It's finally here. The long-awaited Republican replacement plan for the Affordable Care Act (ACA), which is best known as Obamacare, was released by House Republicans on Monday. You can read the full text of the 123-page bill courtesy of CNN.
President Trump made repealing and replacing Obamacare a keynote of his campaign, so his victory in November, along with Republican lawmakers retaining control of both houses of Congress, began the countdown toward Obamacare's imminent demise.
In many respects, Obamacare did exactly what it was intended to do. It wound up allowing more than 20 million Americans who likely couldn't afford health coverage, or who were shut out of the system due to pre-existing conditions, the opportunity to be covered. Unfortunately, it also tied the hands of insurance companies, which found the ACA to be an unsustainable model.
With further ado, let's dive into the 23 important things you need to know about the Republican Obamacare replacement bill.
1. It immediately repeals the individual mandate
The Republican replacement plan phases in a number of changes, but it immediately eliminates the individual mandate. The individual mandate is the actionable component of the ACA that requires all adults to purchase health insurance.
2. The Shared Responsibility Payment will go away
The replacement plan would also do away with the Shared Responsibility Payment (SRP) associated with the individual mandate. The SRP is the penalty you pay come tax time for not purchasing health insurance. In 2016, it was the greater of $695 or 2.5% of your modified adjusted gross income.
3. The employer mandate would be no more
In addition to eliminating the individual mandate, the employer mandate would be axed. The employer mandate required businesses with 50 or more full-time equivalent employees (FTE) to offer health coverage options to those employees and potentially subsidize those FTEs who spent more than 9.7% of their income on premiums.
4. The Advanced Premium Tax Credit will be repealed
The subsidies associated with Obamacare wouldn't be repealed completely until 2020. However, it would mean that the Advanced Premium Tax Credit (APTC) would go away. The APTC is the income-based subsidy individuals and consumers receive that helps lower their monthly premium costs. Individuals and families earning between 100% and 400% of the federal poverty level are currently eligible.
5. Cost-sharing reductions, too
In addition to the APTC being repealed, cost-sharing reductions (CSRs) would also disappear by 2020. Cost-sharing reductions are apportioned out to individuals and families earning between 100% and 250% of the federal poverty level who also purchase a silver-tier plan. CSRs are what help lower the copays, deductibles, and coinsurance tied to a doctor visit.
6. Medicaid expansion ends by 2020
As expected, the Republican replacement plan would no longer allow states to expand their Medicaid programs by 2020. Under the ACA, states were allowed to choose whether or not they would take federal funds to expand the number of people and families that would be covered by Medicaid, ultimately lifting the federal poverty threshold to 138% from 100%. In total, 31 states chose to expand their Medicaid programs.
7. Medicaid funding doled out on per-capita basis
Another massive departure from the ACA is that Medicaid funding will be doled out on a per-capita basis. Republican lawmakers are clearly trying to reduce the amount of federal funding being supplied to the states, and this would be a major step in reducing the federal government's responsibility in covering millions of Americans.
8. Older adults could be charged more
One of the bigger concessions to insurance companies in the Republican Obamacare replacement plan is that it would allow older adults to be charged up to 67% more than they're being charged now relative to younger adults. The ACA currently caps what older adults can be charged compared to younger adults at three-to-one. If this bill were to pass, this ratio would increase to five-to-one. Since older adults are typically costlier for insurers, Republican lawmakers believe this will make their plan more sustainable over the long run.
9. Tax credits will be based on age
Instead of subsidies that are based entirely on income, individuals and families will receive annual tax credits based on their ages:
- $2,000 for people in their 20s.
- $2,500 for people in their 30s.
- $3,000 for people in their 40s.
- $3,500 for people in their 50s.
- $4,000 for people in their 60s.
10. There's a high limit on tax credit phase-outs
However, there is an income component to the aforementioned tax credits. Full credits are available to individuals and households earning up to $75,000 and $150,000, respectively. Tax credit phase-outs begin at incomes above this point until the exemption levels are hit, which is $215,000 for individuals and $290,000 for households. This would mean that approximately 98% of all individuals and households would qualify for tax credits under the Republican plan.
11. Health savings account contribution limits will nearly double
A critical cog for the Republican plan involves lifting the importance of health savings accounts, or HSAs. In 2017, the limit on contributions to an HSA is $3,400 for individuals and $6,750 for a family. By 2018, these contribution limits would jump to $6,550 for individuals and $13,100 for families. HSAs are tax-advantaged accounts that can be used to help pay for eligible medical care costs on a tax-free and penalty-free basis.
