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Obamacare vs Trumpcare

What Happens to Obamacare Now? What We Know about the AHCA

On May 4, 2017, House Republicans managed to eke out enough votes to pass the largely unpopular American Health Care Act through Congress’s lower chamber. From here, it will move on to the Senate for revision, debate and eventual voting. The AHCA remains a contentious piece of legislation not only for Democrats, who are vocally against it, but for many Republicans as well. In fact, Senate Republicans tend to be more moderate than their counterparts in the House, and it’s not clear how well Trumpcare will fare once senators start modifying its provisions.

The AHCA was introduced in March as the conservative answer to overturning the Affordable Care Act, former President Obama’s signature healthcare legislation. Then, it garnered even worse favor than the current version. Republicans went back to the drawing board and made changes to the bill to appease far-right holdouts, specifically members of the House Freedom Caucus, who objected to the “soft” approach that the original bill represented.

The Affordable Care Act has granted access to health insurance for millions of Americans, including many who had never been able to afford coverage before. It expanded Medicaid in states that chose to implement the expansion provision; introduced 10 essential health benefits into every major medical plan sold after March 23, 2010 (the date the ACA was signed into law); and, significantly, required health insurers to accept applicants with pre-existing conditions without charging them higher premiums. These are important and popular components of the current healthcare law, and many – liberals and conservatives alike – fear that these provisions won’t last under Trumpcare.

It’s important to note that the American Healthcare Act has not replaced the Affordable Care Act. The Republican bill was passed by the House last week, but it still needs to make its way through the Senate before it hits President Trump’s desk to become law. There are substantial challenges awaiting Trumpcare in the Senate. The Senate has not offered a timetable, either, for revisions, debate or voting on the bill. Until then, Obamacare remains the law of the land.

If you’re confused or concerned about what might happen under Trumpcare, then you’re not alone. The AHCA has been picked apart by media outlets and political pundits for weeks, but most people are still unsure about the bill’s major provisions. Here’s what we know about Trumpcare – and how it might alter Obamacare – as of the time of this writing.

#1 – Healthcare regulation will be returned to the states.

Obamacare gave the federal government more control over healthcare. States could set up their own exchanges, but the federal government mandated things like coverage requirements, enrollment deadlines and options for financial assistance. The individual and employer mandates were also administered by the IRS at a federal level. Republicans believe in limited federal power and states’ rights. As such, Trumpcare returns healthcare regulation to the states. Under the AHCA, states could:

  • End Medicaid expansion (and there would benefits to them if they did)
  • Require all able-bodied Medicaid recipients to work
  • Fund their Medicaid programs in one of two ways: block grants or per-capita limits
  • Allow insurers to charge more for people with pre-existing conditions
  • Decide which benefits count as “essential” and define the parameters of essential benefits

One of the hallmarks of the Affordable Care Act is its definition of essential benefits. Obamacare requires every major medical policy to cover 10 essential benefits, but the AHCA allows states to apply for a waiver from this provision. One benefit is that states could allow insurers to offer cheaper plans with fewer benefits, and more insurers may return to the marketplace if they can recoup their financial losses with better enrollment. The downside is that people who need good plans, such as those with pre-existing conditions, may not be able to afford costlier insurance with better coverage.

States are given more power under the AHCA, but there are limits. In order to charge people with pre-existing conditions more for coverage, states have to set up high-risk pools, which must prove beneficial to consumers statewide. Trumpcare’s “Patient and State Stability Fund” also allots money to help offset the higher cost of insurance for people with pre-existing conditions. However, critics claim that the amount designated under Trumpcare to help with these costs is extremely inadequate. Insurers can’t discriminate based on pre-existing condition, either. As with Obamacare, Trumpcare retains the rights of people with pre-existing conditions to sign up for coverage. The next point discusses this issue in greater detail.

#2 – There will be changes to the pre-existing conditions provision.

The ACA introduced significant protections for people with pre-existing conditions. The term “pre-existing” confuses a lot of people. Before Obamacare, insurers could deny coverage for people with medical problems, or they could refuse to pay a claim if they determined that the medical issue existed before the policy started.

Kaiser Family Foundation estimated that before the current law took effect, about 27 percent of the U.S. population up to age 64 would be uninsurable due to a pre-existing condition. People with medical issues, ranging from asthma to terminal cancer, had problems finding insurance, let alone affordable coverage. Obamacare changed that by eliminating medical underwriting as a basis for setting rates and accepting applicants.

