In January of this year, I posted a presentation called, “Health Care Reform – Now What?” The presentation highlighted the path that we (NAHU/CAHU) felt the Republicans, who now control both the house and the senate, would take using a reconciliation bill which only requires a simple majority to pass.
The same process used to put Obamacare (the Patient Protection and Affordable Care Act) in place, is now being used to repeal it. In this article, I will just highlight the most important pieces of this legislation, the time frame expected for passage and the issues we still need to contend with in California.
The list below highlights the core changes proposed in this new reconciliation bill, appropriately named, the American Health Care Act (AHCA). The AHCA quickly passed through two House committees last week on its way to the House Budget Committee. We have a long way to go, and although the Republicans want to see this passed by Easter, we think it will most likely take another month or two. Although the AHCA only delayed the Cadillac Excise Tax (we want to see it repealed completely), the proposed budget would still repeal $600 billion in other taxes. NAHU’s main concern is not to repeal and replace (though it is certainly necessary), but to make the important changes now that can stabilize the health care market. That said, we are pleased that the employer exclusion has been preserved, however, it is unfortunate that the Excise Tax was not one of the proposed repeals and instead, the five-year delay of the Excise Tax will still cost the federal government an estimated $45 billion.
House GOP Repeal and Replace Summary Brief Detailed Chart
- and creates a new tax credit adjusted by age and income
- Protects the employer exclusion for premiums on employer-sponsored group coverage
- Eliminates the individual and employer mandate penalties
- Creates a continuous health insurance coverage incentive in 2019 allowing plans to increase premiums by 30% for individuals with a 63-day or more lapse in coverage
- Repeals insurance actuarial value standards
- Delays the Cadillac Tax until 2025
- Repeals the Health Insurance Tax (HIT) Click here
- Permits tax credits for “catastrophic” products
- Modifies age banding requirements from 3:1 to 5:1 federal standard with state flexibility to set different ratios
What Does This All Mean?
How do all these changes improve our economy and stabilize the health care market place? First, let me point to the obvious, stopping the bleeding and saving $600 billion dollars, is huge to consumers. The Affordable Care Act was only affordable to our government. Consumers, corporations, hospitals and doctors were the ones paying the one trillion dollar health care bill that did not lower premiums (only increased premiums on an accelerated basis), required massive amounts of red tape, mandates (many of which were not wanted or needed), new medical coding and the list was massive. However, the things we did want and need, guaranteed issue (coverage regardless of pre-existing coverage), transparency, medical records technology and others, we can hopefully continue with in a way that makes the government much better stewards of our taxpayer monies.
These tax savings alone will greatly benefit consumers who are the ones paying for a failing health care reform system. Removing the huge tax burdens placed on the system and restoring the tax savings accounts (HSA’s and FSA’s) that allowed us tax-preferred health care spending will go a long way in helping individuals pay for their medical premiums and health care expenses.
There are two other changes that will help individuals and families to purchase health insurance in the individual market place. First, allowing all ages to purchase catastrophic plans and receive tax credits will do a lot to reduce premiums across the boards. Secondly, the age banding change from 3:1 to 5:1 will provide a larger spread in premiums from the youngest to the oldest making it more affordable on the whole. Although this will not necessarily help those at the higher end of the age band below Medicare, the change to the new proposed tax credit and subsidy beginning in 2020 based on age and income should be a better system for basing tax credit and could offset any negative affect for those at the high end of the age band.
Employers would still be allowed to deduct the health care premiums they pay for their employees (Employer Exclusion), and the repeal of the health insurance tax will not only help employers, but it will do a lot to stabilize the market place. Employers are the reason that most Americans have health insurance. Many of the “uninsured” that receive insurance under Obamacare were those that already qualified for coverage under state and federal programs but never enrolled (Medicare & Medicaid). If the employer incentive that provides insurance to employees were removed, it would be devastating.
Keeping the guaranteed issue (coverage for all including those with pre-existing conditions), which most all members of the House and Senate agree upon, but finding a better way to finance will go a long way to help the citizens in our country. Tightening up the coverage rules is a good way to reduce the risk of adverse selection and looking to high-risk pools also known as reassurance, would be a huge step in market stabilization.
In addition to better financing solutions, other provisions (not part of this bill) that would be helpful to consumers and market stabilization, are the suggested changes to Health Savings Accounts (HSA’s). By increasing the amount consumers could contribute to an HSA, an amount that would cover their out of pocket expenses (about double what we can contribute today), makes a lot of sense. One provision took it a step further to include the ability to use the account to pay for their insurance premiums. What many consumers might not understand, is that our representatives can create good laws that create better transparency, efficiency, improved medical outcomes and increased competition within the private sector without handling the money.
The problem lies in giving our government the purse strings. We did that for Medicare and Medicaid, and they spent all that money without ever accounting for a penny of it. All the money we paid into Medicare and Medicaid services was spent many, many years ago. Giving the government a blank check (endless money stream) creates problems. Additionally, this whole notion that selling across state lines can somehow help stabilization makes no sense. Every state has its own population and health care cost culture and would only create more problems; we need to stay focused solutions not things that might just sound good.
NAHU, in response to the new legislation, issued a press release expressing its appreciation that the bill does not include a tax on employer-sponsored health insurance and would retain many of the ACA’s consumer protections, such as guaranteed issue coverage, coverage of pre-existing conditions and keeping children on their parents’ policies until age 26. They also noted their support of several provisions of the bill that could help bring down health insurance costs and increase options for consumers, such as changes to HSAs. Incentives for continuous coverage, allowing tax credits to be used for catastrophic coverage, expanding age rating bands and eliminating the Health Insurance Tax.
California is Another Story
CAHU stated in an update last Wednesday the 8th that California has its own statutory framework – distinct and apart from the federal law. California law will stand, even if the federal laws are changed, replaced, or repealed unless the federal statute also dictates a dismantling of California law. CAHU also voted unanimously on taking an OPPOSED position on SB 562 (Lara and Atkins) Single Payer Health Care Coverage. A single payer would create a government-run, health insurance plan where they control the funds, just like our disastrous Medicare and Medicaid system. This is NOT a good idea, in fact, it’s a really, REALLY BAD idea and would be a disaster for California consumers.
It is important to note that the mainstream media can be very selective on what it reports and use words that suggest quite a different meaning than the actual reality. To get the facts on any subject, one needs to hear and understand both sides of the issue. Fox News Channel 57 provides many of the day to day facts of what is actually going on in our current administration. Like mainstream media, they can also be biased in what they report. However, I think to get a more complete understanding of how things are going on health care reform, it would be helpful to get this view that supports our President and the current administration.
I hope you found this information helpful and encouraging. And while former President Obama got the ball rolling with guaranteed issue coverage for everyone and set the stage for change, making the necessary changes to help consumers receive better and more affordable care while creating a sustainable financing infrastructure is what is needed today, and we look to be on track.