ACA’s Replacement…A Sneak Peek

Until recently (late February, 2017), talk of “repealing/reforming/replacing” the Affordable Care Act (ACA), aka Obamacare, has been largely speculative.  We now have our first look at draft legislation that aims to replace major aspects of the ACA.  It is important to note that what is being considered is not a wholesale repeal of the ACA, but rather a line item repeal/replace.  While I have been itching to publish my “2 cents” about where I think health care reform is headed, I forced myself to wait for actual legislation to do so (despite presenting my thoughts at presentations/lectures over the last several weeks). From what I’ve read, there are replacement aspects which link to each of the articulated repeals. So here are the highlights of what the draft legislation (emphasis on draft) includes:

  • The “REPEALs” – elimination of key aspects of the ACA including:
    1. The employer mandate (including fees, taxes, and associated reporting)
    2. The individual mandate (and the associated subsidies)
    3. Taxes/Fees (e.g., health insurance sector tax, Cadillac tax, comparative effectiveness research fee, tanning bed tax, medical device tax)
    4. Medicaid expansion and associated funding (largely impacting the states that expanded Medicaid)
    5. Medicare benefit enhancements (e.g. eliminating the Part D/Prescription Drug benefit’s “donut hole”, reducing benefit over payments)
    6. Mandatory/Minimum essential benefits

  • The “REPLACEMENTs” – provisions replacing those that are repealed, include:
    • The primary revenue generating sources included in the draft legislation, which would presumably fund the “high risk” pools, and offset new tax credits are:
      • A cap on the tax exemption for employer provided coverage attached to the 90th percentile of current premium costs.  Covered employees would be taxed on premium amounts in excess of this threshold.
      •  Individuals that allow coverage to lapse and subsequently re-enroll would be subject to a 30% , one-year premium tax.
    • Refundable premium tax credits to encourage the purchase of health insurance by individuals – $2,000/year for those under age 30; $2,500/year for those 30-40; $3,000 for those 40-50; $3,500 for those 50-60; and $4,000/year for those 60+ years old.
    • $100 billion to fund so called – “state innovation grants” – to address high risk insurance applicants.
    • Converting Medicaid funding to a capped, federal contribution model.
    • By modifying community rating, the current form of pre-existing condition ban, minimum/essential benefits, and standardized/metallic plans, insurance companies who have left markets would (hopefully) be encouraged to re-enter, and would be able to offer more flexible and affordable coverage options to applicants.
    • Expanding Health Savings Accounts (HSAs) to allow for higher contribution limits, and “cleaning up” some of the onerous restrictions.
Several of the insurance reforms included in the ACA would likely remain, including:

  • Coverage for pre-existing conditions
  • Guaranteed issuance of coverage (presumably under certain conditions)
  • Coverage available to dependent children on parents’ coverage to age 26
  • Nondiscrimination of coverage (and premiums) on the basis of race, gender, disability
  • Caps on in-PPO network/out of pocket plan limitations (i.e., deductible/copay/coinsurance)
  • Continued ban on lifetime and (certain) annual benefit limitations

Importantly, some of the changes would take effect shortly (if not immediately) after potential passage of the law; while others would take effect in 2020.  The ACA replacement legislation is expected to be formally introduced to Congress in March, 2017.

As I write this blog post (February 27, 2017) the President is hosting a “listening session” with several health insurance leaders including the heads of Cigna, Aetna, United Healthcare, Humana, several Blue Cross Blue Shield plans and others).