The American Health Care Act — Republicans’ proposal to repeal and replace Obamacare — is inching closer to a vote this week after two months of heated debate and a failed first attempt to pass the bill on March 24.
The bill would likely cause millions to lose health insurance coverage. We don’t know how many because the latest version of the Republican plan has not yet been scored by the nonpartisan Congressional Budget Office to estimate how many people it would cover and how much it would cost. The most recent score for the bill, before new amendments offered in recent weeks, found that 24 million more people would be uninsured by 2026.
Still, even without the CBO score, we have a very good sense of how the bill would work, whom it benefits, and whom it disadvantages:
- Some of Obamacare’s signature features would be gone immediately, such as the tax on people who don’t purchase health care, known as the “individual mandate.”Other protections, including the provision that allows young adults to stay on their parents’ plan through age 26, would survive.
- States would have the option to get waivers from two of Obamacare’s requirements: that insurers cover “essential health benefits,” and that they charge the same price to everyone regardless of their health history. That would get rid of a key protection for people with preexisting conditions. An amendment added to the AHCA in late April allows states to opt out of Obamacare’s “community rating” requirement — which says that all people, healthy and sick, should be charged the same prices — for people who do not maintain continuous health insurance coverage.
- The Medicaid expansion would be phased out. Before the Affordable Care Act, it was difficult or impossible in many states for low-income adults without children to get coverage through Medicaid. The Affordable Care Act expanded the program to cover adults making up to 133 percent of the federal poverty line ($15,800 for one person, or $32,319 for a family of four), a change that helped drive down the rates of uninsured people in the US. Under the AHCA, the coverage expansion would stay in place until the end of 2019, but no newly eligible people could be added to Medicaid rolls after that. Because people on Medicaid often cycle in and out of the program as their employment situation and incomes change, that would lead to a drop in Medicaid coverage.
- The bill would also cut Medicaid in other ways. It changes how the federal government would reimburse states for Medicaid expenses, and introduces the option of states turning the money into a “block grant,” a lump sum rather than a per-person payment for each Medicaid patient, which would cut the program still further. The block grant would ease limitations on states’ ability to kick people off, charge premiums, and cut benefits for children. States, whether or not they take a block grant, could also add a work requirement for nondisabled adults, further limiting access to the program.
- The bill would cut taxes for the wealthy. Obamacare included tax increases that hit wealthy Americans hardest in order to pay for its coverage expansion. The AHCA would get rid of those taxes — tax cuts that add up to $883 billion, the majority of them benefiting the wealthy, according to the Congressional Budget Office. Obamacare was one of the biggest redistributions of wealth from the rich to the poor; the AHCA would reverse that.
- People buying insurance on their own would get tax credits based on their age rather than their income. Obamacare’s tax credits were based primarily on income (as well as on location, because insurance premiums vary regionally). The AHCA would base tax credits primarily on age, increasing them as recipients get older, and phase them out for individuals making more than $75,000 or families making more than $150,000.
- All in all, the replacement plan benefits people who are healthy and high-income, and disadvantages those who are sicker and lower-income. The replacement plan would make several changes to what health insurers can charge enrollees who purchase insurance on the individual market, as well as changing what benefits their plans must cover. In aggregate, these changes could be advantageous to younger and healthier enrollees who want skimpier (and cheaper) benefit packages. But they could be costly for older and sicker Obamacare enrollees who rely on the law’s current requirements.
AHCA would end Medicaid expansion in 2020, cut the program by $880 billion
One of the main ways Obamacare increased insurance coverage was by expanding the Medicaid program to cover millions more low-income Americans. Prior to the health law, the entitlement was restricted to specific groups of low-income Americans (pregnant women, for example, and the blind and disabled).
Obamacare opened up the program to anyone below 138 percent of the poverty line (about $15,000 for an individual) in the 31 states that opted to participate.
The Republican plan would end sign-ups for that program on January 1, 2020. Enrollment in the Medicaid expansion will “freeze,” and states will no longer be able to sign new enrollees up for the program. Legislators expect that enrollment would slowly decline, as enrollees’ incomes change and they shift off the program.
There are significant changes to Medicaid in the American Health Care Act outside of the expansion too. This bill would convert Medicaid to a “per capita cap” system, where states would get a lump sum from the federal government for each enrollee. Or states would have the opportunity of a block grant — a sum of money untethered from the number of people involved.
This is different from current Medicaid funding. Right now the federal government has an open-ended commitment to paying all of a Medicaid enrollee’s bills, regardless of how high they go. The per capita cap would amount to an $880 billion cut to Medicaid, as Vox’s Dylan Matthews explains. A block grant would go further, and would also weaken coverage protections for children and parents.
States could also add a work requirement to Medicaid for the first time, a provision sought by the conservative Republican Study Committee but that even some conservatives groups and experts oppose. Research has found that work requirements on welfare don’t do much to increase the share of recipients working in the long term.
