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Three Ways GOP Health Care Plan Could Succeed Where PPACA Failed
A revised version of the American Health Care Act (AHCA)––the GOP’s plan to repeal and replace the Obama administration’s Patient Protection and Affordable Care Act (PPACA)––is now being considered in the Senate, where further changes are expected. An article posted on the Motley Fool website argues that the GOP’s bill could be a vast improvement over the PPACA if it wins approval in the upper chamber.
According to health care analyst Sean Williams, the PPACA has been “polarizing” from the beginning. On one hand, it met one of its primary goals of lowering the uninsured rate in America. On the other hand, consumers never quite adapted to the idea of being “forced” to buy health insurance, Williams writes, and millions were displeased when they were dropped from their pre-PPACA plans when their insurance companies decided not to update those plans to be PPACA-compliant. At the same time, insurers disliked the constraints placed on them by the PPACA, such as having to accept all consumers regardless of their pre-existing conditions.
According to Williams, the AHCA as it currently stands would:
- Eliminate the PPACA’s individual and employer mandates, along with the controversial shared responsibility payment (SRP).
- Allow insurers to attach a 30% surcharge onto premiums for consumers who did not have continuous coverage during the previous year.
- Replace income-based subsidies with age-based tax credits.
- Terminate Medicaid expansion at the beginning of 2020, and disperse Medicaid funds to states on a per-capita basis.
- Establish a $108 billion risk pool to help states deal with sicker patients and those with pre-existing conditions.
- Keep the PPACA’s “minimum essential health benefits” clause while allowing states to apply for a waiver of these benefits.
- Allow children to remain on their parents’ plans until the age of 26, as in the PPACA.
- Double annual contributions to the health savings account.
- Eliminate the net investment income tax and Medicare surtax.
Williams lists three ways that the AHCA could be a major improvement over the PPACA.
1. The AHCA could be more successful in getting young adults to enroll.
The AHCA should be more attractive than the PPACA to young adults for two reasons, according to Williams. First, dropping income-based credits for tax-based credits should give the average 20- and 30-year-old a larger annual subsidy, he says. That should be enticing for younger adults looking to obtain coverage, especially with no annual SRP.
The second factor is that insurers may have more flexibility with how they package their plans. In other words, there could be a greater emphasis on shifting out-of-pocket deductibles to consumers, which may result in lower premiums. For consumers who don’t see a doctor very often (i.e., young adults), that means lower monthly premium costs.
2. The AHCA could be more successful in lowering premiums over the long-term.
Williams also offers two reasons why the AHCA may succeed in keeping premium inflation under control when the PPACA exchanges failed to do so. First, as mentioned above, the AHCA should be able to attract young adults better than the PPACA did. This would provide a better offset for sicker patients, meaning less pressure on insurers to increase premiums.
Second, state waivers may reduce the minimum essential requirements for health plans on a state-by-state basis. Fewer essential benefits being required on each AHCA plan would be expected to lower the overall base premium price for a plan, according to Williams.
3. The AHCA could provide enough insurer flexibility to be sustainable over the long run.
If approved by the Senate, the AHCA appears set to provide insurers with much more flexibility compared with the PPACA––and while this flexibility has been a major source of consternation among opponents of the bill in both parties, it could also make the AHCA more sustainable for the insurance industry over the long run, Williams say.
For example, if states implement the waiver that allows them to set up their own “essential health benefits,” insurers would potentially be free to devise plans that have fewer essential benefits and possibly narrower networks. These are cost-lowering mechanisms for insurers because companies can avoid costlier health care providers or more-cumbersome plans. Insurers may have more leeway to pass along costs via deductibles.
Williams concludes by noting that the AHCA “is far from perfect, but it has the ability in some respects to be better than Obamacare.”
Source: The Motley Fool; May 14, 2017.