United States: Part V: A Brief Overview Of The American Health Care Act

In Part IV of our blog series, Very Opaque to Slightly Transparent: Shedding Light on the Future of Healthcare, we discussed a few post-inauguration developments with respect to the Affordable Care Act (ACA).  In this Part V, we provide a brief overview of some of the key provisions of the American Health Care Act (AHCA), the latest in the ongoing saga of the ACA's future.

On March 6, 2017, Speaker of the House Paul Ryan unveiled his much anticipated ACA "repeal and replace" bill, the AHCA. Although it is currently undergoing markup in the House of Representatives, and thus is subject to change even in the immediate future, it is worth considering some of the legislation's core features, as they establish a general framework within which a successful repeal and replace effort may operate.  For example, in its current draft form, the AHCA includes various key components, including those set forth in the following abridged list:

  • The so-called "individual mandate," the ACA's primary funding mechanism, would be eliminated. Instead, individuals would be required to maintain "continuous coverage" or face 30% higher premiums for one year when choosing to re-enter the health insurance market. Someone who experiences a lapse of coverage of 63 days or more over the previous 12 months would be subject to this penalty.
  • Like the ACA, the AHCA would utilize refundable tax credits to incentivize and lower the cost of obtaining coverage. However, unlike the ACA's income-based tax credits, tax credits under the AHCA would be based primarily on age (albeit with a small income component).  Individuals earning less than $75,000 (or $150,000 in the case of a couple filing jointly) would receive the same size tax credit, while those earning more would see the size of such tax credit gradually phased out. Beyond that, everyone, regardless of income, would receive a tax credit based on their age, with individuals under 30 receiving a $2,000 tax credit and those over 60 receiving a $4,000 credit.
  • States that have chosen to participate in the Medicaid expansion under the ACA would experience the same levels of federal support through December 31, 2019. Thereafter, two fundamental changes would occur: (i) no new enrollment would be permitted under the expansion program, and (ii) existing funding would be replaced with a per capita cap, pursuant to which states would be granted a lump sum for each enrollee, which amount would only increase with the medical component of the Consumer Price Index. In addition, expansion program enrollees would only be allowed to remain covered to the extent that they don't become ineligible for more than one month. Thus, over time, federal Medicaid funding would likely decrease.
  • The contribution limits for tax-exempt health savings accounts (HSAs) would nearly double. In addition, excess money from a premium tax credit could be contributed to an HSA without being counted against the contribution limit.
  • Some of the ACA's more popular provisions would remain in place, including the prohibition on refusing to provide coverage based on preexisting conditions, the ban on annual and lifetime coverage caps, and the requirement that insurers permit a beneficiary's child to stay on their parent's plan until age 26.

Notwithstanding pressure being applied by Republican congressional leadership and the White House, the bill faces substantial obstacles.  The legislation has been broadly panned by Congressional Democrats.  Some of their chief complaints include the following:

  • Planned Parenthood.  The AHCA targets Planned Parenthood, rendering the women's health organization ineligible for Medicaid reimbursements or federal family planning grants.
  • Medicaid Reductions. Changes to Medicaid would, by 2020, freeze the Obamacare expansion that gave insurance to more than 11 million people, and subsequently slash federal funding.
  • Increased Premiums for the Elderly. Insurance companies would be able to charge the elderly five times more than young people for premiums. (The current limit under the ACA is three times.)
  • Surcharge for Coverage Lapses. Insurance companies can tack on 30 percent premium surcharges for anyone with a lapse in coverage.

On the Republican side of the aisle, the AHCA has also met with significant criticism from conservative (and some moderate-leaning) Republicans in the House and Senate.   For example, some of the material concerns being voiced by the Freedom Caucus and other conservative groups include the following:

  • Obamacare Lite. According to Michael Needham, the President of the conservative group, Heritage Action, "Many Americans seeking health insurance on the individual market will notice no significant difference between the Affordable Care Act (i.e., Obamacare) and the American Health Care Act....That is bad politics and, more importantly, bad policy. Rather than accept the flawed premises of Obamacare, congressional Republicans should fully repeal the failed law and begin a genuine effort to deliver on longstanding campaign promises that create a free market health-care system that empowers patients and doctors."
  • "The Republican Individual Mandate." FreedomWorks, a conservative advocacy group, labeled the AHCA's requirement that people pay a 30 percent premium to insurers if they stop their coverage for more than two months "the Republican individual mandate."
  • A Long List of Concerns. Representative Jim Jordan of Ohio, a member of the hardline House Freedom Caucus, cited three AHCA provisions that conservatives have complained about for weeks leading up to the formal release of the House GOP plan: the AHCA's extension of the ACA's Medicaid expansion for another four years; the AHCA's failure to immediately repeal all of the ACA's tax increases; and the AHCA's provision of refundable tax credits to help people buy insurance, which Jordan labeled "a new entitlement."

At present, the first hurdle that will need to be cleared is overcoming conservative opposition in the House of Representatives.  However, even if the legislation clears the House, it will then be subject to review in the Senate, where the concerns of moderate-leaning Republican Senators will need to be adequately addressed.  This tension between conservatives and moderates reflects more broadly the ideological divide amongst Republicans, even as they control all levers of government at the federal level.  President Trump has indicated that he will be making a push in the coming weeks to promote the legislation, but whether he will succeed in helping bridge the gap amongst his party remains to be seen. Another potentially disruptive force is the pending Congressional Budget Office report, which a number of analysts anticipate will reflect poorly on the bill.  Indeed, an S&P Global Ratings report has estimated that 6 to 10 million individuals could lose coverage if the proposed legislation is implemented.  Regardless of what happens with the AHCA, the debate over the coming weeks and months will provide substantial insight into the future of healthcare reform in America.

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.

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