'Repeal and Replace' the Affordable Care Act? What, Exactly, Is Being Proposed?

Opponents of the Affordable Care Act have said many times that the law needs to be "repealed and replaced." The natural follow-up is: "OK, replace it with what?"

Supporters of the ACA say that the opposition does not have an alternative plan. In fact, congressional opponents have offered alternatives, going all the way back to 2009. At least four pieces of legislation could be categorized as serious alternatives: Patient's Choice Act of 2009, Empowering Patients First Act of 2009 and 2013 and, finally, American Health Care Reform Act of 2013.

None of the bills was analyzed and scored by the Congressional Budget Office, however, so we do not have a long-term, non-partisan analysis of how much the proposals would cost, how much they would reduce or add to the deficit or how many uninsured Americans would be covered under them.

The bills offered various reforms, but to make a comparison to the ACA, we'll use the most recent proposal, House Resolution 3121, "The American Health Care Reform Act of 2013." It was drafted by the Republican Study Committee, sponsored by Rep. Phil Roe of Tennessee and co-sponsored by 107 (out of 240) House Republicans. The bill is divided into six sections:

Section one: 'Repeal of Obamacare'

H.R. 3121 would repeal the Affordable Care Act, using the language of a previous bill sponsored by Rep. Michelle Bachmann of Minnesota. All provisions of the ACA would be repealed, and existing law amended by the ACA would be restored to its original language.

That means some of the most popular reforms of the ACA, such as the expansion of Medicaid eligibility, requiring insurance companies to guarantee coverage, prohibiting insurance companies from dropping coverage based on health status and the ability of children under 26 to stay on their parents' insurance would be repealed or rolled back.

Section two: 'Increasing Access to Portable, Affordable Health Insurance'

The bill would attempt to make insurance coverage more affordable by using tax deductions as opposed tax credits and cost-sharing subsidies under the ACA.

H.R. 3121 would replace the current tax exemption for employer-sponsored insurance and the self-employed tax deduction with a standard deduction for health insurance. It would be based on the amount paid for a qualified private insurance plan and would be adjusted each year according to changes in the Consumer Price Index. The bill's supporters say these tax deductions could equal $7,500 for an individual and $20,000 for a family.

The bill would also increase the allowable contribution for Health Savings Accounts (HSAs) and would allow employers to offer a greater benefit to employees who successfully completed a wellness program.

Under this approach, the value of employer-provided health insurance would count as taxable income and all taxpayers would receive a standard tax deduction to make the coverage more affordable. It strives to put those receiving employer-provided health insurance on equal footing with those who purchase it in the individual market. However, the tax deductions and other tax incentives in the bill may not be the most effective way to make coverage more affordable.

Generally, tax deductions and credits better serve-higher income earners because they have higher tax liability and can take advantage of the full value of deductions and credits. And unlike the ACA's subsidies, the standard deduction can be received only in a lump sum as part of regular tax filing and cannot be claimed in advance. This makes the initial purchase of coverage more difficult for those with very low incomes. Finally, increasing contributions to HSAs is of less value to low income Americans, who lack sufficient available income to take advantage of these provisions.

In fact, the biggest losers under the bill probably would be Americans under 133 percent of the federal poverty level (in 2013: $15,282 for an individual and $31,322 for a family of four), who are now eligible for Medicaid in 25 states because of the ACA. That provision would be rolled back by H.R. 3121, leaving states without the federal funding to make this expansion feasible. There is real doubt, even when coupled with high-risk insurance pools and tax deductions, that private insurance will be affordable for these vulnerable Americans.

Section three: 'Improving Access to Insurance for Vulnerable Americans'

H.R. 3121 would deal with the problem of discrimination for pre-existing conditions in the individual market by appropriating $25 billion dollars over 10 years (or about $2.5 billion annually) to set up high-risk insurance pools in individual states. People with pre-existing conditions would buy health coverage through these high-risk pools, and the federal appropriation would subsidize part of the cost.

