For five years Republicans have been clamoring for repeal of the Affordable Care Act. With Republicans gaining control of both houses of Congress in 2014, it is now conceivable that they could actually get repeal legislation—or repeal and replace legislation—to the President’s desk. Republicans in both the House and Senate are now negotiating budget proposals that call for repeal of the ACA. Realistically, however, as long as President Obama remains in office, repeal legislation stands no chance of surviving a presidential veto.
At this point the Republican’s most realistic opportunity to make significant changes in the ACA is in the hands of the Supreme Court. The Court could decide in late June that the premium tax credits that make health insurance affordable for millions of Americans are not available in two-thirds of the states, placing the individual insurance markets in those states at risk. Although a decision against the administration in King v. Burwell is unlikely to lead to repeal of the ACA, it could substantially strengthen the position of the Republicans in pushing for changes in the law.
But what changes would they seek, and what effect would those changes have? What proposals have the Republicans offered for replacing the law, and how would those proposals affect progress that has been made so far in achieving the goals of the ACA?
The Goals And Achievements Of The ACA
To begin, it is important to understand what changes in our health care system the ACA attempted and what it has achieved. As has often been noted, the ACA is a very big law with large ambitions. Its nine titles address health care delivery system reform, prevention, quality improvement, program integrity, health care workforce reform, generic biologics, and reform of the Indian Health Service — every nook and cranny of our massive and complex health care system. Virtually all public and political attention, however, has been focused on Title I of the legislation, which was aimed at reforming health insurance and extending insurance coverage, and on Title II, which expanded Medicaid coverage.
The ACA reformed insurance markets by banning insurance industry practices that had had deleterious effects such as health status and gender underwriting, preexisting condition exclusions, annual and lifetime dollar coverage limits, and coverage rescissions. The reforms also improved health coverage transparency and accountability. These reforms have enjoyed wide support, and some Republican proposals would retain some of them. The insurance underwriting reforms, however, depended on the creation of a normal risk pool in the individual and small group markets, including healthy as well as unhealthy individuals, which the ACA encouraged through a mandate that requires individuals who can afford health insurance to get insured and through premium stabilization programs. Republicans proposals uniformly reject the mandate requirement, even though it originated in conservative and Republican reform proposals.
The ACA expanded access to coverage through the use of premium tax credits and cost-sharing reduction payments for households with incomes between 100 and 400 percent of the federal poverty level, and through the expansion of Medicaid coverage for adults with incomes below 138 percent of poverty. The ACA’s employer and individual responsibility provisions are also aimed at expanding insurance coverage by encouraging employers to continue to offer coverage for their workers and individuals who can afford coverage to purchase it. The ACA increased the comprehensiveness of coverage through the essential health benefits requirement and by structuring and limiting cost-sharing.
The goals of the ACA also include restraining growth in the cost of health care and improving the quality and coordination of health care. The ACA did not adopt any integrated strategy for achieving these goals, depending rather on a wide range of regulatory interventions, financial incentives, and pilot programs.
Under The ACA: Progress, But Sometimes Slower Than Hoped For
The Affordable Care Act has been largely successful in accomplishing these goals, although there have been serious bumps in the road and progress has been more difficult to achieve than had been hoped. As the legislation passed its five-year anniversary, 11.7 million Americans had signed up for coverage through the marketplaces, while Medicaid enrollment had grown by 11.2 million. Employers, who have traditionally offered coverage to most working age Americans and their families, have continued to offer coverage.
The expansions were dealt a major setback by the 2012 Supreme Court decision that made the Medicaid expansion optional for the states, leaving 4 million uninsured, but the number of Americans who are uninsured has still fallen by 16.4 million since the ACA was put in place. The cost-sharing reduction payments have also made not just coverage but also health care affordable for millions of Americans with incomes below 250 percent of the federal poverty level.
Explicit health status underwriting and exclusion of coverage of preexisting conditions has disappeared in the individual and small group markets. The essential benefits package in these markets also ensures that some forms of benefits are available that were often not available before, like coverage for maternity or habilitation care.
Although the ACA has significantly expanded coverage for both lower- and moderate-income Americans and Americans with health problems as promised, much remains to be done. Millions of Americans are, and are likely to remain, uninsured. The ACA does nothing, for example, to expand coverage for undocumented aliens or to financially help households with incomes in excess of 400 percent of poverty to afford coverage. The coverage expansion has also gone more slowly than was hoped—impeded by marketplace technical issues and the difficulty of selling insurance to lower-income Americans who may not appreciate its value—but it is underway.