12. Insurers can charge a 30% premium to previously uninsured members
Though the individual mandate would be no more, a version of its penalty would continue to live on. Insurers would be authorized to increase the premiums charged to a consumer who didn't have insurance in the previous year by 30% until they've had health insurance for one full year, upon which the surcharge would be removed. This premium surcharge is designed to encourage ongoing coverage.
13. The medical excise device tax would be axed
Even though it's already suspended, the medical device excise tax, which implemented a 2.3% tax on certain medical devices, would be eliminated for good. Medical device makers had warned that this tax would cause them to move their innovation to more tax-friendly foreign markets when it was first introduced, though few device developers actually followed through with that threat.
14. The NIIT will be repealed
Another casualty of the Republican's Obamacare replacement plan is that the net investment income tax (NIIT) would be repealed. The NIIT is a 3.8% tax on investment income for individuals and joint filers earning in excess of $200,000 and $250,000, respectively, in modified adjusted gross income. In short, investors will be able to keep more of their capital gains.
15. The Medicare surtax will be gone
Another tax that will disappear to the delight of the wealthy is the Medicare surtax of 0.9%. Most Americans currently pay 1.45% in payroll tax that heads to Medicare, with your employer covering the other 1.45%. Individuals making more than $200,000 are required to cover an additional 0.9% (2.35% total), with no added burden to the employer. Under the Republican plan, this surtax will be axed.
16. The prescription drug tax will be removed
One of the under-the-radar taxes associated with the ACA involves an excise tax on brand-name prescription medicines. This tax was expected to generate $27 billion for the program over a 10-year period. With the Republican replacement plan the prescription drug excise tax will go away, potentially making brand-name drugs just a tad less expensive.
17. The health insurance tax will be repealed
Another somewhat unknown ACA tax that's currently suspended is the health insurance tax on insurers. This tax was suspended by the federal government last year in the hopes of encouraging insurers to keep their premium prices low in 2017. Needless to say, its suspension didn't do all that much for insurers. Under the Republican plan, the health insurance tax will end.
18. The 10 essential minimum benefits clause stays
Believe it or not, the minimum essential benefits clause remains in place in the Republican replacement plan. Mind you, there are some language and coverage changes between the ACA and the Republican replacement bill, but states will not, despite popular belief, be able to pick and choose the minimum essential benefits for health plans.
19. No maximum lifetime benefits
One major concern prior to the release of the Republican Obamacare replacement plan is that it would allow insurers to reinstitute lifetime benefit caps on minimum essential benefits. The Republican plan provided a pleasant surprise by maintaining that insurers cannot place lifetime benefit limits on minimum essential benefit spending.
20. Establishes the Patient and State Stability Fund
The Republican bill would also devote $100 billion between 2018 and 2026 to create the Patient and State Stability Fund. This money would be given to all 50 states ($15 billion in 2018 and 2019, $10 billion in each year thereafter) to create risk pools to subsidize the sickest and costliest patients, as well as to stabilize premiums in the individual markets.
21. Pre-existing conditions mandate kept
Another semi-surprise is that the Republican bill preserves two of the most popular components of the ACA. These were also components that President Trump himself had suggested be kept after a meeting with now-former President Barack Obama in November. First, insurers will be barred from turning away people with pre-existing conditions, which should be a relief for millions of Americans.
22. Dependent coverage up to age 26 stays
The second component of the surprise is that children under the age of 26 will be allowed to stay on their parents' health plan. This popular ACA component should be a big sigh of relief for college students and those who've just entered the workforce who may not have the income to cover a monthly premium payment.
23. The Cadillac tax comes back in 2025
Finally, and maybe the biggest surprise of them all, the Cadillac tax, which imposes a 40% excise tax on employers that offer high-deductible health plans, won't be killed. The implementation of the Cadillac tax had already been pushed out to 2020, but under the Republican plan it'll be moved out until at least 2025.
Clearly, this is a lot to digest. It's also possible, given the early objections from some Republicans in Washington, that this bill could face some changes before it heads to vote.
Perhaps the biggest question mark of all is whether adjusting from an income-based subsidy to an age-based credit will be enough to coerce lower- and middle-income individuals to enroll. It can rightly be argued that a $2,000 credit for a low-income 20-something may not be enough to make healthcare affordable, even with the establishment of a Patient and State Stability Fund.
Let the debate begin.
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