Quick thoughts on the GOP replacement plan for Obamacare

The first step towards replacing Obamacare

On Monday, March 6th, Republican leaders in the House of Representatives released the first draft of the "American Health Care Act". There's sure to be lots of political posturing and crazy headlines in the next few weeks but we wanted to share what we've seen so far so you, our clients and readers, can remained informed and above the fray.

Remember, this bill is now going to the committees for "mark-up" and revision, so the final law if it makes it that far will likely have some changes.

You can read the full text of the American Health Care Act here.

Quick Thoughts

This is Obamacare-lite. As much as the Republicans want to distance themselves from Obamacare, it's impossible to not recognize how much Obamacare has forever shifted how Americans think about health insurance: no lifetime limits, coverage for pre-existing conditions, and tax credits to help pay for coverage appear to be here to stay. However, there is a significant philosophical shift in the law that introduces greater market forces and puts more demands on the individual health consumer to make the system work. At Take Command Health, we like the idea of empowering consumers, but we know how tricky and cumbersome the health market is right now (it's what we're striving to help fix!). There will likely be some growing pains.

Summary Changes

What's staying:

  • Coverage for pre-existing conditions (can't be denied coverage)
  • Children can stay on plans until they turn 26 (everyone gets excited about it and it's a good thing. It's also a sneaky way for insurance companies to keep young adults in the insurance pools, which of course, is a good thing).
  • No lifetime limits on plans
  • Essential health benefits. These are the 10 things every health plan must cover, including maternity and preventive care.

What's staying but being adjusted:

  • Tax Credits
    • Tax credits to help pay for insurance coverage will now be based on age, not income.
      • $2,000/yr for someone under 30 years old at the start of the year
      • $2,500/yr < 40 years old
      • $3,000/yr < 50 years old
      • $3,500/yr < 60 years old
      • $4,000/yr < 65 years old
    • Credits will be reduced by 10% of someone's adjusted gross income (AGI) over $75,000/yr (double if filing jointly)
    • Limit of 5 people per household can claim the credit
    • Credits can be obtained whether the plan is purchased on or off the federal or state exchanges
  • Premium Cost Ratio
    • Under Obamacare, insurance companies could only charge older individuals 3 times what they charged younger ones. That ratio changes from 3:1 to 5:1.
  • Health Saving Account (HSA) contribution limits
    • Will be increased to your health plan's deductible and/or max-out-of-pocket limit
    • Excess tax credit amounts can be claimed and deposited into your HSA

What's being repealed or removed:

  • Individual mandate
    • This is the tax penalty individuals have to pay if they don't maintain qualified coverage. It's going away and even postdated in the law back to 2015.
    • It's being replaced by a continuous coverage penalty. If you fail to maintain continuous coverage, insurance companies can charge you 30% more for the next 12 months of premiums.
  • Employer mandate
    • Companies are no longer required to provide health insurance to their employees
  • Cost sharing subsidies
    • These were the Silver plans that had lower copays and deductibles for low-wage earners.
  • Various taxes implemented under Obamacare
    • The most notable one that will impact consumers is for over-the-counter-drugs and other prescriptions
  • Tax credits cannot be applied to any plan that includes abortion coverage. Plans that include abortion coverage can be purchased separately.

 

Most of the changes above would go into effect for 2019 and 2020.

It's also worth a quick note about a few things that were "missing" in the above law. We've been closely studying the plans put forth by Paul Ryan, Tom Price, Rand Paul, and others. These things may get added in during the next few weeks of debate, but we were kind of surprised not to see them in this initial draft:

  • Expanded recognition of healthcare sharing ministries (like Medi-Share, Samaritan's Purse, and others) as minimum essential coverage (MEC)
  • Ability to pool resources and underwriting for associations, trade-groups, and individuals
  • Tax credits for small businesses setting up Health Reimbursement Arrangements (HRAs). (Note, we still think these are a great idea, if you're a small business and haven't seen our new HRA solution, check it out here!)

This DRAFT law is just the beginning. It's still very early in what is likely to be a very heated and public debate. If you have any questions or thoughts, please post in the comments below. We'll do our best to keep our readers and clients up to date.

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