The American Healthcare Act: What You Need to Know

Written by Gabe Aaronson Special Correspondent on . Posted in Capital Commentary

The American Healthcare Act (also known as AHCA or Obamacare Repeal) passed the Republican-controlled House of Representatives on May 4 and has the support of President Donald Trump.

 

If it becomes law, then Maryland and DC’s Democratic legislatures and low healthcare costs would shield most residents from the American Healthcare Act’s effect. Individuals in Virginia — which has a Republican legislature but voted for Barack Obama in two elections — could face higher premiums for preexisting conditions and receive fewer benefits from their health insurance. In all states, Medicaid recipients, low-income individuals, and older individuals would face higher costs and reduced benefits.

The law faces significant Republican opposition in the Senate. It is likely to undergo substantial changes before it arrives on the president’s desk.

What would the American Healthcare Act mean for people in the Greater Washington area if it passed today?

Table 1: Overview of Health Insurance in MD, VA, and DC

 

Population

Employer

Individual

Medicaid

Medicare

Uninsured

Maryland

6,006,401

58.0%

6.0%

15.0%

12.0%

7.0%

Virginia

672,228

53.0%

8.0%

11.0%

14.0%

9.0%

D.C.

8,382,993

52.0%

8.0%

26.0%

10.0%

4.0%

 

Preexisting Conditions

Some of the most popular features of the Affordable Care Act (ACA) (also commonly known as Obamacare) are its protections for individuals with preexisting conditions. Under Obamacare, insurance companies cannot deny coverage or charge higher premiums to applicants who have preexisting conditions.

Table 2: Examples of
Pre-existing Conditions

Diabetes

Pregnancy

Heart Disease

Cancer

Acne

 AHCA would keep these protections in place, although States would have the option to remove the premium protection for individuals with preexisting conditions. The Democratic legislatures in Maryland and Washington, D.C., are certain to keep this protection in place, but it is unclear how Virginia’s Republican legislature would act.

Medicare

Medicare recipients will see no changes to their eligibility or benefits under the American Healthcare Act.

However, AHCA would repeal a payroll tax that the ACA placed on high-income earners to help fund Medicare. According to the Kaiser Family Foundation, repealing this tax will cause the Medicare trust fund that pays for hospitalizations to run out in 2025 — three years earlier than it would otherwise.

Employer Sponsored Health Insurance

Maryland and DC residents who receive health insurance through their employers will see no changes. AHCA allows states to scrap the “10 essential health benefits” Obamcare requires all insurance plans to cover, but Maryland and DC have Democratic legislatures that won’t remove these protections.

In Virginia, too, the Democratic Governor Terry McAuliffe would prevent the Republican legislature from eliminating the “10 essential benefits.” However, with a gubernatorial election in November 2017, the future of these protections is far less certain in Virginia.

AHCA also eliminates the “employer mandate” which requires companies with 50 or more employees to offer health coverage or pay a $2,000 per employee fine. However, an analysis by the nonpartisan Commonwealth Fund found that the employer mandate only affected about 100,000 workers, or 0.09 percent of the U.S. workforce. Repealing the employer mandate would similarly impact only a fraction of a percent of workers.

Table 3: Ten Essential Health
Benefits All Plans Must Cover

Outpatient Care

Emergency Services

Inpatient Care

Maternity and
Newborn Care

Mental Health Treatment

Prescription Drugs

Rehabilitative Treatment

Laboratory Services

Preventive Care

Pediatric Dental
and Vision

 

Individual Insurance Markets

Based on Kol HaBirah’s analysis, Greater Washington-area residents who buy insurance on the individual market would pay less for insurance under the American Healthcare Act. People on the individual market generally work for themselves or at small companies.

Table 4: Insurance Premium
Tax Credits Under AHCA

Age

Tax Credit Amount

Under 27

On Parent’s Insurance

27-29

$2,000

30-39

$2,500

40-49

$3,000

50-59

$3,500

60+

$4,000

 AHCA’s first change is to the tax credits individuals can use to purchase health insurance. Under Obamacare, the tax credits are more generous for low-income individuals, the elderly, and residents in rural areas. The AHCA would give flat tax credits based on age alone (see Table 3).

