Before we get into the details of how the American Health Care Act bill will proposed to change the current system, let’s first talk about what is not changing. In fact, while “repeal and replace” has a catchy ring to it, there is a lot that is staying the same. As Ezra Klein of Vox notes, Obamacare provisions that remain include:
- The ability to stay on your parents insurance until age 26
- Requiring insurers to cover pre-existing conditions
- A ban of insurers instituting both annual spending limits and lifetime limits
- Tax credits for health insurance remain (although the exact form and amount of the credit would change)
- Medicaid expansion will not be repealed and in fact stats that did not previously expand Medicaid can do so until 2020.
- All insurers must provide ten “essential health benefits”. These benefits include maternity care and preventive services.
So what did change?
- No more individual mandate…kind of. The individual mandate is gone. Under Obamacare, people who did not buy health insurance owed a tax penalty. Under the American Health Care Act, there is no tax penalty but individuals who’s insurance lapses can be charged a 30% premium over regular rates. A 30% premium rate hike sounds stiff. However, if you are sick and have cancer for instance, a 30% premium hike is small potatoes compared to the actual cost of treatment. On the other hand, for healthy people, a 30% rate increase may drive them away from having insurance. Thus, the non-mandate–even with the 30% penalty–may lead to a adverse selection death spiral whereby only sick people purchase insurance and premiums rise dramatically.
- No more employer mandate. Large and medium size employers no longer have to provide health insurance to their employees. Of course, they can do so if the choose to, but the repeal of the employer mandate is the clearest “repeal” of the Affordable Care Act provisions.
- Medicaid expansion ends in 2020…kind of. Sarah Kiff of Vox explains: “In 2020, enrollment in the Medicaid expansion will ‘freeze’ and states with no longer be able to sign new enrollees up for the program. Legislators expect that enrollment would slowly decline, as enrollees’ incomes change and they shift off the program.” Thus, the expansion is likely to die a slow death. That is, unless there is too much popular support for the Medicaid expansion by 2020. Michael Cannon of the Cato Institute writes: “By 2020, the constituency for preserving the Medicaid expansion would be much larger than it is now. More states, more voters, and more special interests will resist repealing the expansion than do today.”
- Tax credits are based on age and income rather than income alone. Kaiser Health News explains that “The GOP tax credits would be tied largely to age, with older people getting twice as much ($4,000 per year) as younger people ($2,000). ” Specifically, these credit rages are $2,000 for those under 30; $2,500 for those between 30 and 40; $3,000 for those between 40 and 50; $3,500 for those between 50 and 60 and $4,000 for those over 60. However, individuals (households) earning less than $75,000 ($150,000) would get the full $4,000 credit. Setting tax credits based on income (to increase progressively) and likely health care cost (i.e., age) is not unreasonable. However, using crude 10 year age bins
- Community rating remains but with more price variability. Under the ACA, health insurers could charge older individuals premiums that were three times the premium they charge charge younger individuals. Under AHCA, insurers would be able to charge older customers five times as much five times as much as younger ones and give states the option to set their own ratio.
Tomorrow, I will weigh in with my comments on the bill.