An Overview of the Proposed ACA Replacement Plan

Yesterday, House Republicans released the long-awaited plan to replace the Affordable Care Act (ACA).

President Donald Trump has continuously spoken out about his plans to replace Barack Obama’s health care law, calling it disastrous.

The proposal seeks to dismantle several signature parts of the ACA, including income-based tax credits, taxes on high-income individuals, and penalties for the uninsured. Furthermore, the bill would cut federal funding to Planned Parenthood clinics through Medicaid, as well as other government programs for 1 year, according to The New York Times.

The bill proposes the following areas of the ACA for repeal:

• Elimination of the Individual Mandate: Under the ACA, individuals are required to obtain health insurance or face tax penalties. The House Republican bill would eliminate this mandate, meaning individuals would no longer be hit with penalties for being uninsured. A potential repercussion of the repeal would be that individuals who are healthy may be less likely to buy insurance, which would result in price increases for individuals with the greatest need for health insurance. To counteract this, the plan proposes a continuous coverage incentive, which would charge a 30% penalty for lapses in coverage in the individual market.
• Elimination of the Employer Mandate: Currently, the ACA required larger companies to provide affordable insurance for their employees or would face financial penalties. The propose law plans to repeal this.
• Subsidies for Out-of-Pocket Expenses:. The federal government provides tax credits to help some individuals pay their deductibles and co-payments. However, the bill would repeal this “cost-sharing subsidy” in 2020.

The bill will make changes to the following 4 areas of the ACA:

• Premium Subsidies: The federal government provides tax credits to middle-income Americans using a sliding scale based on income to help offset premium and deductible costs. The new bill proposes that subsidies be distributed using age rather than income to calculate the amount individuals will receive. Individuals earning less than $75,000 and households earning less than $150,000 will have full availability to tax credits, however, this would be capped for higher earners. For individuals younger than 30 years, the subsidy would be $2000, and for individuals over 60 years it would be $4000.
• Medicaid Expansion: More than 30 states have expanded Medicaid coverage to raise eligibility cutoff to 138% of the poverty level. The bill would allow these states to keep Medicaid expansion, and they would continue to receive federal funding as they did under the ACA until 2020. However, federal funding would be reduced for individuals who become newly eligible starting in 2020, or who leave the program and return later. Furthermore, the bill proposes capping federal funding per enrollee based on how much each state spent in the fiscal year 2016.
• Health Savings Account: In 2017 under the ACA, an individual could place $3400 and a family could place $6750 into a tax-free health savings account. Under the proposed bill, individuals would be able to put significantly more of their money into a health savings account. Furthermore, it would allow spouses to make additional contributions. Starting in 2018, the basic limit would be a minimum of $6550 for an individual and $13,100 for a family.
• Restrictions for Charging Older Americans More: Health care plans are only able to charge older customers 3 times the prices charged to younger customers. This would be increased to 5 times as much as younger customers, and would provide states the option to set their own ratio.

The following are aspects of the ACA that the replacement plan will keep:

• Dependent Coverage until 26 Years Old: Individuals are eligible to stay under their parents’ health plans until the age of 26.
• Pre-existing Conditions: The ACA requires that all insurers cover individuals regardless of pre-existing conditions, and bans insurers from charging individuals more based on an individual’s health history.
• Essential Health Benefits: All insurers are required to offer 10 essential health benefits: ambulatory patient services (outpatient care); emergency services; hospitalization; maternity and newborn care; mental health services and addiction treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive services, wellness services, and chronic disease treatment; and pediatric services.
• Prohibitions on Annual and Lifetime: Limits Insurers are prohibited from setting a limit on how much they pay to cover an individual.