Everything You Need to Know About the ACA Repeal and Replace Plan

ACA Repeal and Replace Plan Put on Hold

After postponing, delaying and staling the scheduled vote on the American Health Care Act (AHCA) bill, which would repeal and replace multiple parts of Obamacare—House Republicans were forced to pull the bill. And anticipation of America’s future healthcare system was put to a screeching halt.  The ACHA simply lacked the support needed to be passed. The result? No repeal and no replace—at least for now.

That means the Affordable Care Act (ACA), the official name of—Obamacare will remain the law of the land for the foreseeable future. The Employer Mandate, Individual Mandate, Exchanges, etc. will all continue as we know them to be today. We will need to pay close attention to what unfolds with the individual health insurance market. In approximately one out of every three counties in the country, only one health insurance company is offering plans to individuals. Next year that could be zero in some areas and could force Republicans and Democrats to work together on a healthcare bill to rescue that market.

Until that time, it doesn’t appear we’re going to see a whole lot of change with the ACA. There are some things that can be done from a regulatory standpoint. We’ve seen some of this already from the Department of Health and Human Services (HHS). Through regulatory guidance, HHS has proposed to shorten the next open enrollment period and will allow additional time for insurance companies to file their rates for plans to be sold on the Exchanges in 2018, but these things are nominal at best compared to what could have happened had a repeal and replace bill been passed.

Read below for more on the ACHA repeal and replace plan:

The Republican party has released a repeal/replace plan. This was promised to happen immediately after President Trump was sworn into office. But obviously, we are past day one. What took so long? 

Repeal is easy. Replacement gets sticky. 

On his first day in office President Trump signed an executive order stating:

“waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

Basically, telling agency officials—do what you can to not regulate or enforce these taxes and mandates so much.

But there is a big difference between passing a law and enforcing/regulating a law. And passing this law is going to take more than one signature. First things first—why do republicans want to repeal the Affordable Care Act?

Reasons to Repeal the Affordable Care Act*

• 1 out of every 3 counties have only 1 carrier offering exchange plans
• 18 out of 23 Consumer Operated and Oriented Plan (CO-OP) Programs have failed
• Taxes fall on the individual’s shoulders (over $1 trillion dollars) 

When the ACA was implemented the original idea was to create more competition to drive the rates down but premiums and deductibles today are sky rocketing. Individuals suffered a 25 percent premium increase. And deductibles are so high they discourage individuals to access care. This is opposite of what the ACA originally set out to accomplish.  A fire has been lit under republicans to make a change. 

Do republicans currently have enough seats in the house to repeal and replace the Affordable Care Act?

Well, there are 52 Republican Senators. 60 votes are needed to repeal/replace the ACA. This means we need 8 Democrat votes. The ACA was passed with 0 republican votes and it’s expected that a repeal of the ACA will go the same way.

So what could Republicans repeal without Democratic support?

Budget-related bills i.e. reconciliation bills can be passed with a simple majority vote. This would require only 51 Senate votes but the changes must impact federal spending and/or revenues.

With 51 Senators in favor—republicans could repeal:

• Individual Mandate
• Employer Mandate
• Exchange Subsidies
• Medicaid Expansion
  • (138% poverty level 16,000 single person)
• Cadillac Tax

The first set of regulatory guidance issued by republicans attempts to Stabilize Exchanges and the Individual Marketplace rather than focus on Executive Order.

House Republicans proposed bill replacement plan for the Affordable Care Act

The first draft of the bill was released on March 6, 2017.

A New Name

American Health Care Act (AHCA). Some are referring to it as “Obamacare lite” because it doesn’t seek to eliminate everything about the ACA.

Here is what the proposed bill would eliminate:

Individual Mandate

Law currently requiring everyone to have health insurance would go away. So yes, no more penalty.

IRS made a regulatory announcement in response to President Trumps executive order:
When you file your taxes on April 18 this year (just like every year) you will be asked to check either yes I do have health insurance or no I am uninsured. But if you don’t check either box the IRS will still process your tax return.

Tax Credits

Tax Credits will be based on age. Younger people will get less of a tax credit than old people. Fixed amount: $2K-4K per person. $14K max per family.

Everyone is eligible for a tax credit. If you do not have an employer sponsored plan or are not eligible for Medicare.

Whatever plan the states approves you can use the credit. Can be either COBRA, Exchange or Off exchange plans.

Still no underwriting. But there will be a surcharge unless you have continuous coverage. Meaning if you have gone uninsured for the year—when you do elect coverage you will receive a 30% rate increase for the first 12 months.

There will be an application process but it will differ from how the individual market functions today.

