House GOP Obamacare Replacement Plan Has Major Gaps in Cost and Coverage

House GOP Obamacare Replacement Plan Has Major Gaps in Cost and Coverage


House Republicans Monday night unveiled their long-anticipated plan to repeal much of the Affordable Care Act and replace it with a conservative, market-based approach that House Speaker Paul Ryan (R-WI) guaranteed would drive down health insurance costs, spark competition and provide every American with “access to quality, affordable health insurance.”

The plan, more than six years in the making – including highly secretive talks during the past week involving top House GOP leaders, powerful conservative factions, Republican governors and the Trump Administration – seeks to achieve several central goals of the party.

Related: 3 Basic Problems Holding Up the GOP Obamacare Replacement Plan

It would finally eviscerate Obamacare’s much reviled individual mandate that requires Americans to purchase insurance or pay a penalty. It would phase out by 2020 expanded Medicaid benefits to poor people in 31 states and the District of Columbia.  It would eliminate a requirement that larger companies provide health insurance for their workers.

And it would replace Obamacare’s premium subsidies for low and middle-income people with a “refundable” tax credit plan that would help many more Americans buy insurance on the open market. All but wealthier Americans would qualify for set premium supports ranging from $2,000 to $4,000 a year, with the highest support level going to older people who generally have higher premiums and medical costs than younger, healthier people.

“Obamacare is a sinking ship, and the legislation introduced today will rescue people from the mistakes of the past,” Rep. Kevin McCarthy (R-CA), the House Majority Leader, said in a statement.

The GOP alternative approach would also embrace ideas that have been aired repeatedly by Ryan, GOP policy analysts and President Trump himself, including tax-exempt health savings accounts, allowing insurers to sell their policies across state lines, and creation of so-called “risk pools” in every state to help provide coverage for hard to insure older and sicker people.

Related: How 3 GOP Senators Could Stop Obamacare Repeal in Its Tracks

Finally, the plan would preserve two of the most popular features of Obamacare – the ban on insurance companies discriminating against applicants with pre-existing medical conditions and a provision allowing children to remain on their parents’ health care policies through age 26.

And yet for all the Republicans’ complaints about Obamacare’s soaring premiums, shrinking choices of health insurance plans and onerous mandates and rules, they have finally come up with a plan that is highly flawed and woefully incomplete – and lacking in vital details as to how much it will cost and how many Americans will be able to hang onto their insurance.

The House Republicans’ “American Health Care Act” creates a new set of winners and losers among consumers, with younger, healthier and wealthier people faring much better than under Obamacare while older, sicker people doing less well.

This is the result of a combination of factors, including a new tax credit premium subsidy plan that benefits a much broader income group than does Obamacare, as well as changes that would allow insurers to charge more than they can now for health care policies in the individual market and  scale back the benefits they must provide.

The Republican approach would also jettison an Obamacare stricture preventing insurers from charging their oldest enrollees, in their 50s and 60s, any more than three times what they charge their youngest customers. And consumers who have a lengthy break in their health insurance coverage – either because they lost their jobs or decided to do without coverage for a while -- could be slapped with a steep 30 percent surcharge when they seek to purchase a new policy.

Related: Boehner ‘Started Laughing’ When Republicans Vowed to Replace Obamacare

“In the aggregate, these changes could be advantageous to younger and healthier enrollees who want skimpier (and cheaper) benefit packages,” noted Sarah Kliff of Vox. “But they could be costly for older and sicker Obamacare enrollees, who rely on the law’s current requirements.”

House and Senate Democrats have shown no indication they will support a Republican repeal and replacement effort, and they immediately denounced the House GOP plan as a serious setback in federal health care policy. “Trumpcare doesn’t replace the Affordable Care Act, it forces millions of Americans to pay more for less care,” Senate Minority Leader Chuck Schumer (D-NY), said in a statement.

Among the most glaring problems of the House GOP replacement plan:

  • The tax credit had to be scaled back so much to placate conservative critics that it’s not likely to be able to match or even come close to the tax subsidies provided to low and middle-income people under Obamacare.

Related: A First for Obamacare: Majority of Americans Now Support It

Unlike Obamacare, which provides premium subsidies based on income to low and moderate income people, the House GOP plan would make the tax credit available to individuals earning up to $75,000 a year and couples making up to $150,000. Younger Americans would qualify for tax credits of between $2,000 and $2,500 while older people in their 50s and 60s would qualify for credits of between $3,500 and $4,000.

While on the face of it, older Americans would fare best of all, their higher tax credits would be offset by having to pay much higher premiums than before under Obamacare.  Moreover, the 9.4 million people currently receiving premium subsidies through Obamacare exchanges get on average $291 per month or a significant portion of the $386 per month average premium for people who obtained coverage through Critics warn that many people would have a hard time under the GOP subsidy plan finding insurance in the private market that they could afford.

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Many conservative Republicans and outside groups have opposed refundable tax credits, largely because people with lower incomes, who pay less in income taxes, would receive the full credit even if it exceeds their tax bill. Conservative critics including Sens., Rand Paul (R-KY) and Ted Cruz (R-TX), have dismissed the refundable tax credit as “Obamacare Lite” and want it stricken from any final replacement plan. 

  • Republican leaders have yet to find a way to finance their program because business leaders and conservative groups complained too much about a proposal for raising tens of billions of dollars by imposing a cap on a highly generous tax exemption for employer-sponsored health care policies.  In the short term, Republicans will leave in place a handful of Obamacare tax increases that have long been criticized by the GOP. Those include taxes on insurers, hospitals, drug companies and even tanning salons.

  • There’s no way of telling at this point how much the plan will cost or how many people are likely to lose their coverage. That’s because the non-partisan Congressional Budget Office and Joint Committee on Taxation have yet to complete their analysis of the plan. GOP leaders appear willing to forge ahead with committee action on their plan this week, even without the analysis.

Democrats are clamoring for evidence that the GOP approach would result in millions of Americans losing their health care coverage in the coming year or two, and want to see the CBO report first. “The American people deserve to see what Republicans are trying to do to their health care,” House Minority Leader Nancy Pelosi (D-CA) said.

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The GOP bill includes what some moderate Republicans consider a “poison pill” – a one-year elimination of federal Medicaid funding for Planned Parenthood to placate the party’s influential anti-abortion forces. Although federal law prohibits Planned Parenthood from using federal funds and grants for abortion services, abortion foes argue that the federal funding is fungible and might end up indirectly supporting abortions.

  • Finally, the American Health Care Act would permit the 31 states with expanded Medicaid benefits for childless adults and others to continue that coverage through January 2020 when the program would be frozen and then gradually phased out. This represents a victory for the 15 Republican governors whose states opted for the expanded, federally funded Medicaid who fought to prevent an immediate end to the program.

However, some moderate Republicans are not satisfied with the compromise and are vowing to oppose the plan unless they are assured that Medicaid would be spared major cuts or converted into block grants or per capita payments to the states. On Monday, four Republican senators signed a letter to Senate Majority Leader Mitch McConnell saying that an earlier draft of the House GOP plan did not adequately protect people from losing their expanded Medicaid coverage.

The senators –- Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska –- threatened to oppose the legislation unless that Medicaid coverage was preserved. Any two of them could stop the legislation in its tracks once it reaches the Senate by opposing the measure on the floor.