The AHCA retains the basic protection for people with pre-existing conditions. Insurance companies still can’t deny coverage based on medical underwriting. But there are some new provisions in Trumpcare that could undermine this protection:

  • Under Trumpcare, insurers could charge more for people with pre-existing conditions if they let their coverage lapse.
  • Right now, community rating exists to keep rates the same for everyone within the same age demographic regardless of medical history. People with emphysema pay the same as healthy people within the same age group.
  • If you lose your health insurance under Trumpcare and you have a pre-existing condition, then you’ll be subject to medical underwriting if you apply for insurance later.
  • Insurers can decide how much to charge you for a policy since there’s no limit to how much your premium could increase. You would have to maintain continuous coverage for a full year before being allowed to renew your policy at a lower rate.

Insurance companies define what counts as a pre-existing condition, some with stricter guidelines than others. But you should be aware of one particularly false story being shared around social media at the moment. It claims that sexual assault and domestic violence are considered pre-existing conditions under Trumpcare. This isn’t true. The AHCA does not define pre-existing conditions at all. Even under pre-ACA guidelines, most insurers did not discriminate solely on the basis of a history with sexual assault or domestic violence. In fact, almost every state has a law in place apart from the ACA that prevents insurers from discriminating based on these factors. There are plenty of things to critique about Trumpcare without playing into the hysteria surrounding pre-existing conditions.

#3 – Trumpcare replaces ACA subsidies with age-based credits.

When you sign up for health insurance right now, you may qualify for financial assistance to help you pay your premiums. The ACA implemented advance premium tax credits, also called subsidies, in the individual insurance market. People who earn up to 400 percent of the federal poverty limit get a dollar amount from the federal government to apply toward the cost of insurance. More than 8 out of every 10 marketplace enrollees qualified for subsidies under Obamacare. The amount of your subsidy depended on several factors, such as your income level, where you live and what the cost of the benchmark plan was (second-lowest silver plan).

The American Health Care Act replaces Obamacare tax credits with age-based tax credits. Under Trumpcare, everyone would qualify for the same age-based subsidies up to an income limit of $75,000 for individuals and $150,000 for married couples. The highest earners would not receive the same subsidies. However, higher earners still benefit from Trumpcare’s system of tax credits.

As an individual, you’ll get anywhere from $2,000 to $4,000 per year to apply to your health insurance plan. That might sound like a good deal, especially if you didn’t qualify for Obamacare subsidies before, but the amount that you get under the AHCA is much less than the average subsidy under Obamacare. Plus, plans may cost more under Trumpcare for certain demographics (primarily older and sicker enrollees).

Trumpcare also allows insurers to charge older people up to five times the rate of younger consumers. In other words, the older and sicker you get, the more you’ll pay for health insurance under the AHCA. In 2018, premiums could increase by about 15 percent for everyone due to changes in the new law. By 2026, analysts say that younger people will actually enjoy lower premiums while older people will see price hikes. A Commonwealth Fund analysis suggests that health insurance premiums will rise for everyone over age 47. With increasing premiums and lower tax credit amounts, older Americans – the demographic that typically requires more care – could pay much more for their healthcare.

#4 – Essential benefits could change.

You may have heard about the 10 essential health benefits that Obamacare introduced. Under current law, every major medical plan has to cover a set of benefits provided that the plan was created after the ACA was signed into law on March 23, 2010. Whether you buy insurance on our off the marketplace, or through your employer, your plan will cover essential health benefits. It also doesn’t matter how much you pay for the plan, though how much you pay out of pocket for each benefit will still be determined by your tier of coverage. Essential benefits are:

  • Outpatient services
  • Preventive care
  • Hospital services
  • Emergency services
  • Maternity care before, during and after labor
  • Pediatric services, including dental and vision for children
  • Mental health services
  • Prescription drugs
  • Lab testing
  • Rehabilitative care and equipment

When Republicans introduced the initial AHCA bill, essential benefits were still included. In the most recent version, the one that passed the House, states are given the option to apply for a waiver that allows them to define essential benefits instead of adhering to federal rules. Supporters of this provision point out a couple of benefits to the idea, including:

Greater flexibility

While Obamacare’s essential health benefits requirement makes plans more robust, it also makes them more expensive. Insurers have had to create standard, comprehensive policies for everyone who signs up, even people who will never need certain services. Older couples, for instance, likely won’t ever need pediatric care. A common complaint among young, healthy enrollees – the demographic most needed to sign up – is that plans were too comprehensive, and therefore unaffordable. The AHCA could change this. States may be allowed to offer fewer benefits and cheaper coverage, thus drawing more healthy people into the individual insurance market.