Moreover, the expansion of coverage of pre-existing conditions, the elimination of gender underwriting, and limitations imposed on age underwriting, the expansion of benefits, and limits on cost-sharing have resulted in substantial premium increases for individuals and small groups with young and healthy populations. This in turn prompted the administration to adopt a transitional approach to imposing the underwriting reforms and benefits expansion that allowed the continuation of non-compliant plans and slowed the introduction of the underwriting and benefit reforms. Some insurers have limited the availability of in-network specialists or of access to specialty drugs, in effect discriminating against individuals with high-cost medical conditions. Narrow provider networks and high cost sharing for individuals ineligible for cost-sharing reduction payments continue to limit access to care.
The cost of health care in the United States remains higher than in any other country—both absolutely and as a percentage of gross domestic product—and continues to increase. In fact, however, the United States has experienced a sustained period of historically low rates health care cost growth since the ACA was adopted. Although some individuals and groups have experienced dramatic increases in health insurance costs, in fact overall insurance premiums have also been increasing at a slower rate than in the past. Correspondingly, the cost of the ACA’s coverage expansions has been significantly lower than originally projected. Though it is certainly not the only factor, the ACA has undoubtedly played a role in reducing health care costs, particularly through holding down the growth of Medicare rates.
The ACA has also encouraged positive changes in the health care delivery system. It has driven a greater emphasis on primary care, on integration and coordination of medical care, and on accountability of health care providers. There is some evidence that the quality of health care has been improving in the half decade since the ACA was adopted.
Polls repeatedly show that more Americans have an unfavorable than have a favorable opinion of the ACA, although support is much stronger for improving the law rather than repealing it. Polls also show, however, that Americans are broadly supportive of the specific provisions of the ACA. It is impossible to know to what extent opposition is based on an informed judgment on the actual law itself and to what extent it has been driven by the avalanche of political advertising attacking the law to which Americans have been exposed in the past five years. It is also likely that negative public opinion is based to a considerable degree in a general ideological opposition to “big government” rather than opposition to the specific provisions of the ACA.
Republican Reform Proposals
In any event, Republicans believe, not unrealistically, that public opposition to the ACA played a role in their steady stream of electoral victories at both the federal and state level since its enactment, and that they have a mandate to repeal or replace the law. How they would do that, however, remains to be seen. There is no lack of proposals from Republican legislators or conservative or libertarian advocacy groups. At least a dozen are presently available and more are appearing regularly. For an excellent summary of these proposals, see Philip Klein’s excellent Overcoming Obamacare.
But for most proposals we only have brief summaries in blog posts or fact sheets. None have been reduced to legislative language and fully evaluated for their cost and effect on coverage by the Congressional Budget Office. Given the divisions in the Republican party between the right and the far right and between the more ideological House and more pragmatic Senate, it is hard to imagine Republicans coalescing behind, much less adopting, a single plan between now and late June when the Supreme Court is likely to rule on King v. Burwell.
If the Supreme Court in King invalidates the Internal Revenue Service rule permitting the federally facilitated exchanges to grant premium tax credits, one option would be for Congress simply to extend those tax credits through the end of 2015, affording a little more time for Republicans to come together on a replacement strategy. Leaving aside the fact that the more radical elements in the Republican Party would in all likelihood see delay as an unacceptable concession, delay would also do little to avoid the collapse of insurance markets for 2016. Insurers must decide whether or not to participate in insurance markets and file rates by late summer of 2015 for 2016, and many would find the uncertainty as to the availability of tax credits for 2016 and going forward unacceptable. Moreover, there is no guarantee that the delay would do much to facilitate the adoption of a Republican alternative.
The biggest barrier to the adoption of a Republican alternative to replace the ACA and carry out its goals is that Republicans simply do not accept those goals, and thus cannot and will not adopt a program for achieving them. The primary goal of the ACA is to extend health care coverage to Americans regardless of their income or health status, while controlling health care costs and improving quality. The goals of Republican health care reform proposals are to diminish the role of the federal government in regulating and funding health care. These goals are incompatible.
Republican reform proposals would end the Medicaid expansion and most would terminate means-tested premium tax credits and cost-sharing reduction payments. Most replacement proposals would repeal ACA provisions prohibiting insurers from underwriting based on health status or excluding coverage for preexisting conditions, the ACA’s essential health benefit coverage mandate, and the premium stabilization programs. Indeed, most of the plans, including both House and Senate Republican budget proposals, purport to repeal all of the Affordable Care Act, or at least Title I.
