percent of the cost, compared to 90 percent under the ACA.
• Federal payments to the states through Medicaid or any other program for Planned Parenthood would be prohibited.
• House Republicans propose helping people pay for healthcare by expanding health savings accounts (HSAs). HSAs allow individuals who have high-deductible health plans to put pre-tax money away to pay for healthcare expenses. The new House plan would allow people to contribute more than the current amount, which is $3,350 for single individuals and $6,750 for a family. The plan nearly doubles those limits, to $6,550 for individuals and $13,100 for families. In the House plan, people would be able to contribute up to the amount of their deductible.
• Beginning in 2018, the bill would establish a “State Innovation Grant and Stability Program,” states could use funding from this program for a variety of purposes such as high risk pools, reinsurance programs, programs to stabilize premiums in the individual market or programs to promote access to preventive services. The federal government would spend $100 billion over 10 years to fund the pools, starting in 2018.

The biggest question is how House Republicans propose funding the draft bill. The bill eliminates all of the taxes that funded the ACA, yet would provide tax credits (less generous than the ACA’s), to millions of additional individuals. The only real revenue in the bill is the tax on high end employer plans.

Best guess is that the tax on high end plans does not represent enough money to fund the GOP tax credits.