Premiums would be capped at 200 percent of the average premium rate in the state, although the bill is not specific on how that cap can be supported and maintained regardless of health status.

High-risk pools have been offered in many states for some time. The first such pools began in Connecticut and Minnesota in 1976. High-risk pools can vary substantially from state to state; some are hard to access, others impose waiting periods and some have premiums as much as 200 percent above the average paid in the individual market.

High-risk pool rates have proven to be unaffordable for many potential low-income enrollees. As a result, risk-pool enrollment rates have been historically low. Even though as many as 11.6 million Americans technically qualified for high-risk pool enrollment in 2012, only 226,000 Americans were able to enroll.

The Affordable Care Act used state-based high-risk pools as a temporary measure to insure people with pre-existing conditions before the elimination of the exclusion in 2014. The ACA appropriated $5 billion over three and a half years (roughly $1.4 billion annually) to cover those state-based efforts. However, the money essentially ran out at the beginning of 2013, and enrollment in those temporary pools for the most part ceased. This raises a question whether a $25 billion appropriation over 10 years would be able to do the job.

A 2010 article in National Affairs written by two conservative health experts concluded that covering pre-existing conditions would require "between $15 and $20 billion per year for a comprehensive set of high-risk pool programs."

Section four: 'Encouraging a More Competitive Health Care Market'

H.R. 3121 would attempt to increase competition by implementing three new reforms.

The first would be to allow individuals to purchase insurance across state lines. While there may be some competitive advantages in selling plans across states lines, there are issues that must be considered. Consumers might be attracted to the cheapest plans (with the least comprehensive benefits), leaving many of them underinsured when they actually need health care; this kind of competition could create a "race to the bottom" in terms of covered benefits between insurance companies. It could also destabilize state insurance markets by driving younger and healthier consumers into out-of-state plans. Finally, consumers could have more difficulty in resolving disputes, since the plans would be subject to the regulations of the issuing states, not where necessarily where consumers live. *

The Affordable Care Act allows states to form Health Care Choice Compacts to facilitate the interstate sale of individual policies. Those policies would be subject to the state regulations where the policy is issued. However, unlike H.R. 3121, they would require guaranteed coverage as well as the ACA's 10 essential benefits.

H.R. 3121 also would attempt to eliminate anti-trust exemptions for insurance companies. This provision could help prevent one insurance carrier from gaining a commanding majority of market share within a given state. However, all previous attempts to do this have failed.

Finally, the bill would fund an informational insurance website (or transparency portal) that would allow consumers to compare insurance plans. The portal, unlike the ACA's insurance marketplaces, would not allow people to enroll in insurance plans or Medicaid.

Sections five and six: 'Reforming Medical Liability Law" and "Respecting Human Life'

A major focus of H.R. 3121 is to reform malpractice laws. While it would not place a cap on economic damages in lawsuits, it would cap non-economic damages at $250,000 and would assign proportional responsibility. Courts would be allowed to restrict some attorney fees and limit punitive damages. Also, state medical liability laws would have priority.

A 2010 Harvard study indicated that annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion (2008 dollars), or 2.4 percent of total health care spending. The study concluded that reforms designed to reduce these costs "have modest potential to exert downward pressure on overall health spending. ... Reforms to the health care delivery system, such as alterations to the fee-for-service reimbursement system, ... (would) probably provide greater opportunities for savings." Those types of reforms are largely absent in H.R. 3121, compared provisions in the ACA.

Finally, the bill would prevent federal funding for abortions and would prohibit any federal law from requiring health plans to cover abortions. It would also guarantee that nothing in the bill would pre-empt state pro-life or conscience-protection laws.

Final chapter not written

The Affordable Care Act is the law of the land. However, it faces operational hurdles because of its balky rollout, and opponents will continue applying pressure to "repeal and replace."

Ultimately, Americans will have to decide if "replace" is an alternative that will provide adequate health insurance coverage and health security.

* - Although regulations relating to consumer protection, fraud and abuse would be governed by the home state of the purchaser, other regulatory issues would be governed by the insurer's home state.