To be sure, most proposals offer alternatives for the provisions they would repeal. Most proposals would offer block grants or capped funding to the states in lieu of all or part of the existing Medicaid program. Most would also offer fixed-dollar tax credits or deductions to assist with payment for health care coverage. Most proposals would not means-test these credits, but a few proposals would offer tax credits only to lower-income individuals and some would offer tax credits to individuals and families who currently receive coverage through the Medicaid expansion.
Others proposals would offer universal fixed-dollar credits or deductions. These would be substitutes for long-standing tax exclusions and deductions for employment-related health coverage, which would be repealed. Most proposals would expand the availability of and current tax subsidies for health savings accounts.
Although most proposals would repeal the ACA’s prohibitions against discrimination on the basis of preexisting conditions, some proposals would allow individuals with preexisting conditions to obtain coverage with standard rates if they had had continuous coverage for some period of time. Some would allow individuals with preexisting conditions a one-time opportunity to lock in coverage at standard rates. Others would cover individuals with preexisting conditions through state high risk pools. Most proposals would eliminate or loosen constraints on age rating bands or gender underwriting.
Most proposals would eliminate federal insurance benefit mandates. Although most plans would leave issues of insurance regulation to the states, some proposals would permit the sale of insurance across state lines, effectively repealing state benefit mandates as well. All proposals would repeal the individual and employer responsibility mandates, although some would penalize individuals who do not maintain coverage by allowing insurers to subject them to health status underwriting.
Finally, a number of the proposals include provisions designed to appeal to key Republican constituents and financial supporters, such as restrictions on abortions or medical malpractice claims or the repeal of taxes imposed by the ACA on high-income Americans or on certain health care industry participants.
The Challenge Facing Republicans
It goes without saying that combining these disparate approaches into a single proposal and reducing it to legislative language would be a feat at least equal to that faced by the Democrats in 2009 and 2010 as they attempted to rally the disparate factions of their party to draft the ACA. Moreover, if Republicans were actually to repeal fully the ACA, they would also have to patch major holes that would be created in the Medicare law, which currently incorporates many ACA provisions. They would also have to repeal provisions of the law that have been very popular, like those covering adult children up to age 26. As a practical matter, the ACA, and in particular its Medicare provisions, are so deeply entrenched in our health care system that a total repeal is no more possible than repealing the interstate highway system.
The Constraints Of The Budget And Budget Rules
They will also face the challenge of producing a bill that does not explode the deficit. It is projected that if the Supreme Court finds that the federally facilitated marketplaces cannot in fact issue premium tax credits, the CBO spending baseline will drop by $340 billion over 10 years, a gap that the Republicans will either have to fill or make disappear through budget chicanery. If Republicans repeal the taxes and Medicare savings imposed by the ACA to achieve budget neutrality, they will have to either have to find hundreds of billions of dollars in additional revenue and savings, increase the budget deficit, or count on what Jon Gruber famously referred to as “the stupidity of the American voter” and fudge the budget rules, as the Senate budget proposes doing by proposing a trillion dollars in unspecified cuts.
The House and Senate Republican budget proposals affirm an intention to use the budget reconciliation rules to repeal the ACA. Under current Senate budget reconciliation rules, Congress can only use reconciliation to change provisions of the law that affect the revenues and expenditures of the federal government, and only then when the changes do not increase the budget deficit in years following the period affected by the reconciliation provision. Reconciliation could be not be used, therefore, to repeal or amend provisions of the ACA regulating health insurance or other non-financial provisions of the legislation unless the rules are changed. The Republicans would face the same constraints in using reconciliation to repeal the ACA that Democrats faced in using reconciliation to adopt it.
Moving In The Wrong Direction
Beyond the difficulties Republicans face in actually replacing the law, however, is the fact that Republican proposals would turn back the substantial gains that have been made under the ACA, leaving millions of Americans uninsured and millions more with inadequate coverage. Block granting Medicaid would certainly mean that states that have not so far expanded Medicaid would not do so in the future. A number of states that have expanded Medicaid would probably reverse course, or at least impose work requirements, premium or cost-sharing obligations, or other barriers to coverage that would dramatically reduce coverage. Block granting is also a thinly veiled cut in Medicaid funding, with the shortfall of funding increasing over time as increases in block grants failed to keep pace with increased program costs.
Replacing current means-tested tax credits with fixed dollar tax credits would make health insurance unaffordable for lower- and moderate- income Americans who cannot afford to cover the gap between the actual cost of health coverage and the amount offered through the tax credit. If the ACA’s prohibitions against health status and gender underwriting and limitations on age underwriting are repealed, insurance will cost more for women, older individuals, and individuals with preexisting conditions. Fixed dollar tax credits, even if crudely adjusted for age, will not cover these increased premiums, leaving health coverage unaffordable for many older and less healthy individuals. Fixed-dollar deductions, of course, are an even worse idea, as they are worthless to individuals with incomes below the filing limit and of much less value to individuals in low-tax brackets than to individuals with high incomes.
