United States: Part 3: Exploring "Repeal And Replace"

In Part II of our blog series, Very Opaque to Slightly Transparent: Shedding Light on the Future of Healthcare, we considered potential healthcare market consequences of a partial repeal of the Affordable Care Act (ACA).  In this Part III, we explore several potential "repeal and replace" scenarios that could unfold under the Trump Administration.

Tom Price Plan

Tom Price, President-Elect Trump's nominee to lead the Department of Health and Human Services, unveiled in 2015 the "Empowering Patients First Act" – legislation that would fully repeal the ACA and replace it with a comprehensive healthcare reform package.  Among the core tenets of the Price plan are:

  • Individuals who purchase health insurance through the individual market would be granted refundable tax credits for purchasing health insurance ranging from $1,200 to $3,000, depending on their age, although these tax credits would not be available to those receiving federal or other benefits, including Medicare, Medicaid, SCHIP and TRICARE. Similarly, individuals in employer subsidized group plans would be ineligible.
  • People with pre-existing conditions could not be denied coverage if they maintain "continuous coverage" for 18 months before choosing a new policy. However, if an individual ceases to maintain such coverage, insurers can (i) impose pre-existing condition exclusions for up to 18 months, and (ii) raise premiums up to 50% for up to three years.  In addition, some federal funds would be available to the states to partially offset the cost of state-sponsored high-risk pools.
  • The amount of money that companies would be permitted to deduct from their taxes for employee health insurance expenses would be capped at $20,000 for a family health insurance plan and $8,000 for an individual insurance plan.
  • The Secretary of Health and Human Services would collaborate with various physician/medical organizations to develop clinical guidelines for the evaluation and/or treatment of medical conditions. Such clinical guidelines would provide a safe harbor for medical malpractice defendants who adhered to the guidelines absent clear and convincing evidence establishing liability otherwise.  In addition, the Secretary may award grants to states for the development and implementation of administrative healthcare tribunals.
  • The use of health savings accounts (HSAs) – a mechanism that permits people to contribute pre-tax dollars to accounts dedicated to covering healthcare expenditures – would be incentivized in a number of ways (e.g., availability of a one-time $1,000 tax credit, increase in the allowable HSA contribution limits, ability to roll over an HSA to a surviving spouse and/or other family members).
  • Insurers licensed to sell policies in one state would be permitted to sell such products in other states.
  • The expanded Medicaid coverage under the ACA would be eliminated.

Paul Ryan Plan

Paul Ryan, Speaker of the U.S. House of Representatives, also has a widely discussed ACA replacement plan.  Titled "A Better Way," Paul Ryan's proposal – which is a more of a set of guiding principles than fully developed legislation – has many elements in common with Tom Price's plan.  In particular:

  • Refundable tax credits of an indeterminate amount (but scaling up with age) would be available to individuals buying insurance plans in markets regulated by the states, not the federal government.
  • Insurers would be permitted to sell plans across state lines.
  • Insurers would not be permitted to discriminate against individuals with pre-existing conditions so long as such individuals maintain continuous coverage. A one-time open enrollment period would be available for individuals to join the health care market if they are uninsured, regardless of how healthy they are.
  • The plan would promote wider use of HSAs.
  • States would be able to choose whether to accept federal Medicaid funding as a block grant or a per capita cap, with federal funding based on 2016 spending adjusted based on general inflation.
  • The plan would encourage employers to support and adopt wellness programs.
  • Changes to medical liability laws would limit the amount of money plaintiffs could recover in malpractice lawsuits.
  • The government would fund, to some degree, high-risk insurance pools for the sick.
  • Tax breaks on employer-based premiums would capped.