A return to the marketplaces

In terms of flexibility, there’s also an advantage for insurers. Insurance companies could create cheaper policies that cover fewer benefits, which would allow them to stay competitive in the individual market. In 2017, several large insurers pulled out of Obamacare exchanges because they were losing money selling pricey policies that only sicker, older enrollees were buying. Allowing insurers to return to pre-ACA guidelines for selling policies could encourage them to come back to the exchanges. Greater insurer participation could then spur competition while giving consumers more options to choose from.

The amendment to allow states to define essential health benefits is part of a series of amendments introduced by Tom MacArthur (R.-NJ). Known collectively as the MacArthur amendment, this series was designed to boost last-minute support from Republican holdouts in the House. It worked. However, these amendments are unlikely to fly in the Senate, where lawmakers tend to be more moderate. There are some downsides to allowing states to define essential benefits, including:

Less comprehensive coverage

Offering cheaper plans with fewer benefits could attract more enrollees, but for people with health problems, less comprehensive policies aren’t enough. Obamacare required major medical plans to cover a long list of essential benefits in order to make sure that people with health issues could afford the care that they needed. Costs were spread throughout the entire risk pool for healthy and sick people alike. If states are allowed to define essential benefits, then more comprehensive policies could cost much more. People with chronic medical problems and pre-existing conditions might be priced out of the individual market altogether. Trumpcare protects the right of people with pre-existing conditions to buy policies, but there aren’t any regulations on cost in high-risk pools. People who need more care may be unable to afford it.

The effect on job-based coverage

We’ve been talking about the individual insurance market because that’s the focus of healthcare reform. Most Americans with health insurance continue to get coverage through an employer. The ACA made a few changes to employer-sponsored coverage as well, primarily increasing covered benefits through the essential benefits provision. Trumpcare could impact job-based insurance, too.

As we mentioned, states could apply for a waiver from the essential benefits provision if they can prove that doing so would benefit consumers. This could impact employer-sponsored plans. In order to understand how, it’s important to know how Obamacare influences catastrophic coverage.

Under current law, insurers can’t limit how much they pay in claims (lifetime limits) for covered benefits as long as you’re paying your premiums. You also have an out-of-pocket maximum. Once you hit that dollar amount, your insurer pays for the rest of your covered benefits at no added out-of-pocket cost for the rest of the plan year. These limits and restrictions were created so that people didn’t have to worry about excessively high medical bills. When you hit the out-of-pocket maximum, it’s called catastrophic coverage.

Obamacare’s catastrophic coverage provision only applies to the 10 essential benefits mandated by federal law. When your employer picks a benefits package, that package has to adhere to state guidelines. Large employers – those that have a presence in several states – can set health plan benefits according to any state’s guidelines.

Currently, all states are adhering to federal requirements for essential benefits, but Trumpcare could change that. If one state has fewer essential benefits, then a large employer could set its health plan to match that state’s requirements, which would cut down on the catastrophic coverage limits for its own plan, even if the company’s primary state hadn’t changed the rules. As you can probably figure out, this practice could create a serious problem for employees of that company, especially low-income workers who need the protection of out-of-pocket spending caps.

#5 – Medicaid expansion will end.

The Affordable Care Act expanded Medicaid at the federal level, but states had the option to expand their individual programs. Thirty-one states along with the District of Columbia opted to expand their programs, which meant that anyone who earned up to 138 percent of the federal poverty level could apply for Medicaid. Before, most states limited enrollment to 100 percent and for specific groups: children, pregnant women and people with certain disabilities. Each state sets its own guidelines for eligibility, but funding comes from the federal government.

Since 1965, when the program was created, Medicaid has been funded on an open-ended system. For every dollar that states spend on Medicaid, the federal government matches that spending at least one-to-one. Trumpcare wants to cut Medicaid funding down using one of two options: per-capita caps or block grants.