It is possible that with the repeal of essential health benefit requirements (and the subversion of state benefit mandates through allowing the sale of insurance across state lines), insurers will market cheaper insurance plans with very high cost-sharing or very limited benefits. This could make insurance coverage more affordable to some Americans, particularly those whose incomes are above 400 percent of poverty.
But high cost sharing is already an issue under the ACA. Bronze plans—even silver plans—impose much higher cost-sharing than do typical employer plans, impeding the ability of covered families to actually access health care. A significant proportion of marketplace enrollees receive cost-sharing reduction payments that substantially reduce their cost-sharing obligations, and in general the problem of medical debt seems to be decreasing under the ACA.
Some proposals tout health savings accounts as a means to fill the cost-sharing gap. While tax deductions for HSAs may help wealthy individuals cover their cost-sharing, they will do nothing for families that lack the wherewithal to save money in HSAs and for whom tax deductions have little value because they pay little income tax.
The elimination of benefit mandates may mean that health plans in the nongroup market will once again fail to cover maternity coverage or limit mental and behavioral health coverage. Access to preventive care may be sharply curtailed. Mini-med plans with such minimal coverage that it is essentially fraudulent to call them health insurance will reappear. Permitting sale of insurance across state lines will eliminate the ability of state insurance regulators to protect consumers and could set off a race to the bottom in which the state that overlooks the most outrageous behavior on the part of insurers will pick up the most insurance business. (It is worth noting, incidentally, that some states have allowed sale of health insurance across state lines, but that no insurers have attempted interstate insurance sales because health insurance is network based and an insurer must have an actual presence in a state to offer a provider network.)
If the ACA is repealed, with it will go the protection it offers individuals with preexisting health problems. They would again be denied health insurance or subjected to unaffordable insurance premiums. Some replacement proposals would allow individuals who maintain continuous coverage to purchase health coverage at standard rates. This could be helpful to individuals who had insurance but lose coverage (and who can afford to purchase individual coverage), but would not help the long-term uninsured. Some proposals would couple this with a one-time open enrollment period. Given our experience with the difficulty of enrolling the uninsured over two open enrollment periods so far, it is clear that this is not an adequate opportunity to get covered.
Yet other plans would provide federal support for state-high risk pools. We have a great deal of experience with state high risk pools and they have not worked. Premiums have been high and enrollment low. The House budget bill also relies heavily on association health plans, which have a history of segmenting insurance markets and making health insurance less accessible to higher-risk individuals and families, offering limited health benefits, and defrauding consumers.
Replacement plans would also repeal the individual and employer responsibility requirements. The individual responsibility requirement is perhaps the most unpopular ACA provision. But it plays an important role in ensuring that healthy as well as unhealthy people purchase insurance, thus making insurance more affordable for all. Replacement plans that subject individuals who do not maintain continuous insurance coverage to health status underwriting when they try to purchase insurance also impose penalties, which could be much higher than the ACA penalties. They are also likely to dissuade people with medical needs from seeking coverage while offering little incentive to healthy individuals to purchase coverage as long as they remain healthy. Repeal of the employer mandate would likely cause more employers to drop coverage. If replacement plans reduce tax subsidies for employer coverage, this effect will be magnified.
The Bottom Line
Republican plans cannot “replace” the ACA, in the sense of achieving its goals through a different means. They may achieve different goals—reducing federal expenditures on health care, freeing insurers from requirements that limit their ability to discriminate on the basis of health status or provide skimpy coverage, allowing individuals who wish to remain uninsured—but millions of Americans who have found health security under the ACA will lose it if the ACA is repealed and replaced by Republican proposals.
If the Supreme Court rules that the federally facilitated exchanges cannot issue premium tax credits, the results will be devastating. Congress could easily avoid this devastation through simply adopting a statute reaffirming its obvious original intent that federal exchanges have the same powers as state-operated exchanges. It will not do this. Indeed, at this point it is hard to see Congress doing anything, in the sense of coalescing around a single policy that would rescue our health care system. If Congress at some future point, however, does succeed in repealing the ACA and replacing it with a law resembling the proposals now before it, it will leave millions of Americans without coverage and millions more with inadequate coverage. A replacement plan, if one is ever adopted, could easily be even less popular than the ACA is now.