When the CBO last scored AHCA, it estimated that the bill would cause 14 million people to lose health insurance coverage. Any new estimates will likely be similar, as the Medicaid portions of the bill have not changed significantly through congressional negotiations.
The AHCA allows discrimination against people with preexisting conditions, cover fewer benefits
When House Speaker Paul Ryan introduced the AHCA last year, it left some of Obamacare’s most popular provisions in place. This included the laws around preexisting conditions and the requirement that insurers cover things like maternity care and mental health services.
But those provisions made it impossible for the AHCA to move through the House. The conservative Freedom Caucus refused to support a bill that left those parts of the law standing.
A new amendment, offered by Rep. Tom MacArthur (R-NJ) in late April, assuaged their concerns — but raised alarm bells for other members. It revised the Republican bill to let states waive out of Obamacare’s “community rating” provision, meaning states could once again charge sicker people higher premiums.
This would be a significant shift from Obamacare, which bars this practice. It would mean that insurers could once again consider a patient’s preexisting conditions to decide what premium he or she ought to pay.
Under these waivers, insurers could only do this for people who have a break in health coverage. This means that when those uninsured people returned to the market, health plans could charge them higher prices based on their expected costs.
States would be allowed to make this change so long as they participate in the Patient and State Stability Fund. This is a pool of money in the AHCA that states can use to set up high-risk pools or shore up insurers that get stuck with really expensive patients.
Republicans’ operating theory here is that it’s okay for states to charge sick people higher premiums so long as they have some kind of fallback option for coverage, like a high-risk pool. But health law expert Tim Jost points out that states don’t have to use their stability funds to create high-risk pools, which means these people could find themselves out of luck.
“The idea was people who fall through the cracks would have a high-risk pool,” he says. “What happens though if a state uses their money for reinsurance” — payments directly to insurers that cover expensive patients — “instead?”
States could also opt out of Obamacare’s essential health benefits requirement. This is the core set of medical services that the Affordable Care Act requires all insurers to cover. It includes 10 types of coverage:
- Outpatient care without a hospital admission, known as ambulatory patient services
- Emergency services
- Pregnancy, maternity, and newborn care
- Mental health and substance use disorder services, including counseling and psychotherapy
- Prescription drugs
- Rehabilitative and habilitative services and devices, which help people with injuries and disabilities to recover
- Laboratory services
- Preventive care, wellness services, and chronic disease management
- Pediatric services, including oral and vision care for children
The Republican plan would let states waive out of this requirement too. This means that plans in the individual market could once again decide not to cover maternity care — like 88 percent of plans did before the Affordable Care Act passed.
The AHCA would end the individual mandate — but charge higher prices to people who have a break in coverage
Unlike Obamacare, the AHCA does not mandate that all Americans be covered by health insurance or pay a fee. It repeals the individual mandate, which was one of Obamacare’s least popular provisions.
Instead, it has a different way of penalizing people who decide to remain uninsured: requiring those who don’t maintain “continuous coverage” to pay a hefty fine when they want to reenter the insurance market.
This continuous coverage policy has shown up a lot in Republican replacement plans. It was part of Speaker Ryan’s A Better Way proposal and Rep. Tom Price’s Empowering Patients First Act.
Here’s how it works: If a worker goes straight from insurance at work to her own policy, her insurer has to charge her a standard rate — it can’t take the cost of her condition into account.
But if said worker had a lapse in coverage longer than 63 days — perhaps she couldn’t afford a new plan between jobs — and went to the individual market later, insurers could charge her a 30 percent premium surcharge. She would need to pay that higher premium for a full year before returning to the standard rate.
This is also the point at which that person could face higher prices for being a sicker patient. Those who enter the individual market without existing coverage would be evaluated by health plans, to decide what their expected costs would be. Insurers could charge the sicker people a higher premium for one year before dropping down to the regular rate.
The whole point of this change is to do what the individual mandate did: encourage healthy people to buy coverage. There is concern, however, that this provision could actually discourage healthy people from buying insurance because they would be turned off by the higher prices when they did return to the individual market.
“You’re not suffering any consequences for being uninsured beyond not being protected,” says Robert Laszewski, an insurance industry consultant. “It’s only when you decide to buy coverage that you pay a penalty, and that could discourage you from signing up.”
The AHCA would fund high-risk pools for those who lose coverage. Experts worry the bill doesn’t have enough money.
The Republican health care bill would put about $115 billion toward something called the Patient and State Stability Fund (a new amendment that Michigan Rep. Fred Upton is pursuing might also add an additional $8 billion towards a similar provision).
One way states could use this money is to build high-risk pools. These allow the government to offer subsidized health insurance to the most expensive patients — people with illnesses that could range from diabetes to cancer. The idea is to give those people coverage but keep premiums lower for other, healthier patients by pulling these sicker patients out of the insurance pool.
But high-risk pools also have a history of running into a big problem: They cost a ton of money. Pooling together the sickest patients means that a state high-risk pool will have really high medical claims.