Richard Burr, Orrin Hatch and Fred Upton Plan

Senators Richard Burr and Orrin Hatch, together with Representative Fred Upton, have also proposed a comprehensive replacement for the ACA.  The "Patient Choice, Affordability, Responsibility and Empowerment Act," also known as the "Patient CARE Act," has a number notable provisions, many of which align with the Price and Ryan proposals.  Specifically:

  • Insurers would not be permitted to discriminate against individuals with pre-existing conditions as long as such individuals maintain continuous coverage, and there would be a one-time open enrollment period to enable individuals to obtain insurance, regardless of how healthy they are.
  • Americans would be permitted to purchase coverage across state lines.
  • Individuals who do not receive employer-sponsored coverage through a large employer (e.g., small business employees or unemployed individuals) would be eligible to receive an age-adjusted, advanceable, refundable tax credit, which would also be scaled to income relative to the federal poverty level.
  • Reforms would help to expand eligibility for and the use of HSAs.
  • States would be allowed to utilize default enrollment – e.g., states could create a default enrollment option with premiums equal to the value of the tax credit so that the individual assigned to the plan would not be charged any additional premium. However, individuals would be able to switch plans or opt-out of coverage altogether.
  • States could leverage high-risk pools with targeted federal funding.
  • Medical liability reforms would place caps on non-economic damages and limitations on attorneys' fees. In addition, states could elect to establish "health courts" presided over by judges with health care expertise.
  • States would receive capped allotment federal Medicaid grants.
  • Employers' deductions for employee health insurance expenses would be capped at $30,000 for a family health insurance plan and $12,000 for an individual plan.

Healthcare Market Impact

As outlined above, many of the Republican ACA replacement proposals have common elements.  While it is impossible to forecast with any certainty the full effect of any replacement legislation, one can surmise the potential consequences of healthcare legislation modeled off of the above proposals.

One commonality among the plans described above is the enactment of changes to how the federal government funds state Medicaid programs.1  Generally speaking, Republican healthcare proposals would replace existing federal Medicaid funding structures and move towards block grants or per capita caps.  On the one hand, proponents of such a shift in methodology contend that block grants and/or per capita caps would provide states with financial predictability and flexibility in designing and operating their programs in ways that improve the quality of care offered to beneficiaries and reduce costs.  On the other hand, critics worry that such a shift could result in insufficient funding, which would force states to take steps to limit enrollment, reduce covered benefits, increase state revenue, and/or lower provider payments.  Depending on funding levels and the political tendencies of state legislatures, providers in certain jurisdictions could be at risk for reduced Medicaid revenue.

The proposals described above also would permit insurers to sell insurance plans across state lines.  Those in favor of such an idea believe that it would encourage competition by allowing consumers to shop for cheaper insurance policies while simultaneously simplifying operations for insurers.  Opponents of such an approach fear a "race to the bottom," in which insurers seek to locate to states with the least stringent regulations and sick people are priced out of coverage.  Regardless of the impact on consumers, such a policy shift could prove to be a boon to companies wishing to enter the health insurance space, as the high costs and regulatory burdens that provide a barrier to entry, at least to some degree, theoretically would be reduced.

Another common element of the plans discussed above is medical malpractice liability reform.  Such reforms, proponents argue, would reduce the practice of "defensive medicine" and reduce costs associated with medical malpractice coverage, resulting in overall healthcare cost savings.  While the plaintiffs' bar would certainly not welcome malpractice liability reform, and some consumers (or victims of professional negligence) would likely take umbrage as well, providers could potentially see cost savings and, all things being equal, increased profit margins as the cost of professional liability coverage decreases (though detractors may disagree).

As noted in the last installment in this series, barring a massive shift in the composition of legislature (e.g., Senate Republicans obtaining a filibuster-proof majority in 2018), the buy-in of Congressional Democrats almost certainly will be required to pass legislation to replace the ACA.  Consequently, the Republican proposals discussed herein are likely to undergo substantial modification if they are to attract the requisite Democratic support.  Nonetheless, healthcare market participants looking to plan for the future could be well-served by understanding the general principles underpinning Republican healthcare reform proposals.

Footnote

1. Although the Empowering Patients First Act does not directly provide for Medicaid block grants or per capita caps, Tom Price's proposed 2016 budget contemplates such block grants.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
13 Sep 2018, Other, Los Angeles, United States

Liisa will be giving opening remarks and presenting, "Big Data and Online Behavioral Advertising (OBA): An Advertiser’s Perspective Origins of big data and how to legally acquire data."

26 Sep 2018, Seminar, San Francisco, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series.

28 Sep 2018, Other, Los Angeles, United States

Leaders today don't just have to worry about nefarious cybercriminals getting "inside" their firewalls; there's an entire ecosystem of SAAS partners, third party vendors and suppliers, and all the hardware from switches to POS terminals that need to be monitored.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions