The
long-awaited Republican replacement plan for the Affordable Care Act (ACA),
which is best known as Obamacare, was released by House Republicans on Monday.
President
Trump made repealing and replacing Obamacare a keynote of his campaign, so his
victory in November, along with Republican lawmakers retaining control of both
houses of Congress, began the countdown toward Obamacare's imminent demise.
In
many respects, Obamacare did exactly what it was intended to do. It wound up
allowing more than 20 million Americans who likely couldn't afford health
coverage, or who were shut out of the system due to pre-existing conditions,
the opportunity to be covered. Unfortunately, it also tied the hands of
insurance companies, which found the ACA to be an unsustainable model.
With
further ado, let's dive into the 23 important things you need to know about the
Republican Obamacare replacement bill.
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1.
It immediately repeals the individual mandate
The
Republican replacement plan phases in a number of changes, but it immediately
eliminates the individual mandate. The individual mandate is the actionable
component of the ACA that requires all adults to purchase health insurance.
2.
The Shared Responsibility Payment will go away
The
replacement plan would also do away with the Shared Responsibility Payment
(SRP) associated with the individual mandate. The SRP is the penalty you pay
come tax time for not purchasing health insurance. In 2016, it was the greater
of $695 or 2.5% of your modified adjusted gross income.
3.
The employer mandate would be no more
In
addition to eliminating the individual mandate, the employer mandate would be
axed. The employer mandate required businesses with 50 or more full-time
equivalent employees (FTE) to offer health coverage options to those employees
and potentially subsidize those FTEs who spent more than 9.7% of their income
on premiums.
4.
The Advanced Premium Tax Credit will be repealed
The
subsidies associated with Obamacare wouldn't be repealed completely until 2020.
However, it would mean that the Advanced Premium Tax Credit (APTC) would go
away. The APTC is the income-based subsidy individuals and consumers receive
that helps lower their monthly premium costs. Individuals and families earning
between 100% and 400% of the federal poverty level are currently eligible.
5.
Cost-sharing reductions, too
In
addition to the APTC being repealed, cost-sharing reductions (CSRs) would also
disappear by 2020. Cost-sharing reductions are apportioned out to individuals
and families earning between 100% and 250% of the federal poverty level who
also purchase a silver-tier plan. CSRs are what help lower the copays,
deductibles, and coinsurance tied to a doctor visit.
6.
Medicaid expansion ends by 2020
As
expected, the Republican replacement plan would no longer allow states to
expand their Medicaid programs by 2020. Under the ACA, states were allowed to
choose whether or not they would take federal funds to expand the number of
people and families that would be covered by Medicaid, ultimately lifting the
federal poverty threshold to 138% from 100%. In total, 31 states chose to
expand their Medicaid programs.
7.
Medicaid funding doled out on per-capita basis
Another
massive departure from the ACA is that Medicaid funding will be doled out on a
per-capita basis. Republican lawmakers are clearly trying to reduce the amount
of federal funding being supplied to the states, and this would be a major step
in reducing the federal government's responsibility in covering millions of
Americans.
8.
Older adults could be charged more
One
of the bigger concessions to insurance companies in the Republican Obamacare
replacement plan is that it would allow older adults to be charged up to 67%
more than they're being charged now relative to younger adults. The ACA
currently caps what older adults can be charged compared to younger adults at
three-to-one. If this bill were to pass, this ratio would increase to
five-to-one. Since older adults are typically costlier for insurers, Republican
lawmakers believe this will make their plan more sustainable over the long run.
9.
Tax credits will be based on age
Instead
of subsidies that are based entirely on income, individuals and families will
receive annual tax credits based on their ages:
$2,000
for people in their 20s.
$2,500
for people in their 30s.
$3,000
for people in their 40s.
$3,500
for people in their 50s.
$4,000
for people in their 60s.
10.
There's a high limit on tax credit phase-outs
However,
there is an income component to the aforementioned tax credits. Full credits
are available to individuals and households earning up to $75,000 and $150,000,
respectively. Tax credit phase-outs begin at incomes above this point until the
exemption levels are hit, which is $215,000 for individuals and $290,000 for
households. This would mean that approximately 98% of all individuals and
households would qualify for tax credits under the Republican plan.
11.
Health savings account contribution limits will nearly double
A
critical cog for the Republican plan involves lifting the importance of health
savings accounts Opens a New Window. , or HSAs. In 2017, the limit on
contributions to an HSA is $3,400 for individuals and $6,750 for a family. By
2018, these contribution limits would jump to $6,550 for individuals and
$13,100 for families. HSAs are tax-advantaged accounts that can be used to help
pay for eligible medical care costs on a tax-free and penalty-free basis.
