President-elect Donald Trump, during his press conference Wednesday morning, commented that whatever replaces the Affordable Care Act will “be better and cheaper.” That is, he implied that a replacement plan would not only cover more Americans but also have lower premiums and deductibles. However, not a single GOP replacement proposal to date, including Paul Ryan’s Better Way and Health and Human Services Secretary nominee Tom Price’s Empowering Patient’s First Act, seems to accomplish either. For most replacement plans, the outcome is the exact opposite.
On closer examination of replacement policy proposals, what Congressional Republicans don’t like about the Affordable Care Act seems to be very different from what the public doesn’t like about the law.
Republicans, on a policy level, most notably hate ACA insurance coverage standards, including the Individual Mandate and regulations that force insurance companies to, at minimum, cover certain guaranteed health benefits for each enrollee and a certain average percentage of health care costs, known as actuarial value. That is, insurance companies are required to both cover certain types of care and pay for a predetermined fraction of that care. Republicans are also quick to vocalize criticisms of Obamacare that deeply resonate with public voters: high premiums, high deductibles, and narrow provider networks.
However, the three most common threads in current Republican replacement plans ― sparser coverage standards, interstate insurance plans, and widening the age band along with switching to age-based tax credits ― all seem to worsen, rather than ameliorate, the complaints that the American public has with health insurance coverage and costs under Obamacare.
Sparser Coverage Standards
Nearly every Republican replacement plan removes coverage standards to allow insurers to offer even thinner catastrophic coverage-type plans, which would provide even fewer health benefits than baseline catastrophic plans on the current insurance exchanges. While the premiums on these plans would be lower, deductibles would be much higher, people would lose access to some doctors they had seen previously, and most routine medical expenses would come out of pocket. In other words, sparser coverage standards would not only make high-deductible health plans more common, but as a result of lower premium prices, also make narrow networks worse, neither of which is helpful or popular. Republicans argue that sparser coverage will encourage more young, healthy people to buy health insurance, but there is no economic evidence that low premiums alone, particularly when coupled with high-deductibles that make that coverage almost useless, will be enough to persuade more young people to purchase insurance.
Interstate Insurance Plans
Republicans also continue to advocate for the ability for insurance companies to sell plans across state lines, arguing that some states have more stringent benefits and regulatory requirements than others. This would, in theory, allow insurers to set up shop in states with fewer requirements and then compete with insurers in other states would reduce administrative costs and increase competition, thus pulling down prices. The problem with this policy is that there’s no reason for the insurance companies themselves to sell across state lines and even in states that have allowed interstate plans, no out-of-state insurers took the offer. Overcoming regulatory barriers doesn’t outweigh the additional financial and network barriers they would face in new state markets. Even if insurance companies were mandated by the federal government to sell interstate policies, the increased costs associated with meeting the benefit requirements of certain states and negotiating contracts with physicians and hospitals in different states would likely cancel out any possible downward effect of increased competition on prices. In particular, having negotiating power during contract talks with providers to keep costs low requires having some semblance of market share, which is difficult for an insurer that was previously only operating in, for example, Virginia to leverage in Pennsylvania. Additionally, keeping with the same example, that same reasoning would likely also make it harder for someone in Pennsylvania, who bought a Virginia plan, to find an in-network doctor at a cheaper cost locally.
Widening the Age Band and Shifting to Age-based Tax Credits
Most Republican healthcare replacement plans also propose “widening the age band,” which would change the amount that insurers are allowed to charge older enrollees from three-times the amount they charge younger enrollees under current policy to anywhere from four to six times that amount. This would make premiums cheaper for younger, healthier people and more expensive for older, sicker people. Additionally, most Republican plans switch the method in which federal support is provided to enrollees from means-tested, or income-based, tax credits to age-based tax credits. Means-tested tax credits provide more financial support to those who earn less. Age-based tax credits would provide more financial support to older Americans, although they would likely also be charged higher insurance premiums under an aforementioned widened age band. These moves risk pricing out both poorer and older Americans from the insurance market, leaving those who are most likely to get sick and need healthcare without coverage.
Unfortunately, the key takeaway from every GOP replacement plan thus far is that the cost of health insurance and care will only be lower or more accessible for those who don’t immediately need it.