“There is nothing definitionally broken about the concept of a high-risk pool,” says Karen Pollitz, a senior fellow at the Kaiser Family Foundation who helped launch Maryland’s high-risk pool in the early 2000s. “The hurdle is it’s expensive.”
Experts have cautioned that the money allotted in the Republican bill would not be enough to cover all the people who needed insurance through a high-risk pool.
The AHCA would let insurers charge older enrollees more
Obamacare currently restricts how much insurers can charge their oldest enrollees in the individual market. It says that insurers can only charge the oldest enrollee three times as much as the youngest, which pushes down premiums for those in their 50s and 60s. This used to be a group that faced prohibitively steep premiums on the individual market.
The AHCA would get rid of that regulation, allowing insurers to charge their oldest enrollees up to five times as much as their youngest ones. This change “increases the overall number of people with coverage, but older people end up falling out of the market as premiums rise,” says Christine Eibner, an economist with the RAND Corporation who has modeled similar changes to Obamacare’s age-rating provisions.
Eibner estimates that this particular policy would lower premiums for a 24-year-old from $2,800 to $2,100. But premiums for a 64-year-old would rise from $8,500 to $10,600.
And while young people might have cheaper premiums and an easier ability to enroll, older Americans could struggle to purchase coverage in this market, where their costs would rise. These are people who tend to have more urgent health care needs and could be in a worse position without health care than a young adult might be.
This worries some Obamacare supporters, who say the goal of insurance reform isn’t just to expand coverage — it’s to expand coverage for people who really need health care.
“If you replace a 60-year-old with a 20-year-old, that doesn’t change the number of people covered, but it changes the value of the coverage and of the program,” says Jonathan Gruber, the MIT economist who helped the White House model the economic effects of Obamacare.
The CBO estimated that this has been one of the least popular provisions of the bill.
The AHCA provides tax credits for the individual market that would benefit high-income Americans
The Republican replacement, like Obamacare, envisions that Americans will use tax credits to purchase individual health insurance. But the structure of the tax credits is very different.
Obamacare’s tax credits are based on income, with those who earn less getting more help. Under Obamacare, people who earn less than 200 percent of the poverty line (about $24,120 for an individual or $49,200 for a family of four) get the most generous help. They would get enough money so that a midlevel plan would cost no more than 6.4 percent of their income. People who earn more than 400 percent of the poverty line ($48,240 for an individual or $98,400 for a family of four) get nothing at all. There is no cap on what they have to pay for insurance.
The Republican plans would be based mostly on age and a bit on income. Everyone who earns less than $75,000 (or $150,000 for a couple filing jointly) would get the same amount of help. Those above the income threshold would have the help slowly phased out in 10 percent increments. The tax credits would be doled out this way:
- $2,000 for those under 30
- $2,500 for those between 30 and 40
- $3,000 for those between 40 and 50
- $3,500 for those between 50 and 60
- $4,000 for those over 60
On the surface, the tax credits for the oldest Americans seem the most generous. People in their 60s, for example, get twice as much help as those in their 20s.
But under the Republican plan, insurers would be allowed to charge the oldest Americans five times as much as the youngest Americans. Their financial help would not scale nearly as much as their premiums would.
“You’re both jacking up the prices and giving people less of a subsidy, which is a damaging combination,” says David Certner, legislative policy director for the AARP, which lobbies on behalf of Americans over 55.
This new tax credit structure could also hurt many low-income Americans, whose subsidies would fall substantially. The CBO estimates that a 64-year-old who earns $26,500 would see her post-credit annual premiums increase from $1,700 under current law to $14,600 under the AHCA.
Higher-earning Americans, however, could see their benefits increase significantly. People who earned $48,280 or more under Obamacare got no help — but now anyone under the $75,000 threshold gets the biggest tax credit.
So a 64-year-old who earns $68,200, CBO says, gets a benefit: Her annual premium would decline from $15,600 under current law to $14,600 under the AHCA.
The AHCA would likely cause millions of Americans to lose health insurance coverage. We don’t know exactly how many.
The Congressional Budget Office estimated in March that the Republican bill would mean 24 million fewer people would have health insurance coverage by 2026.
Since then, Republicans have made significant changes to the bill. They have added the waivers from Obamacare’s community rating provision, for example, a provision that would likely cause even more people to lose insurance. They have also added more funding for programs to cover sick people, a change that could might reduce the number of uninsured.
Republicans have not, however, significantly changed the Medicaid provisions of the AHCA, which are also the source of most coverage loss in the CBO report. The nonpartisan agency estimates that 14 million fewer people will have Medicaid by 2026 if the AHCA passes.
It is unusual that the Republicans are moving toward a vote on the AHCA without a CBO score, and surprising that rank-and-file members aren’t demanding one. A Republican leadership aide says that the House has provided the CBO with information on the bill, but there is currently no timeline for when to expect a score.