12.
Insurers can charge a 30% premium to previously uninsured members
Though
the individual mandate would be no more, a version of its penalty would
continue to live on. Insurers would be authorized to increase the premiums
charged to a consumer who didn't have insurance in the previous year by 30%
until they've had health insurance for one full year, upon which the surcharge
would be removed. This premium surcharge is designed to encourage ongoing
coverage.
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13.
The medical excise device tax would be axed
Even
though it's already suspended, the medical device excise tax, which implemented
a 2.3% tax on certain medical devices, would be eliminated for good. Medical
device makers had warned that this tax would cause them to move their
innovation to more tax-friendly foreign markets when it was first introduced,
though few device developers actually followed through with that threat.
14.
The NIIT will be repealed
Another
casualty of the Republican's Obamacare replacement plan is that the net
investment income tax (NIIT) would be repealed. The NIIT is a 3.8% tax on
investment income for individuals and joint filers earning in excess of
$200,000 and $250,000, respectively, in modified adjusted gross income. In
short, investors will be able to keep more of their capital gains.
15.
The Medicare surtax will be gone
Another
tax that will disappear to the delight of the wealthy is the Medicare surtax of
0.9%. Most Americans currently pay 1.45% in payroll tax that heads to Medicare,
with your employer covering the other 1.45%. Individuals making more than
$200,000 are required to cover an additional 0.9% (2.35% total), with no added
burden to the employer. Under the Republican plan, this surtax will be axed.
16.
The prescription drug tax will be removed
One
of the under-the-radar taxes associated with the ACA involves an excise tax on
brand-name prescription medicines. This tax was expected to generate $27
billion for the program over a 10-year period. With the Republican replacement
plan the prescription drug excise tax will go away, potentially making
brand-name drugs just a tad less expensive.
17.
The health insurance tax will be repealed
Another
somewhat unknown ACA tax that's currently suspended is the health insurance tax
on insurers. This tax was suspended by the federal government last year in the
hopes of encouraging insurers to keep their premium prices low in 2017.
Needless to say, its suspension didn't do all that much for insurers. Under the
Republican plan, the health insurance tax will end.
18.
The 10 essential minimum benefits clause stays
Believe
it or not, the minimum essential benefits clause remains in place in the
Republican replacement plan. Mind you, there are some language and coverage
changes between the ACA and the Republican replacement bill, but states will
not, despite popular belief, be able to pick and choose the minimum essential
benefits for health plans.
19.
No maximum lifetime benefits
One
major concern prior to the release of the Republican Obamacare replacement plan
is that it would allow insurers to reinstitute lifetime benefit caps on minimum
essential benefits. The Republican plan provided a pleasant surprise by
maintaining that insurers cannot place lifetime benefit limits on minimum
essential benefit spending.
20.
Establishes the Patient and State Stability Fund
The
Republican bill would also devote $100 billion between 2018 and 2026 to create
the Patient and State Stability Fund. This money would be given to all 50
states ($15 billion in 2018 and 2019, $10 billion in each year thereafter) to
create risk pools to subsidize the sickest and costliest patients, as well as
to stabilize premiums in the individual markets.
21.
Pre-existing conditions mandate kept
Another
semi-surprise is that the Republican bill preserves two of the most popular
components of the ACA. These were also components that President Trump himself
had suggested be kept after a meeting with now-former President Barack Obama in
November. First, insurers will be barred from turning away people with
pre-existing conditions, which should be a relief for millions of Americans.
22.
Dependent coverage up to age 26 stays
The
second component of the surprise is that children under the age of 26 will be
allowed to stay on their parents' health plan. This popular ACA component
should be a big sigh of relief for college students and those who've just
entered the workforce who may not have the income to cover a monthly premium
payment.
23.
The Cadillac tax comes back in 2025
Finally,
and maybe the biggest surprise of them all, the Cadillac tax, which imposes a
40% excise tax on employers that offer high-deductible health plans, won't be
killed. The implementation of the Cadillac tax had already been pushed out to
2020, but under the Republican plan it'll be moved out until at least 2025.
Clearly,
this is a lot to digest. It's also possible, given the early objections from
some Republicans in Washington, that this bill could face some changes before
it heads to vote.
Perhaps
the biggest question mark of all is whether adjusting from an income-based
subsidy to an age-based credit will be enough to coerce lower- and
middle-income individuals to enroll. It can rightly be argued that a $2,000
credit for a low-income 20-something may not be enough to make healthcare
affordable, even with the establishment of a Patient and State Stability Fund.
