Republicans have introduced their first bill aimed at fulfilling President Trump’s campaign promise to repeal and replace the Affordable Care Act (“ACA”), also known to many as Obamacare. Before outlining the major provisions of the bill, it’s important to understand that Congress will begin reviewing and debating the bill today and will likely continue doing so for months. During that process, it’s very likely that the bill’s provisions will change. Therefore, the key take away from the bill is its framework, not its details.
The proposed American Health Care Act (“AHCA”) retains many of the ACA’s key features, like prohibiting lifetime benefit limits, preventing insurers from denying coverage to people with pre-existing conditions and allowing children to stay on their parents’ plan until age 26.
The AHCA makes substantial changes to the ACA in many other areas, including:
- The elimination of the employer and individual mandates. The AHCA reduces to $0 the penalties for failing to comply with either mandate, effective 2016.
- It also eliminates the cost-share subsidy beginning in 2020, which was available on health insurance exchanges to help low-income purchasers afford coverage. Instead, it retains the premium subsidy tax credit but changes how they are calculated.
- Tax credits will be available for those making less than $75,000 ($150,000 for households) who do not have access to coverage through their employer.
- For a person under 30 the tax credit would be $2,000. The credit would double for people over 60.
- The tax credit would grow with the size of a family to a maximum of $14,000.
- Medicaid expansion in more than 30 states would remain in place but sunset in 2020.
- Increases the amount insurers can charge older customers. The ACA limited insurers to charging their oldest enrollees three times the premium charged to the youngest ones. The AHCA increases that to five times and gives states the option to set their own ratio.
- Health savings account contribution limits would increase substantially – from $3,400 for an individual and $6,750 for a family to $6,500 for an individual and $13,100 for a family.
It was speculated that the Republican bill would cap the tax exclusion on employer-provided health care, but the AHCA does not contain that provision. It does, however, introduce other significant provisions, including:
- Allowing insurance companies to charge a 30% premium increase to individuals who did not have health insurance for more than 2 months before enrolling. The AHCA retains the ACA’s prohibition on denying coverage to those with preexisting conditions and does not require individuals to purchase coverage. The 30% penalty is an incentive to maintain coverage, however.
- Delaying – but not repealing – the Cadillac tax from 2020 to 2024.
- Stopping all federal funding to Planned Parenthood.
The AHCA needs 218 votes in the House of Representatives and 51 votes in the Senate to pass Congress before it can be presented for President Trump’s signature. It is likely to change during that process – perhaps substantially. So prepare for more proposals, changes and debates about health care reform during the next several weeks and months.