Under the AHCA, states could choose to accept a block grant, which is a set dollar amount for the whole program, each year. Alternately, they could accept per-capita limits on funding. In this approach, the federal government would give states a set dollar amount for each enrollee, regardless of health status or any other factor. Both approaches award a fixed dollar amount that isn’t tied to the actual cost of caring for people on Medicaid. Republicans argue that restructuring Medicaid like this would force states to develop innovative ways to serve their Medicaid populations. In either case, these new funding measures would limit how many people could enroll.

Trumpcare also seeks to end Medicaid expansion nationwide. States will still be able to set eligibility guidelines, but since funding would not be open-ended anymore, there would be no cost-effective way to expand enrollment. The states wouldn’t be able to afford expansion, in other words. The AHCA ends expansion on January 1, 2020.

Not insignificantly, Trumpcare also provides for states to start requiring Medicaid recipients to work. It’s not clear whether states will adopt this provision, but it does mark the first time in the program’s history that a work requirement could be attached. Conservatives claim that requiring able-bodied people on Medicaid to work would lessen the financial burden on everyone else in the program. It could also help states innovate their programs.

#6 – Obamacare’s mandates get a new name.

Even supporters of Obamacare disliked one of the law’s primary features: the individual mandate. The Affordable Care Act implemented individual and employer mandates. Every eligible American citizen (just about everyone) had to have health insurance, and every large employer (more than 50 employees) had to offer an ACA-compliant policy to full-time workers. If people failed to get covered, then they were subjected to a penalty fee, also called the shared responsibility payment, when they filed their taxes each year. Employers also had to pay a fee (per worker) if they failed to comply with the law.

The individual mandate was designed to encourage young, healthy people to sign up for health insurance. Otherwise, there was little incentive for them to buy a plan they might not use. Unfortunately, the mandate was not only unpopular but ineffective. Plenty of people chose to pay the fine – which was comparably low – instead of buying health insurance.

The American Health Care Act claims to eliminate the individual mandate, but the new law would actually just change how the mandate is enforced. Instead of imposing a fee on everyone who doesn’t have health insurance, the new law lets insurers charge a hefty fee on top of monthly premiums for anyone who fails to maintain continuous coverage. In other words:

  • Under Trumpcare, if you have health insurance, you have to keep it or buy a new plan on time during open enrollment.
  • If you lose your insurance and don’t get another plan for two months (63 days), then the next time you sign up for a policy, the insurer could add a 30 percent surcharge to the rate.
  • You’ll pay the new, higher rate for the whole plan year. When that plan year ends, you could apply for a lower-cost plan without the surcharge.

It’s not exactly the same thing as a mandate, but it works the same way in that it forces people to get covered if they want to avoid paying extra. Some people won’t have a problem with the surcharge, but for others, an extra 30 percent on top of a $400 policy, for instance, would mean that policy jumped to $520 a month instead. Many people in America don’t have an extra $120 a month to spare on health insurance.

The argument is that this will encourage people to maintain continuous coverage, but life is unpredictable, and people lose their health insurance for many reasons (not just laziness or lack of concern). Critics of the AHCA fear that other aspects of the bill, namely fewer essential health benefits and Medicaid cuts, could create coverage gaps for people. The result would be that too many families in America would never be able to afford health insurance.

Changes in the Upper Chamber

It’s easy to get mixed up in all of the hype surrounding the American Health Care Act, especially since the bill has yet to become law. Trumpcare is likely to change as it goes through the Senate. In fact, many senators have already said that they plan to modify the existing bill to make it more palatable to the majority of Americans. One example is Lamar Alexander from Tennessee, who also chairs the Health, Education, Labor and Pensions Committee. Sen. Alexander expects that the Senate will create its own version of the AHCA, which will have to be sent back to the House for review. Senators typically work on a more moderate basis than their peers in the lower chamber. Even Republicans in the Senate want to keep some aspects of the ACA intact, including protections for people with pre-existing conditions and the expansion of Medicaid.

No timeline has been released as to when the Senate will start reviewing and revising the American Health Care Act. Senators have indicated that they will take their time. The bill has a long way to travel before it becomes law. In the meantime, the country continues to wait for news regarding the future of healthcare reform.