Now-former President Barack Obama's hallmark legislation, the Affordable Care Act (ACA), appears destined for the scrap heap if the Republican-led Congress and President Trump get their way.
The health law of the land, which is more commonly referred to as Obamacare, has been a mixed bag since being signed into law in March 2010. While it did accomplish one of its primary goals -- decreasing the uninsured rate -- Obamacare failed to become a sustainable means for the nation's largest insurers to offer coverage. Recently, three of the five largest national insurers, UnitedHealth Group (NYSE:UNH), Aetna, and Humana, all slashed their ACA-based coverage for 2017. In particular, UnitedHealth, the largest health insurer in the U.S., cut its ACA coverage from 34 states to just three!
17 provisions that will disappear if Obamacare is eliminated
The big question going forward is what the winding down of Obamacare might look like. If Democrats in the Senate are unwilling to work with Republicans, the Republican majority will likely turn to a reconciliation act. Reconciliation allows lawmakers to remove the aspects of Obamacare that directly impact the federal budget.
The other option would be a full repeal of the law, which requires 60 Senate votes. What many Americans may not realize is that a full repeal would remove a lot of provisions, some of which they may not even be aware of.
Here are 17 provisions that would disappear if Obamacare is eventually repealed.
1. Individual mandate
The individual mandate is the actionable component of Obamacare requiring individuals to purchase health insurance or face a penalty. Its purpose was to coerce all Americans to enroll so as to create a balanced risk pool for insurers. Without the individual mandate, no one would be required by law to purchase health insurance.
2. Shared Responsibility Payment
Building off the first point, repealing Obamacare also means removing the carrot that enticed healthier young adults to enroll: the Shared Responsibility Payment (SRP). The SRP was the penalty most consumers paid come tax time if they didn't have health insurance during the previous year. In 2016, it was the greater of $695 or 2.5% of an individuals' modified adjusted gross income. The Kaiser Family Foundation predicts that the average household SRP in 2016 will be $969.
3. Employer mandate
The employer mandate would also go away. The employer mandate required that employers with 50 or more full-time equivalent employees (FTE) offer health coverage options to those FTEs, as well as provide a subsidy should their premiums eat up more than more than 9.7% of their employees' income. If they didn't, the employer could be fined between $2,160 and $3,240 per FTE.
In other words, employers would no longer be obligated to offer health insurance to FTEs without Obamacare.
4. Advanced Premium Tax Credit
The most immediate loss to the individual market would be the absence of Advanced Premium Tax Credits (APTCs). The APTC is the subsidy provided by the federal government to lower- and middle-income individuals and families making between 100% and 400% of the federal poverty level. Its purpose is to make monthly premiums more affordable. Heading into the 2017 enrollment season, an estimated 77% of marketplace enrollees were expected to find plans that would cost $100 or less after assistance.
5. Cost-sharing reductions
However, it shouldn't be overlooked that cost-sharing reductions (CSRs) would go away, too. CSRs are given to individuals and families that purchase silver ACA plans and are earning between 100% and 250% of the federal poverty level. The purpose of CSRs is to lower or eliminate the costs associated with going to the doctor, such as copays, coinsurance, and deductibles. No CSRs would mean the onus of copays, deductibles, and coinsurance would fall back onto the patient.
6. Medicaid expansion
One of the biggest enrollment agents of all, Medicaid expansion, would also disappear. Taking federal funds and expanding Medicaid to cover individuals and families earning up to 138% of the federal poverty level (from the usual 100%) was a decision left up to all 50 states. When all was said and done, 31 states chose to expand their Medicaid programs. If the plug is pulled on Obamacare, then the millions of low-income folks who've received free medical care through Medicaid will see their coverage disappear.
7. Dependent coverage up to age 26
Cutting the cord on Obamacare also means no longer allowing children under the age of 26 to stay on their parents' health insurance plan. This clause has been particularly useful for college students and recent graduates who may not have jobs or the funds to afford health coverage.
8. Pre-existing conditions protection
One of the biggest changes Obamacare brought to the treatment landscape for health insurers is that it required them to accept all enrollees, regardless of whether or not they had pre-existing conditions. Prior to Obamacare, insurers could turn away people with potentially costly diseases, such as cancer or heart disease. Assuming Obamacare is repealed, insurers will once again have the luxury of picking and choosing who they insure.
