After the 2016 election, pundits on all sides swore, “We’re out of the prediction business.”
The same declaration should be made for anyone involved in healthcare policy — because while commentary abounds on the future of health insurance under President Trump, nothing has been confirmed. In March, Republicans put together a bill to “repeal and replace” Obamacare. However, until actual legislation gets approved by Congress, healthcare reform is just a matter of speculation.
In this post, we won’t dive into every nuance of the proposed changes to Obamacare. There’s just too much to keep track of, and as we said before, nothing is set in stone.
For a summary of the most important updates on healthcare reform, and how they could affect your health insurance coverage, check out our Q&A below. If you want to get deep in the mud (or should we say swamp?), check out NPR’s news feed on all things “repeal and replace.”
What Does “Repeal and Replace” Mean?
It’s a move by President Trump and Paul Ryan, Speaker of the U.S. House of Representatives, to do away with the Affordable Care Act (a.k.a. Obamacare).
According to Health and Human Services Secretary Tom Price, there are three phases of the the “repeal and replace” plan. Phase One is the current bill, the American Health Care Act (AHCA). Phases Two and Three include regulatory changes and additional AHCA provisions. Future legislation would, for example, allow insurance companies to sell policies across state lines, reduce benefits that insurers are currently required to cover, and allow the government to negotiate lower drug prices.
What Does The American Health Care Act (AHCA) Do?
The American Health Care Act (AHCA) is a legislative follow-up to Trump’s campaign promise to “repeal and replace” Obamacare. This bill doesn’t completely dismantle Obamacare. Instead, it replaces certain parts of the law that its supporters (namely, Trump, Ryan, and some GOP legislators) consider to be better aligned with conservative ideology.
The AHCA includes multiple adjustments to Obamacare. We explain the most important ones below.
The AHCA Cuts Medicaid Funding
Medicaid is a federal program that provides funding for medical and health-related services to low-income Americans.
The AHCA is estimated to cut Medicaid spending by 17.6% by 2026. First, the bill will phase out Medicaid expansion by 2020. Second, the AHCA will cut $400 million in Medicaid reimbursements to Planned Parenthood. Third, federal funding for Medicaid will be capped at a fixed amount for each state, regardless of the total cost of care for Medicaid enrollees in that state. This spending cap shifts $370 billion from federal to state control, but it dramatically reduces funding to state Medicaid programs.
It Repeals The Individual Mandate
Under Obamacare, individuals who did not enroll in a health insurance plan in the previous tax year (either through the exchange or an employer-sponsored plan) had to pay a penalty up to $695 per adult.
The AHCA gets rid of the individual mandate. Americans without insurance won’t have to pay a penalty, but they still take on the financial burden of covering 100% of future healthcare costs.
It Repeals And Adjusts Tax Credits
Tax credits are federal subsidies that help people pay for their health insurance costs. They’re a major component of Obamacare because they allow low to moderate-income Americans to buy health insurance coverage. Under Obamacare, the amount that individuals and families receive in subsidies depends on their income level, household size, and cost of plans in their area.
Under the AHCA, however, cost-sharing tax credits (subsidies that help eligible individuals pay for out-of-pocket costs) will be repealed. Premium tax credits (subsidies that reduce monthly premiums) will continue, but they will include major adjustments:
- Tax credit eligibility will expand to individuals earning $75,000 or couples earning $150,000 per year.
- Tax credit amounts for individuals and families will be adjusted for age, not for income or local plan cost.
- Insurance carriers can charge older adults up to five times more than what they charge younger adults. (Under Obamacare, the ceiling is limited to three times the amount.)
In short, the AHCA’s adjusted tax credits are more generous to younger, middle-income Americans. They’re less generous to two very vulnerable groups: older and lower-income Americans, especially those living in rural areas with few plan options.
It Offers Major Tax Cuts
The AHCA will offer tax cuts that amount to almost $1 trillion over a decade. However, the size of these tax cuts is not proportionate to average household incomes.
For example, according the Tax Policy Center, the top 1% of income earners in the U.S. will receive an average tax cut of $37,000. That’s about 2.1% of their income. Meanwhile, Americans in the lowest income bracket will receive an average of $150 in tax cuts — about 0.9% of their income.
Over the next decade, the AHCA will lift about $348 billion in taxes for health insurers, high-income investors, drug companies, and medical device companies.
It Incurs Future Healthcare Costs
Under an AHCA provision, insurance companies can charge enrollees 30% more on premiums if they let their coverage lapse.
Also, in 2020, the AHCA will eliminate the “metal tier” plans currently offered under Obamacare. Metal plans are categorized based on the percentage of healthcare costs that the insurance carrier agrees to cover. The AHCA provision allows insurance carriers to decide how much of your healthcare costs they want to cover — which means you could get stuck with higher deductibles and other out-of-pocket costs.
Has The AHCA Been Approved?
No.
The AHCA was originally schedule for a vote in the House of Representatives on Thursday, March 23 — ironically (or intentionally?), the seven-year anniversary of the day that Obama signed the Affordable Care Act into law. However, the bill was on too thin of ice: GOP leadership pulled it from a House vote when backers couldn’t secure enough support.
How Could “Repeal and Replace” / AHCA Affect You?
That depends on your age and income. The AHCA offers a yearly tax credit up to $2,000 for 26 to 29-year-olds; up to $2,500 for 30 to 39-year-olds; and up to $4,000 for people under 60.
In a nutshell, healthy, younger Americans pay less; older, sicker Americans pay more.
Can You Keep Your Health Insurance?
Yes. Even if the AHCA passes, you won’t lose your current coverage. Instead, the question will be, Can you afford your current coverage once the AHCA goes into effect?
What Parts Of Obamacare Will Stay?
Some essential Obamacare provisions will remain intact, including the following:
- Adults under age 26 can stay on their parents’ plan.
- People with pre-existing conditions cannot be denied access to health insurance.
- Your state or federal exchange will still offer health insurance. (California’s state-run exchange is called Covered California.)
- The 10 categories of “essential health benefits” — including preventive services, hospitalization, mental health care, addiction treatment, maternity and newborn care, and birth control — will still be covered under your insurance policy.
- Insurance companies can’t set a cap on what they pay to cover you for the year.
Any Other Updates On Healthcare Reform?
It wouldn’t be Trumpian politics without “Apprentice”-worthy drama.
First, just days before the scheduled vote in Congress on March 24, House Republican leaders released a package of amendments to the bill. It was the result of rushed, closed-door meetings to appease both hard-line and moderate Republican skeptics of the AHCA.
Then GOP leadership pulled the bill.
Fast forward to May 4, when House Republicans passed the bill in a very narrow victory (217 to 213).
Then, after a summer recess and very raucous Town Hall meetings nationwide, Congress returned to the Hill. The Senate vote was postponed on July 17, followed by the release of a “skinny repeal” (called the Health Care Freedom Act) on July 27. That same day, by a vote of 49 to 51, the Health Care Freedom Act failed to pass in the Senate.
Is Obamacare Still Intact?
For now, yes. But the AHCA hasn’t been completely scrapped. There have been (and will be) renewed attempts to repeal the law. Since “Phase One” of the “repeal and replace” movement is an ongoing development, check back on this post for regular updates.
And if you have any questions, don’t hesitate to get in touch with us! At Regency West Insurance, licensed health insurance agents are ready to answer your questions and help you find affordable health insurance coverage. Visit us online or call us at (858) 699-0286.
*Post updated 1/13/2018.