When Donald Trump was elected president, he vowed to tackle the repeal and replacement of the Affordable Care Act (ACA), known better as Obamacare, with haste. However, the president has found that repealing and/or reforming healthcare in America is a lot tougher than it appears.
Trump and his GOP colleagues put forth the American Health Care Act (AHCA) in early March as an alternative to Obamacare. If passed, it would have put an end to Obamacare's insurance mandates, subsidies, and penalties. Also, consumers would have received tax credits based on their age as opposed to income. The bill, which some pundits dubbed "Trumpcare," never even made it to a vote because it failed to garner enough Republican support in the House, despite Republicans controlling a majority of seats.
In case you missed it, Republicans just passed new Obamacare rules
Yet, in spite of the AHCA's failure, Trump and Republicans have quietly forged on with the idea of repealing and replacing the ACA, or at least making Obamacare more to their liking. Last week, a number of major changes to Obamacare were passed, and there's a decent possibility you may not have even heard about them.
Here are some of the key provisions that were passed which could make life a bit tougher and potentially costlier for millions of Obamacare enrollees in 2018.
1. A shorter enrollment period
The ACA enrollment period was six months in the 2014 calendar year, and three months this past year. Beginning next year, enrollment for Obamacare will run just 45 days, from Nov. 1, 2017 through Dec. 15, 2017 for the 2018 calendar year. This move caters to insurance companies by reducing procrastination and eliminating some of the late-January enrollees who only join because they're sick.
2. Fewer special enrollment exemptions
In addition to a shorter enrollment period, consumers are going to have to jump through more hoops and get through a more rigorous verification process if they want to enroll in the ACA outside of the normal 45-day enrollment period.
Right now consumers are able to enroll year-round using the special enrollment clause if they lose health insurance through their employer, or if they move. Many of these special enrollment rules will still apply, but the verification to qualify will be stepped up to protect insurance companies from consumers who are abusing the system when they become sick beyond the normal enrollment period.
3. Allows insurers to collect unpaid premiums
Continuing with the theme of providing insurers with more leeway, the new rules would require that enrollees pay any outstanding premiums owed before their new coverage in 2018 would begin. This would discourage healthier adults from skipping out on their premium payments toward the end of the year and then reenrolling at the beginning of the following year without paying any penalties. For context, the Obama administration had been granting a 90-day grace period of non-payment before a consumer is removed.
4. Insurers allowed to create narrower networks
One of the more intriguing changes is that federal oversight of doctor and insurer networks will be reduced beginning next year. Per the new rules, insurers will be allowed to include fewer essential community providers in their networks, which in plainer English simply means they can exclude pricier health providers and work with narrower and presumably cheaper networks. The Trump administration had required the inclusion of 30% of an area's health providers, but this will be dropped to 20% by the new rules.
States, and not the federal government, will also have the final say on whether or not an insurance policy has enough providers in its network.
5. Insurers can skimp a little more on their coverage
But the biggest change of all could be the newfound leeway that insurers will have with their tiered plans.
Obamacare has four metal tiers that consumers can choose from: bronze, silver, gold, and platinum. Bronze plans have the cheapest monthly premiums, but the highest out of pocket costs given that insurers only cover about 60% of eligible costs. As a consumer progresses up the metal-tier ladder, silver plans cover 70% of eligible costs, gold 80%, and platinum 90%. Platinum plans have the highest monthly premiums, but also the lowest out-of-pocket costs.
Under the Obama administration, insurers were allowed a two-percentage-point leeway in terms of what they had to cover. This meant a silver plan (by far the most popular plan) had to cover between 68% and 72% of eligible costs. Trump and his colleagues are reformulating this to allow for more leeway. Insurers can now cover between 66% and 72% of eligible costs with silver plans.
This is especially noteworthy because benchmark silver plans are what help determine the Advanced Premium Tax Credits that are given to consumers and families earning less than 400% of the federal poverty level. If insurers are allowed to pay a little bit less for silver plan coverage, it could ultimately reduce what's paid out in subsidies to reduce premium costs.
Long story short, these five changes are designed to make life easier for health-benefit providers, but could come with higher costs for the consumer in 2018. It also remains to be seen if these changes will be enough to encourage insurers to give Obamacare one more try in 2018, since some very big industry names have pulled back on their coverage in recent years.
This was surprisingly not addressed
Interestingly enough, though, one highly contested topic that wasn't addressed with the newly passed rules are cost-sharing reductions, or CSRs.
CSRs are given to consumer who purchase silver plans and have incomes ranging between 100% and 250% of the federal poverty level. Their purpose is to help cover the costs of copays, coinsurance, and deductibles associated with seeing a doctor.
In 2014, the Republican-led Congress sued Sylvia Burwell, who, at the time, was the Secretary of Health and Human Services (HHS). The suit alleged that the billions of dollars being apportioned to CSRs annually weren't approved by Congress. In May 2016, a federal district judge agreed and found in favor of the Republicans. However, the order was stayed given the (correct) expectation that the Obama administration would appeal the decision. The case continues to drag on, only now the GOP is essentially suing itself now that Republican Tom Price is the secretary of the HHS.
The Republicans have an interesting choice to make with CSRs. They could drop the appeal entirely and disallow their payout, which is expected to amount to $9 billion to $11 billion in 2018. That's a significant chunk of change that could be saved to reduce the federal deficit. But it would also result in around 7 million people losing CSR coverage, and thus likely being unable to afford doctor visits. It's also possible the threat of eliminating the CSRs could bring Democrats to the negotiating table.
The other option is Republicans could keep the CSRs in place, at least for the next year or two as they continue to work on a replacement plan. This would require leaving the appeal in place and essentially suing themselves.
It's very surprising that CSRs weren't addressed at all among the new rules, and it could imply that the GOP is still undecided as to what to do about this critical subsidy that currently covers around 7 million people.
I expect this to be the first of many changes coming Obamacare's way over the next couple of years.
The Motley Fool has a disclosure policy.