By the end of this week, President-elect Donald Trump will officially become the 45th president of the United States. With his ascent into the Oval Office will also come a changing of the guard when it comes to policy.
Obamacare's days are numbered
Trump's 100-day plan, like those of most incoming presidents, is a veritable mile long. However, unlike the recent tenure of President Obama, Trump will have both houses of Congress firmly on his side, with Republicans possessing a majority in the House of Representatives and the Senate. Trump did manage to ostracize some members of his party during the election process, which could complicate matters when it comes to getting his proposals passed into law, but the overall feeling is that we could see a considerably more productive Congress than we've witnessed in many years.
Trump's agenda includes:
- A complete overhaul of the U.S. tax code for individuals and corporations.
- The investment of $1 trillion in America's aging infrastructure over the next decade.
- A renewed focus on domestic oil and gas production.
- Repealing and replacing the Affordable Care Act.
This last component, the repeal of the ACA, which is more commonly known as Obamacare, is probably the top priority of Trump and Congressional Republicans. There have been dozens of attempted repeals of the ACA from House Republicans over the years, with one actually making it to the desk of President Obama, whereby it was vetoed. However, with Obama only in the Oval Office for a few more days, there's not much standing in the way of Republicans and a soon-to-be defenseless Obamacare.
Seven Obamacare provisions that could soon disappear
Of course, repealing Obamacare won't be a walk in the park for Republican lawmakers. Just as the health law of the land was passed with 60 Senate votes, a full repeal of Obamacare will take 60 votes. Instead, Republicans will likely turn to a process known as reconciliation. A reconciliation act would allow Republicans to remove aspects of Obamacare that directly affect the federal budget with a simple majority vote (i.e., 51 Senate votes). Though it would leave a number of Obamacare's regulations pertaining to what insurers can and can't do intact, a reconciliation act would essentially gut the meat and potatoes of the ACA.
Here are seven Obamacare provisions that could disappear on, or shortly after, Jan. 20 through a reconciliation act.
1. Advanced Premium Tax Credit
One of the most important provisions that could be eliminated through reconciliation is the Advanced Premium Tax Credit, or APTC. The APTC is the subsidy provided to consumers earning less than 400% of the federal poverty level which helps lower their monthly premium costs.
According to the Department for Health and Human Services, 72% of consumers can buy a health insurance plan for $75 or less a month, and 77% can find a marketplace plan for under $100 a month, on account of the APTC. By mid-2016, 84% of the 10.4 million paying customers enrolled in an Obamacare plan was receiving the APTC. In other words, removing the APTC would expose around 8.8 million consumers to the full cost of healthcare premiums, which many would probably be unable to afford.
2. Cost-sharing reductions
Another big subsidy that would disappear is cost-sharing reductions (CSRs). CSRs help make receiving medical care more affordable by lowering copays, deductibles, and coinsurance. CSRs are available to consumers earning less than or equal to 250% of the federal poverty level, but this isn't the only qualification. To currently qualify for CSRs, you also must purchase a silver-tier plan. Even though bronze plans have lower monthly premiums, low-income individuals and families that purchase a bronze plan aren't eligible to receive CSRs. As of mid-2016, 56% of the 10.4 million marketplace enrollees qualified for CSRs.
Presumably, if cost sharing reductions are eliminated through reconciliation, it would make it very difficult for lower-income folks and their families to pay their portion of the medical care they've received.
3. Shared Responsibility Payment
There is, however, one Obamacare provision that a number of Americans could be cheering to see eliminated: the Shared Responsibility Payment (SRP). The SRP is the penalty you're required to pay when you forgo purchasing health insurance as required by the individual mandate. In 2014, the average SRP was $150 per individual, according to H&R Block. In 2016, it's the greater of $695 or 2.5% of your modified adjusted gross income. The Kaiser Family Foundation estimates the average noninsured household will owe $969 in 2016 come tax time because of the SRP.
Eliminating the SRP is great news for healthier individuals who've shied away from enrolling in Obamacare. But, at the same time, it's terrible news for insurers that are reliant on young, healthier adults to counteract the higher costs of insuring sicker individuals. Without the SRP to coerce young people to enroll, insurer losses tied to ACA plans could grow.
4. Medicaid expansion
Perhaps the biggest disappointment should reconciliation come to fruition is that the Medicaid expansion would be no more.
Medicaid expansion offered all 50 states the opportunity to take federal funds and extend full medical care coverage to individuals and families making 138% or less of the federal poverty level (up from 100%). The catch was that beginning in 2017, and extending to 2020, some of the added costs to ensure these millions of newly eligible Medicaid patients would be transferred to the states. By 2020, 10% of the annual costs of Medicaid expansion would be the responsibility of the states. In total, 31 states chose to participate. If Medicaid expansion is rolled back, millions of low-income individuals and families could lose their coverage.
5. Medical-device excise tax
Though it's currently suspended for two years, the medical-device excise tax would disappear as well, and device companies couldn't be happier to see it go.
The medical-device excise tax is a 2.3% tax levied on the sale of most medical devices. While not designed to be a huge revenue generator for Obamacare over the long run, it was vilified as a potential job killer among medical-device companies, some of which threatened to take jobs and innovation overseas. Removing the medical-device excise tax for good could lift a concern off the shoulders of medical-device companies.
6. Cadillac tax
The Cadillac tax on high-cost employer plans would also be shown the door. The Cadillac tax hasn't seen the light of day, and its implementation has been pushed back till 2020. However, if it Obamacare wasn't repealed, individual employer plans exceeding $10,200 in premiums per year, and those topping $27,500 for families, could be hit with a 40% excise tax.
High-deductible health plans (HDHPs) are a popular choice for employers for the time being because it pushes some of the costs of medical care to the employee. If the Cadillac Tax were eliminated, there would be little to stop employers from promoting HDHPs even more.
7. Employer mandate
Finally, the employer mandate would be no more. Just like the individual mandate, which currently requires consumers to purchase health insurance or face the dreaded SRP, the employer mandate requires businesses with 50 or more full-time-equivalent employees to offer health coverage options to their employees and potentially subsidy assistance if their premium costs eat up too much of their income. For each employee that's non-compliant, the business could face a $2,000 to $3,000 fee.
Removing the employer mandate means employers would once again have the ability to pick and choose whom they'll insure. Presumably, it would also reduce the healthcare costs many large businesses face.
One last thing to keep in mind is that reconciliation probably wouldn't mean the instantaneous elimination of these provisions. Republicans appear to still be hashing out a replacement plan for Obamacare, meaning any repeal or reconciliation would likely be drawn out over a two-year period. In other words, your insurance coverage is unlikely to disappear overnight.
Nonetheless, you should be fully aware that big changes are heading down the pipeline, and you'd be smart to prepare for them.