Following the sensationalized reactions to the House passing the AHCA, our political analyst Richard Wagner has carefully researched the actual words of the bill in Congress, compared to the many articles that attempted to summarize it often within minutes or hours of it’s passing.
The Republican line on Obamacare has been for years – “repeal and replace”. The American Health Care Act (AHCA) is essentially a partial repeal of Obamacare (The Affordable Care Act, or ACA), with several new provisions. As portions of the ACA have proven popular, President Trump would like to keep those provisions. But the controversial “Individual Mandate” is at the top of the chopping block.
As you read this, remember that this is based entirely on the current version of the AHCA which has only passed the US House of Representatives.
Before laying out what stays from the ACA (Obamacare) and what changes, the issue of pre-existing conditions coverage deserves a section of its own.
Pre-existing Conditions
Contrary to many rumors, very little will change about this. Pre-existing coverage will remain, but states can opt for an alternative. The claim that “pre-existing conditions” are not covered is based entirely on a not so thorough reading of the “MacArthur amendment”. This allows states to opt for letting insurers charge more for pre-existing coverage, only if they meet several requirements, among those includes setting up funds (partly covered by the Federal Government) to subsidize low-income people with pre-existing coverage.
Most importantly, they must show that this is part of a plan to lower premiums. Hence, it offsets the current premium increases we’ve seen in health insurance (average of 22% this year) that have been caused in part by insurers having to cover pre-existing conditions at the same rates as everyone else. Consider also that this is an option for the states, and so your own state may or may not chose it.
Claims that it will simply allow states to charge more for pre-existing conditions are partly true at best and are not giving you the whole story. Many articles even seem to operate on the assumption that this will simply be the new policy, and that pre-existing conditions will be covered by this alternative method. This is only true for states that chose this option and meet the requirements laid out by the AHCA.
Some of the more inflammatory claims that rape will be a “pre-existing condition” not covered are very far-fetched. For this to be at all true, essentially, a state would have to opt-out as described above, meeting the requirement to do so, and therefore would have to somehow convince the Department of Health that not covering rape is important to lowering premiums in their state.
Here’s what stays
Stay on your parent’s’ plan until 26 – This provision of the ACA is probably the most fiscally responsible piece of the entire bill. Naturally, most 18-26-year-olds have few health care needs. By requiring insurance companies to allow parents to keep them on the plans, which come with a premium, this ensures more premiums coming into the insurance risk pool with little risk. The AHCA, as currently written, keeps this provision intact. This could also help offset the higher cost to insurance companies for continuing to cover pre-existing conditions, at least as compared to health care before Obama’s ACA.
The Health Insurance Exchanges – Trump’s AHCA does keep these marketplaces in-tact. They were created under Obama’s ACA to make it easier for those purchasing private insurance to meet the requirements and avoid the tax penalties. Plans sold on these exchanges, which can be either federal or state managed, had to meet the minimum requirements under the ACA, so those purchasing a plan here could be sure that they would not face a tax penalty. The AHCA will keep these exchanges, though, without a tax penalty, they would simply be used to shop around, and there is no requirement that one must purchase from these exchanges in order to get the tax credits of the AHCA.
Here is what changes
Individual Mandate and 24 million Americans “losing” coverage – The single most important change will be the repeal of the Individual Mandate, which has been called the “linchpin” of the Affordable Care Act. No longer will anyone face a tax penalty for not buying insurance.
Consequently, many who have bought insurance in order to avoid this penalty will choose to no longer buy insurance, thereby “lose coverage”. It has been estimated by the Congressional Budget Office that 24 million Americans will not have coverage under the AHCA, who do under Obama’s ACA. This number is based on a combination of those who chose simply to stop buying insurance (no longer needing to avoid the tax penalty), and those who may not be able to afford it under the new AHCA.
It’s a great exaggeration to claim that 24 million Americans are having their healthcare plan taken away from them. But there is no denying that much lower income and older Americans will find it more difficult to afford insurance if the AHCA becomes law.
