ACA replacement plan clears House committees, meets with widespread resistance

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A set of budget reconciliation bills collectively referred to as the American Health Care Act (AHCA) was passed last week—along party lines—by the House Ways and Means Committee and the Energy and Commerce Committee. The proposed legislation now goes to the House Budget Committee and then on for a full House vote before proceeding to the Senate.

The legislation will likely undergo several rounds of changes, but here are the major ways in which the current version revamps the Affordable Care Act (ACA):

• It eliminates the individual mandate, but allows insurers to charge people a 30 percent penalty if they allow their coverage to lapse and then want to buy a new policy.
• It eliminates the requirement that larger employers offer coverage to full-time employees, further delays the “Cadillac tax” through 2024 and ends the small employer tax credit as of Dec. 31, 2019.
• It replaces the income-based premium tax credits, starting in 2020, with a smaller system of refundable aged-based tax credits for individuals with incomes below $75,000 and households with incomes below $150,000. Individuals under the age of 30 would receive a tax credit of $2,000, and the amount increases to $4,000 for individuals over the age of 60. There is no adjustment for local differences in premium costs, like there is under the ACA. These tax credits could be used to purchase plans not sold on the public exchanges and plans that only cover catastrophic health events. Tax credits could not be used to pay for plans that cover non-exempt abortions.
• It eliminates the ACA’s cost-sharing subsidies after 2019, which help low-income individuals and households pay for deductibles and other out-of-pocket costs when coverage is purchased through the public exchanges.
• Insurers could charge their older enrollees fives times more than they charge younger enrollees. The ACA limits insurers to a 3:1 ratio.
• It keeps the ACA’s prohibition against denying coverage to individuals with pre-existing conditions, the ACA’s ban on lifetime coverage caps and the provision of the ACA that allows young adults to stay on their parents’ policy until age 26. It also keeps 10 essential health benefits that are covered under ACA, including maternity care and preventive services.
• It raises the limits on contributions to health savings accounts (HSAs), starting in 2018.
• It changes Medicaid’s open-ended entitlement health care to a per-person allotment for each state by 2020. In the states that expanded Medicaid under the ACA, eligible individuals can continue to enroll until Jan. 1, 2020. For the other states, the AHCA provides $10 billion in safety net funding over five years.
• It bars Medicaid from paying for any health services provided at Planned Parenthood clinics for one year, including preventive screenings and low-cost birth control.
• It creates the Patient and State Stability Fund, which allows for $100 billion in state funding from 2018 through 2026. States could use the funding for high-risk pools, for reinsurance to stabilize individual market insurance premiums, for assisting individuals with their out-of-pocket costs and other purposes.
• It repeals the ACA’s Prevention and Public Health Fund after 2018. That fund provides the Centers for Disease Control and Prevention (CDC) with approximately $1 billion per year, accounting for approximately 12 percent of the CDC’s total budget.
• It also repeals various taxes imposed under the ACA, including taxes on manufacturers of medical devices, insurance companies and taxpayers with incomes exceeding $250,000.

Republicans on the House committees were intent on pushing the bills through before the Congressional Budget Office could provide estimates on how much the legislation would cost and how many people would gain or lose coverage. Democrats and industry groups have asked Congress to hold off until those estimates are available.

Congressional Democrats have voiced strong opposition to the proposed legislation. So have the American Medical Association and at least half a dozen other medical societies, along with various health care industry organizations and AARP. The general concerns are that millions of patients—particularly in the most vulnerable populations—would likely lose coverage, and the cost of care and coverage would increase.

Some conservative GOP groups are also against the AHCA. They believe it doesn’t go far enough and want a complete repeal of the ACA. 

Our Take: The concerns surrounding this proposed legislation are legitimate. The rate of uninsured Americans would almost certainly increase. For one thing, doing away with the individual mandate would encourage more healthy people to skip coverage, even with the threat of a 30 percent penalty if they decide to buy a policy later on. With even fewer healthy enrollees to offset the cost of coverage for sicker enrollees, insurance companies would undoubtedly raise premiums even higher, which would mean even fewer people could afford to buy a decent plan.

The AHCA’s restrictions on Medicaid would further increase the number of uninsured individuals—and these would include some of the highest utilizers of health care: those with multiple chronic diseases. Without coverage, many of these patients would turn to their local emergency department for care, which of course would drive up costs. Stripping the funding for public health programs and community-based interventions would cause even more harm to low-income individuals and families.

The changes in premium tax credits would likely exacerbate the uninsurance problem. According to an analysis by Kaiser Family Foundation (KFF), the AHCA tax credits would be lower than current ACA premium subsidies in many cases—by 55-73 percent in several examples involving low-income individuals. Older and sicker patients would probably find that the tax credits wouldn’t pay for a health plan that fully meets their needs (especially in light of the AHCA’s 5:1 ratio that would allow insurers to charge seniors five times more for premiums), exposing them to higher out-of-pocket costs. On the bright side, though, many more affluent families would qualify for a premium tax credit under the AHCA than under the ACA.

Quashing the cost-sharing subsidies and effectively defunding Planned Parenthood would create additional hardship for patients at the lower end of the income scale, and increasing the limits on HSAs would do nothing to help these individuals, since they typically don’t have much money left over at the end of the month.

Insurers that predominantly administer Medicaid programs (which, incidentally, include many of the smaller regional insurers that have done well under the ACA) would naturally also feel the effect of the AHCA’s cuts to Medicaid, and the lack of adequate premium and cost-sharing subsidies could cause some small insurers not to offer individual products, but larger insurers that offer more diverse plans probably wouldn’t fare so badly—and chances are they’d find the sizeable tax cuts attractive. Ranking Democrats on the House committees that passed the legislation went so far as to say the AHCA would “put insurance companies back in charge.”

Speaking of taxes, the Joint Committee on Taxation estimates that repealing the tax provisions that fund the ACA would cost at least $593.7 billion over the next 10 years—a figure that does not include the loss of revenue from several other provisions, such as the penalties for the individual and employer mandates—and there’s no indication yet as to how the AHCA would make up for this loss of revenue, other than through reduced Medicaid spending. As Democrats on the Hill lamented for much of last week, the health care bill looks like a tax cut for the most affluent members of our society.

We reached out to our readership last week—mostly C-suite executives—and were overwhelmed by the number of responses. Our apologies that we didn't reply to everyone. We asked about their initial impressions of the bill and how it might affect their business, as well as health care delivery in general.

The response? About three quarters of the responses were negative, with the rest being neutral, said that it was too early to comment, or didn't have enough information to say for sure.

We did receive one positive reply, but it was very political, rather than being policy or business-focused.

Our favorite reply came from a vice president and medical director of a large integrated health system, who wrote:

1. Overall, the rate of uninsured Americans will likely increase due to repeal of Medicaid expansion
2. Healthy citizens across the board may not have incentives to do some screening tests (ACA allowed that)
3. Flat age-based tax credits may not cover all healthcare needs/costs for some members, particularly for those age greater than 50 years
4. Some small insurers may not offer individual products due to lack of premium and cost sharing subsidies
5. Public health efforts and community-based interventions to promoting health and wellness will be reduced due to cuts in funding
6. Some large insurers may choose to offer products across state lines

We probably should have just written that.