On February 16, 2017, the House Republican Leadership released a policy brief outlining its favored approach to replacing the Affordable Care Act.

After reciting the Republican view of the ACA’s failures, the brief declares that the House leadership supports:

  • Repealing the ACA’s employer and individual responsibility provisions as well as the ACA’s provider and insurer taxes (nothing is said about the additional Medicare taxes the ACA imposed on high-income taxpayers, although these would presumably be repealed as well);
  • Providing fixed-dollar advanceable, refundable tax credits, adjusted for age but not for income, which could be used to purchase any state-approved individual market plan or for COBRA premiums (not for employer plans or government programs);
  • Increasing health savings account contribution limits and liberalizing other HSA requirements;
  • Phasing out enhanced funding for the Medicaid expansion and moving federal Medicaid funding to a per-capita cap or block grant basis;
  • Repealing the ACA’s Medicaid disproportionate-share hospital cuts; and,
  • Providing “innovation grants” to states, which the states could use to fund high-risk pools, reduce out-of-pocket costs, reinsure health plans, fund preventive services, or for other purposes.

The brief states that these measures would move forward, presumably through reconciliation legislation, in tandem with Trump administrative initiatives and legislation to reduce insurance regulation, “increase flexibility” for employer coverage, and allow the sale of insurance across state lines. No legislative language or budgetary information was provided with the brief.

These proposals would seem to affect the revenues or outlays of the United States, and it is thus conceivable that they could move through reconciliation. If adopted, they would have dramatic effects. Repealing the ACA’s Medicare tax surcharge and Medicare tax on unearned income, which apply to taxpayers earning more than $200,000 ($250,000 for joint filers), would result in $2.8 billion for the nation’s highest-earning 400 families, a tax cut of $7 million each.

Allowing additional tax subsidies for HSAs would help individuals who have disposable income to save, particularly wealthier taxpayers in higher brackets. The fixed-dollar tax credits would provide substantial help for higher-income insurance purchasers in the nongroup market who are now often faced with high premiums without federal assistance. Eliminating taxes on health insurance and medical devices might reduce costs to consumers if market conditions are such that manufacturers and insurers must share their savings from the tax reductions.

The policy brief does not disclose the amount of the tax credits that would be offered. However, the credits are not income-adjusted and could, unless very generous, be too small to permit lower-income consumers to purchase coverage sufficient to approach their health care costs. The innovation grants could help, but there is no indication as to how much money the states would get, or that the funding should be targeted to help those losing coverage with ACA repeal. The mention of high-risk pools seems to assume that insurers could resume health status underwriting, making adequate funding of the high-risk pools critical for less healthy Americans who could otherwise lose coverage.

Restoring Medicaid disproportionate share hospital cuts could help safety-net hospitals provide more care for the poor. But the shift of Medicaid to per-capita caps or block grants could lead to a massive transfer of cost from the federal government to the states, growing over time, which could endanger coverage for many Medicaid enrollees unless the governors could significantly increase the cost-effectiveness of their Medicaid programs with the flexibility promised by Republicans.

Walden Modifies Pre-Existing Condition Legislation

Representative Greg Walden (R-OG), chair of the House Energy and Commerce Committee, has revised his pre-existing conditions bill. As originally released, this legislation promised that if the ACA was repealed, a ban on pre-existing conditions clauses and a guaranteed availability requirement would remain in the individual and group markets. It imposed no restrictions, however, on the premiums that could be charged to individuals with health problems.

The new version incorporates provisions from pre-ACA law prohibiting group health plans from discriminating against employees on the basis of health status in determining eligibility for coverage or the amount of premiums charged. With respect to the individual market, however, it states:

The [group health status discrimination] provisions . . .shall apply to health insurance coverage offered to individuals by a health insurance issuer in the individual market in the same manner as such provisions apply to health insurance coverage offered to employers by a health insurance issuer in connection with health insurance coverage in the group market.

The bill explicitly allows insurers to charge employers premiums based on the health status of their employees as long as the upcharge is not based on genetic information. Thus, read literally, the bill would allow health status underwriting for individuals. If the intent of the bill is, however, to prohibit health status underwriting for individuals as well as to ban pre-existing conditions and to require insurers to guarantee availability, more will need to be done to keep insurance markets from collapsing if the individual mandate and ACA subsidies are repealed.

New HSA And Association Health Plan Legislation

Senator Orin Hatch (R-UT) has also released a lengthy bill liberalizing rules governing health savings accounts, while Congressman Sam Johnson (R-TX) has released an even longer bill supporting association health plans for small businesses. Association health plans allow small businesses to pool their experience and could lead to lower insurance costs. They have been a part of a number of recent ACA replacement proposals. The American Academy of Actuaries has recently released an issue brief flagging problems that association health plans pose in terms of adverse selection, insolvency risks, and consumer protection. Congressman Johnson’s bill attempts to address these issues.

New Coverage Estimates

On February 14, 2017, the National Health Interview Survey released its estimates of health coverage for the first three quarters of 2016. Once again, the number of persons who were uninsured has dropped year-over-year, from 28.6 million in 2015 to 28.2 million for the first nine months of 2016. Just over one-fifth, 20.3 percent, of adults aged 18-64 had public coverage, while 69 percent had private coverage. Only 5 percent of children were uninsured in 2016. A total of 43.4 percent of children had public coverage; 53.5 percent had private coverage.

Poor and near-poor adults (age 18-64) were more likely to be uninsured (26 and 23 percent respectively) than their not-poor counterparts (7 percent), but rates of uninsurance have dropped precipitously among both the poor and near-poor since 2013. The rates of adults 18-64 uninsured at the time of the interview and those uninsured for at least part of the year dropped after 2013 (to 12.3 and 17.1 percent respectively in 2016) but did not did not change significantly between 2015 and 2016. The rate of those uninsured for more than a year, however, did drop significantly from 9.1 percent in 2015 to 7.6 percent in 2016.

Coverage through the marketplaces dropped from 11.3 million in the third quarter of 2015 to 11.1 million in the third quarter of 2016 (a statistically insignificant decrease). The percentage of adults 18-64 who were uninsured in 2016 was highest in federal marketplace states (15.5 percent), lower in partnership states (8.9 percent), and lowest in state-based marketplace states (8.6 percent). The variance in percentage of uninsured adults was greater, however, between Medicaid expansion states (9.3 percent) and non-expansion states (17.3 percent), and the presence or absence of a Medicaid expansion likely accounts for much of the differences between states with different types of marketplaces. In 2016, 39.1 percent of persons under age 65 were enrolled in a high-deductible health plan, while 15.2 percent were enrolled in a high-deductible health plan and also had a health savings account.