Health Savings Accounts – These are tax-exempt savings accounts to be used for healthcare, effectively encouraging individuals to save money to pay for their health care needs, rather than relying on a third party insurance company. They were originally implemented by the Bush Administration, they were expanded by Obamacare, and they would be expanded yet further under the AHCA. The AHCA would nearly double the annual limit for tax-exempt contributions to these plans, according to the House GOP. The exact amount, as well as the extended uses for HSAs, will likely be determined by Congressional committees drafting the bill.
Medicaid – Obamacare expanded Medicaid eligibility to those earning up to 133% of the Federal Poverty Level. This portion would be repealed by the AHCA, meaning only those at or below the poverty level would qualify for Medicaid. This expansion was one way of helping lower income Americans deal with the individual mandate, as those covered by Medicaid would have met the requirements of ACA. As AHCA will repeal the mandate, those who are at 100 – 133% of the poverty level would lose Medicaid, but would also no longer need to worry about the tax penalties of the ACA. Medicaid would also become more of a block grant to the states. The AHCA reduces national management of Medicaid and gives larger block grants to the states so that they can determine how Medicaid will apply to their populace.
Taxes and tax credits – It is fair to say that the AHCA cuts taxes for the wealthy, as it does repeal a Medicare tax increase that is part of Obama’s ACA. It also repeals a 3.8% tax on investment income that is part of the ACA. Tax credits, however, have no effect on the wealthiest Americans but will be more beneficial to the middle class. Tax credits will be based more on age than income, though income is still a factor. While the ACA (still the law of the land for the time being) gives tax credits which steadily decrease as incomes increase, the AHCA will simply give tax credits to those with an income up to $75,000 for an individual, and $150,000 for a family. The size of the tax credit will be based on age: $2,000 at 20 years of age, $3,000 at 40, and $4,000 at 60.
The rich, the poor, the middle class, and healthcare in America
Obama set out to make healthcare more affordable to lower income Americans who earned just a little too much to qualify for Medicaid. This resulted in the Affordable Care Act, Obama’s signature domestic policy achievement.
Essentially, there were two winners in the ACA: the lower middle class, and the health insurance sector. The lower middle class found themselves either qualifying for Medicaid or in a better position to afford private health insurance. The health insurance sector saw a significant increase in their customer base, with a combination of tax credits and a penalty for those who don’t buy their insurance.
The losers in the ACA were the middle to upper-middle class and the wealthy. The wealthy saw several tax increases, in the form of Medicare taxes and investment income taxes, with no direct impact on their health care options. The middle class was hit the hardest. While they did not see their Medicare taxes go up, remember that Medicare taxes are based on a percentage of income. The middle class instead faced tax penalties for not purchasing insurance, and insurance premiums have increased substantially since the ACA was implemented. So they’ve had to either buy ever more expensive insurance or pay the tax penalty.
The American Health Care Act, or AHCA, essentially reverses much of the above, with particular benefit to the middle class. It ends the individual mandate, thereby repealing Obama’s broken promise to not raise taxes on anyone earning less than $250,000 a year.
It does not totally reverse the Affordable Care Act, however, as it maintains, though modifies, the tax credits for health insurance. It also allows these credits to be used for a larger variety of plans, including less expensive plans to simply cover catastrophic health care costs, rather than the routine doctor appointments and minor health problems requiring antibiotics, etc.
Under the AHCA, the rich clearly win, as the tax increases are repealed. The poor are unaffected, as they simply remain on Medicaid. The middle class gets to keep much of what benefited them in the Affordable Care Act and find new options available. But the lower middle class who are older or sick will lose out.
The lower middle class who are healthy might prefer the AHCA since many of them preferred not buying insurance. But those who are sick will have less assistance from the government to purchase health insurance, and will not qualify for Medicaid unless they fall to the poverty level. It is hoped that the AHCA’s other provisions will result in overall health care costs in the country being lower than under Obama’s ACA, and this would then benefit the lower middle class. But only time will tell, assuming it even becomes law, if this will ultimately help lower healthcare costs in the US more broadly.