When Donald Trump was elected as the 45th president of the United States in November, and Republicans retained a majority in both houses of Congress, it was practically a forgone conclusion that the Affordable Care Act's (ACA) days were numbered.

The ACA, which is best known as Obamacare since it's the hallmark legislation of the Barack Obama presidency, has been polarizing since Day 1. It's managed to lower the uninsured rate to historically low levels, but it's also not done as much to control premium inflation or protect consumers from losing their preferred health plans.

President Trump addressing Congress.

Image source: President Donald J. Trump's official Facebook page. Photo by Shealea Craighead.

President Trump made repealing and replacing Obamacare a priority of his campaign, and his party wasted little time in offering a replacement plan, the American Health Care Act (AHCA), in March. Interestingly enough, though, it didn't get enough support from its own party in the House to be put to vote. After some slight modifications, the AHCA, which is also being referred to as Trumpcare, passed the House by a narrow four-vote margin earlier this month. The bill has since moved onto the Senate for debate.

Here's how Trumpcare would change the face of healthcare as we know it

Here are the basic tenets of what Trumpcare would do to healthcare in America based on the initial bill that failed to pass muster in March:

  • Obamacare's individual and employer mandates would be repealed, and the Shared Responsibility Payment associated with not buying health insurance would be eliminated.
  • Income-based subsidies would be replaced with age-based tax credits.
  • Medicaid expansion would be eliminated by 2020, with Medicaid funding being doled out on a per-capita basis to the states.
  • Older adults can be charged up to 67% more for premiums relative to young adults based on the current setup under Obamacare.
  • Insurers have the right to add a 30% premium surcharge to consumers who did not have continuous coverage in the previous year.
  • Practically doubles the amount that can be contributed to a health savings account annually.
  • Eliminates the net investment income tax and Medicare surtax.
  • Establishes a risk pool for higher-risk patients that have pre-existing conditions.
  • Keeps the ACA's provision allowing children to stay on their parents' health plan until age 26.
  • Keeps the ACA's pre-existing conditions clause and minimum essential health benefit clause in place.
An ACA plan stamped with the word "Repealed" and flanked by a judge's gavel.

Image source: Getty Images.

Here are the two major amendments that were added to the original AHCA that gave Trumpcare enough momentum to recently pass the House:

1. Upton Amendment: This Amendment further bolstered funding for the high-risk pool patients by an additional $8 billion to $108 billion between 2018 and 2026. This added funding was designed to sway House Republicans who felt concerned that those with pre-existing conditions would be harmed by the AHCA.

2. MacArthur Amendment: Perhaps the most controversial aspect of Trumpcare, the MacArthur Amendment gives states the ability to apply for a waiver of the essential minimum benefits clause. This would effectively allow individual states, if approved for the waiver, the ability to design state-specific minimum essential health benefits. Doing so would allow insurers to reinstitute some of the pre-ACA practices whereby they can charge higher premiums to sicker members. This amendment was put in place to appease Freedom Caucus members who felt the initial AHCA bill didn't go far enough in distancing itself from Obamacare.

This governor is considering applying for the waiver if the AHCA becomes law

The MacArthur Amendment is what really has consumers, especially those with pre-existing conditions, worried.

On one hand, reducing the number of minimum essential benefits per plan could very well reduce premium costs for some Americans. Fewer minimum benefits means more basic plans, and thus lower-cost plans for many Americans. It would also, arguably, give insurers more freedom in pricing their plans, which could make Trumpcare more sustainable over the long term than Obamacare has been.

Two doctors discussing the fate of Obamacare and Trumpcare.

Image source: Getty Images.

But at the same time, it also lessens the responsibility of insurers with regard to covering lifetime costs on benefits that may no longer be considered "essential." Those with pre-existing conditions can't be turned down for coverage, but there are no guarantees that they'll be able to afford coverage.

Would any states actually consider applying for this waiver, you wonder? According to Argus Leader, a part of USA Today's publication network, South Dakota Gov. Dennis Daugaard (R) said that he would give serious consideration to applying for the waiver and opting out of the minimum essential health benefits requirement, assuming the bill passes in its current state. Said Daugaard: "I think most citizens are probably not conscious of the cost [of healthcare] so a responsible government has to weigh both sides. We want to give as much benefit, particularly in health, as you can afford, but you have to be able to afford it."

Rural states like South Dakota tend to not have too many areas of dense population. Thus, hospitals and medical care facilities within these states often lack specialized equipment that may be needed to treat higher-risk patients. This, along with minimal state competition among insurers in more sparsely populated states, is why rural states tend to have higher health premiums relative to the national average.

Mount Rushmore, South Dakota.

Mount Rushmore, South Dakota. Image source: Pixabay.

Applying for a waiver and reducing the number of essential benefits could help bring initial premium costs down. However, when members do need care, the out-of-pocket costs may be a lot higher.

Will other governors follow Daugaard's lead and support the idea of applying for a waiver? With 19 states having opted not to expand their Medicaid program with federal dollars under Obamacare, I'd suggest you can almost count on it.

However, we also have to take into account that it's extremely likely the Trumpcare bill we see now will be modified in the Senate in order to achieve the necessary 51 votes needed to pass by reconciliation. It means that weighing the impact of a waiver might be a bit premature given that there's no guarantee the AHCA has enough votes in the Senate to pass, or that the MacArthur Amendment remains in the final bill, assuming Senate approval.

For consumers, insurers, and healthcare investors alike, this remains a wait-and-see scenario.

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