9. Automatic state-level enrollment
If you were enrolled in an ACA plan in the previous year, and that same plan has carried over to the new year (perhaps with some minor changes to its premium and network coverage), the state you live in (or HealthCare.gov) will automatically reenroll you in that plan by Dec. 15 if you did nothing in terms of choosing another plan. If Obamacare is repealed, there will be no more state-level automatic reenrollment in health plans, and no marketplace exchange for that matter.
10. Essential minimum benefits
When Obamacare was signed into law, insurers had to make some pretty hefty changes to their health coverage. In order to list their plans on an ACA exchange, insurers had to cover 10 essential minimum benefits. If Obamacare is repealed, insurers will presumably be free to tinker with what's considered an "essential minimum benefit" once again. Coincidentally, fewer essential minimum benefits per plan may lower monthly premiums.
11. Lifetime limits
On the other hand, Obamacare also prevented insurers from setting lifetime dollar limits on essential health benefits, which was great news for consumers with chronic or serious diseases. Keep in mind that grandfathered plans could still have lifetime limits under Obamacare. If Republicans bid adieu to the ACA, lifetime limits on essential benefits could return, protecting insurers from potentially large losses, but exposing individuals with chronic or serious illnesses to the possibility of high out-of-pocket costs.
12. Premium regulations that guide insurers
Another major change that's probably flying under the radar for most people is that insurers would be able to charge consumers more based on their pre-existing conditions (assuming they'd even insure them at all). Obamacare currently only allows insurance premiums to fluctuate in value based on 1) age, 2) location, 3) whether it's an individual or family plan, 4) the metal tier of choice, and 5) whether the person uses tobacco or not. If Obamacare is no more, insurers can charge consumers more based on a new array of factors.
13. Medical loss ratio requirements for insurers
Obamacare also had a provision built in that required insurance companies to spend at least 80% of their premiums received on patient care, or advances that would directly benefit their members. If insurers failed to reach this 80% mark, they'd be required to provide a refund to their members. If Republicans can repeal Obamacare, this special medical loss ratio figure will disappear, allowing insurers to possibly book more of their premiums as profit.
14. Medical device excise tax
On the plus side, medical device makers would have little qualms saying goodbye to the medical device excise tax. This tax was designed to raise money to cover a small percentage of the ACA's extensive costs with a 2.3% tax on the sale of many medical devices. Some device companies had threated to move their research labs overseas, or to cut their research and development budgets, as a response to the medical device excise tax. The medical device excise tax is currently suspended by Congress for two years, but device companies would just as soon see it gone forever.
15. Cadillac tax
The Cadillac tax hasn't even seen the light of day, and isn't schedule to until 2020, but an Obamacare repeal would mean it won't exist at all. The Cadillac tax imposes a 40% excise tax on employers that offer high-deductible health plans (HDHPs) where premiums exceed $10,200 per year for individuals and $27,500 for families. HDHPs are a way for employers to pass along more of the health-cost burden to employees, and without the threat of the Cadillac tax, it's possible employers may rely even more on HDHPs.
16. Net investment income Tax
Repealing Obamacare could also be a boon for well-to-do investors. The net investment income tax (NIIT) is a 3.8% tax on investment income for individuals with modified adjusted gross incomes in excess of $200,000, and joint filers over $250,000. Investment gains from the sale of stocks, bonds, mutual funds, and investment real estate, and even interests in partnerships and S corporations are included. Without the NIIT, investors would keep more of their profits, post-sale.
17. Medicare surtax
Last but not least, the Medicare surtax of 0.9% on wages earned in excess of $200,000 would go away. The current Medicare tax rate is 2.9%, which is often split down the middle between you (1.45%) and your employer (1.45%). If, however, you earn more than $200,000 in wages, this extra 0.9% surtax would kick in just for you (2.35%) and not your employer for every dollar over $200,000. Once again, without the Medicare surtax, the well-to-do would keep a little bit more of what they earn.
There are a lot of changes at stake if Obamacare is repealed. Keep in mind that a Republican replacement plan will likely address at least some of these changes. But, in the meantime, at least now you know the full ramifications of what might happen.