AHCA’s second change is to allow insurance companies to charge higher premiums for older people and lower premiums for younger people. Obamacare allows insurers to charge older individuals (who generally have higher healthcare costs) up to three times what it charges younger individuals. This is called “age rating,” and Obamacare limits age rating to 3:1 — meaning an insurance company can’t charge the oldest person more than three times what it charges the youngest person.

AHCA would change the default age rating to 5:1, but allows states to choose a different ratio.

The Greater Washington area’s relatively low health insurance costs and high median income mean that most residents buying individual insurance will benefit if AHCA becomes law. However, this does not hold true for lower-income or middle-aged individuals (see Table 5).

Table 5: Insurance Costs for
Individual Making $50K per Year – Obamacare vs. AHCA

Location

Age

Insurance premiums as a % of income…

Obamacare

AHCA

Montgomery County, MD

27

7%

3%

40

9%

3%

60

10%

17%

Washington,
D.C.

27

6%

2%

40

8%

2%

60

10%

10%

Fairfax County,
VA

27

7%

3%

40

9%

3%

60

10%

17%

 

AHCA’s final change to individual insurance markets is to eliminate Obamcare’s “individual mandate,” which fines people who don’t buy health insurance. The purpose of this fine is to ensure people don’t wait until they’re sick to buy insurance. Instead, AHCA would create an insurance premium surcharge on individuals whose coverage lapses. Under AHCA, anyone whose coverage lapses for 63 days must pay a 30 percent premium surcharge for one year when they next buy insurance.

The Congressional Budget Office predicts that these changes will slightly increase overall insurance premiums before 2020, but slightly decrease premiums after 2020.

Medicaid

Medicaid recipients will be heavily affected by AHCA. Medicaid is a subsidized health insurance program for children, pregnant women, and low-income individuals. It is jointly funded by the federal government and states.

Starting in 2020, AHCA will reduce overall federal funding for Medicaid, particularly for those who gained insurance under Obamacare’s Medicaid expansion. States would either need to cut Medicaid benefits and eligibility or supply significantly more state funding to keep benefits steady.

The effects on Maryland Medicaid recipients would be devastating, according to State Delegate Ben Kramer and State Senator Roger Manno. They told Kol Habirah that the state could not possibly afford the two billion dollars per year it would take to make up for the lost federal funding. Instead, the state would be forced to make serious cuts to Medicaid benefits and eligibility.

Washington, D.C., Medicaid recipients could be hit even harder by a cut in federal funding — over a quarter of DC residents are on Medicaid.

The effects on Virginia may be less pronounced. The state never participated in the Medicaid expansion under Obamacare, so it would lose less funding from an Obamacare repeal. Even in Virginia, though, federal funding for Medicaid would probably fail to keep up with costs after 2020.

Abortion

The AHCA takes two large steps to prevent federal money from even indirectly supporting abortion providers.

First, Planned Parenthood could no longer receive federal funding for treating Medicaid patients. Marylanders would be unaffected by this because on April 7, 2017, the state passed a law providing state money to reimburse Planned Parenthood for any services provided to Medicaid recipients. However, Virginia and DC Medicaid recipients may have to find another provider for women’s health and reproductive services.

Second, individuals could no longer use federal tax credits to purchase insurance plans that include abortion coverage (except for in cases of rape, incest, and risk to the mother’s health). Individuals would need to purchase plans that offer abortion coverage without federal financial assistance.

Unlikely to Pass the Senate without Changes

One very important caveat is that the American Healthcare Act will not pass the U.S. Senate without large changes. Four Republican senators — Rob Portman (R-OH), Shelley Moore Capito (R-WV), Cory Gardner (R-CO), and Lisa Murkowski (R-AK) — signed a letter in March opposing the bill for its effects on the Medicaid population. Senate Republicans only have a 52-48 majority; they cannot pass a bill if more than two of their numbers defect.

Several other influential Republicans, including President Trump, Rep. Mark Meadows (R-NC) of the House Freedom Caucus, Sen. Ted Cruz (R-TX), and Sen. Rand Paul (R-KY), have already said they expect the bill to change before it passes the Senate.

Given the influence of the conservative House Freedom Caucus, the Republican House of Representatives may reject the Senate’s changes if they soften the provisions on Medicaid or preexisting conditions. It is entirely possible that the two chambers are too far apart ideologically to agree on any healthcare law. If this is the case, then Obamacare may be safe after all.

By Gabe Aaronson
Special Correspondent