What would change?

Each State Could do Something Different
Federal Regulation is part of the problem in the eyes of the Republican Party

State innovation programs created for high risk individuals and premium stabilization. States will determine which benefits are “essential” minimum level of coverage that must be administered.  Create inner state commerce with 50 different insurance markets vs. only 1 with ACA

Today 7 percent of the population is uninsured.
Cheap plan option will return. A “bare bone catastrophic” plan all the way up to plan with every benefit.

An additional 10 percent in the “new uninsured” category.  These are individuals with insurance. But if they needed to use their insurance, they might have to file for bankruptcy because their plan deductibles are so high that every medical expense ends up being paid out of pocket.

Premiums are currently too high for young people. Age-related premium variations will shift, younger people will start to pay a little less and older people will start to pay a little more.

The table below outlines the current regulations under the Affordable Care Act what will either be kept, eliminated, or changed under the proposed American Health Care Act: 

Medicaid

Funding of Medicaid expansion will be cut.

• Will start using block grants meaning each state will get a check a flat dollar amount elected to each state and let them decide. Will be capped, per-capita payments.

Medicare

Medicare is being left mostly untouched.

• Used to be 15 to 1 paying taxes for Medicare.
• Today that is about a 2 to 1 ratio of those supporting Medicare.

We may see in Congress raise the eligible age to 67.

Group Market

Eliminate Employer Mandate

• ACA-like reporting may still be required. A lot of hours go into the reporting process today.
• Eligibility for individual tax credits need to be verified prior to administering benefits
• You are not eligible for subsidy or tax credit if you have an employer sponsored plan. If there is any other coverage available to you such as Medicare or Medicaid—you cannot receive tax credits.
• Employer market to return to employer deciding what “full time” means—meaning more flexibility with eligibility i.e. potentially more people eligible for insurance.
• Delay Cadillac Tax

Flexible Spending Accounts (FSAs)

$2500 (indexed) annual limit removed

Heath Reimbursement Arrangements (HRAs) 

Integration requirement to go away (if there are no longer any federal regulated health plans)

Health Savings Accounts (HSAs)

• Increase contribution amounts
• Increase number of HSA eligible plans.
• You will see less HDHP (High Deductible Health Plans) and more eligible expenses.
  • For example: gym memberships, insurance premiums in limited situations will be eligible.
• “Glitches to be Removed”
  • Two married individuals can both contribute $1,000 into the same HSA account.
  • You have until April 18, 2017 to take tax deduction for 2016 and you can get reimbursed for your previous year of eligible medical expenses from when you became HSA eligible in 2016.

OTC Drugs

• No RX required for Over the Counter OTC drugs i.e. Tylenol and Advil

What would stay the same?

• Individuals under 26 can remain on their parent’s health insurance
• Individuals with pre-existing conditions cannot be denied coverage

What we don’t know:

Where does the money come from to provide these credits and do these things?

How are the carriers going to react?
Carriers must file their plans for 2018 by June 21

Will exchanges still exist?
When the ACA was passed we thought every state would build their own exchange. Only 1/3 of them did.

Will AHCA get enough support?

What we do know:

• Most significant changes are expected in individual and Medicaid markets
• Politics will continue to play a huge role
• Ranking Republicans want this passed by April 7

What would need to happen for this to be passed by April 7?

The bill must first be scored by the Congressional Budget Office (CBO). This score is a report outlining the anticipated financial and economic impact of proposed bills. It answers two questions:

1. How much is this going to cost the government?  Estimated reduction in federal deficits by $337 billion (Savings would come from reductions in outlays for Medicaid and from the elimination of the ACA’s subsidies for non group health insurance.)
2. How will this impact how many people have insurance?  Estimated 14 million people uninsured in 2018 (Most of that increase would come from repealing the penalties associated with the individual mandate.)

This could circle between the House and the CBO for a while—House does revisions and represents them to CBO, then CBO will rescore (you get the gist). The Houses final revisions then go to the Senate. The Senate hands this over to be signed by the President.

So, what’s the next big step for repeal and replace?

President Donald Trump stated, “The best thing we can do, politically speaking, is let Obamacare explode.” It appears we are heading towards a wait-and-see type of situation and healthcare reform will be revisited another day.  For now, Republicans are moving on from healthcare and towards other policy initiatives, such as reforming the tax code. 

Watch closely and wait patiently. We encourage you to follow us on Facebook and Twitter for frequent updates. As things change (because we can almost guarantee you they will) you can count on us to provide you with the latest information.

*“Obamacare Repeal and Replace Policy Brief and Resources”