The Affordable Care Act is one of the more divisive pieces of legislation in the last decade. President Barack Obama’s signature health reform law has not only been mired in partisanship since its inception, but consumers also tend to have pretty passionate opinions on the topic. For some, the law was a literal life-saver. For others, it has only made health coverage more expensive and less accessible.
With a Republican-led Congress and White House, repeal of the ACA is imminent. Most expect Congress to repeal the law early next year, but put off dismantling the ACA for up to four years, as a replacement policy is developed.
Republicans have issued a few replacement proposals already, though no legislation has been introduced since Trump won the election. House Speaker Paul Ryan and Tom Price, Trump’s pick for the Department of Health and Human Services, have each published policy papers on what Republican health reform looks like.
As Larry Levitt of the Kaiser Family Foundation recently tweeted, “Obamacare” had winners and losers, and whatever Republicans come up with to replace it will also. The ACA particularly benefited lower income consumers, as well as those with pre-existing conditions who were previously “uninsurable” before the law was passed. However, it hit healthier, wealthier people harder. Those with higher incomes, ineligible for subsidies, have faced increasingly expensive premiums.
In looking at the current Republican proposals, we can make a few predictions about who will be most impacted by an ACA replacement—both the “winners” and “losers.”
Winners:
Individual consumers who don’t currently qualify for subsidies
This group was hit hardest by the ACA. If you don’t have access to an employer plan, you are supposed to get coverage through the individual market, or pay a fine. But costs for individual health insurance have continued to increase dramatically. Many marketplace consumers were insulated from high prices through tax credits, but those with incomes too high to qualify for subsidies have had to pay full premium prices.
Not only are Republican policies expected to lower premiums for healthier consumers by cutting regulations around what insurers have to cover, Ryan’s and Price’s plans actually expand the tax credit function of the ACA. Currently, subsidies are based on income, which is why some individual consumers aren’t eligible for them. The Republican tax credits are based on age, which means consumers who didn’t get subsidies under the ACA—because they made too much—would now get tax credits to pay for insurance premiums, possibly up to $250 per month.
Insurers
Republican policies likely will make the insurance market more attractive than it became under the ACA. Though the proposals do maintain some protections for consumers with pre-existing conditions, they also cut a number of insurance regulations that will, theoretically, improve profitability for insurance carriers.
Insurers will be able to decide what they cover, instead of being held to the ACA’s “essential health benefits” standard. This is expected to lower costs for both insurers, who won’t have to cover a full set of standardized services, and consumers, who may not want those comprehensive plans anyway.
Brokers
The more attractive insurance market will likely benefit insurance brokers, too. Through what’s called the “medical loss ratio,” the ACA forced insurers to spend 80 percent of their revenues on medical claims and improvements, leaving just 20 percent for profits, marketing and administrative costs.
This squeezed insurers’ ability to pay broker commissions. In fact, many insurers stopped paying insurance brokers commissions for individuals at all, further disincentivizing individual assistance.
A more profitable insurance market stands to benefit brokers and other insurance-adjacent businesses.
Losers:
Super-subsidies
Some lower-income consumers were able to find health coverage on the marketplace for free or nearly free. The ACA provided the most benefit to the poor—many people with low incomes were eligible for large subsidies, making health coverage very affordable at just $25 or $50 per month. Compared to the hundreds of dollars that those ineligible for subsidies paid, these were pretty big tax credits.
If Republicans link tax credits to age instead of income, these consumers will receive much less assistance. In theory, this makes sense—younger people typically have less health needs than older people. But basing the tax credit on age ignores the fact that health isn’t always associated with age, and that lower-income consumers have a harder time accessing care than higher-income consumers do, regardless of health status.
Under the Republican proposals, a CEO would receive the same government help as a fast-food worker. A perfectly healthy 50-year-old would also receive 2.5 times as much help as a diabetic 20-year-old. In this way, Republican policies will have the most negative effect on sicker, lower-income people compared to the ACA.
Hospitals and other providers
Big changes to health policy are always very disruptive for hospitals, doctors and other providers. This industry just went through a major disruption via the ACA, and dismantling it would put them right back where they started. The hospital industry has spent the last six years evolving many of their business models and operational practices to meet the requirements of the ACA. Repealing the ACA, particularly with no replacement in place, would likely cause turmoil for the provider segment.
Further, some provider groups are taking the position that repealing the ACA would represent an “unprecedented public health crisis,” as the American Hospital Association put it. The AHA published a study in December estimating that repeal would double the uninsured rate by 2026, costing hospitals $165.8 billion.
People who don’t make good choices
Here’s a health insurance fact—the industry works better, and more affordably, when most people have coverage. Policymakers in the U.S. continue to struggle to figure out how to achieve this feat, as we don’t have universal healthcare like some of our peer nations.
Obamacare had the individual mandate—get coverage, or pay a fine. Republican proposals use what’s called “continuous coverage” policies. This means if you have a pre-existing condition, insurers have to charge you the same as a healthy person, but only if you maintain coverage throughout your life. If your employer-based coverage ends, you have to go straight to the individual market, or vice versa. If you are uninsured for a while, and then decide to get coverage, insurers can charge you an upcharge over the standard rate for your age.
Theoretically, this is a sound strategy. It makes sense—incentivize people to do the right thing, but allow them to make their own choices. If they make the wrong choice, they may have to pay the consequences in the form of that upcharge.
But the reality is that Americans don’t always make good choices. This is already a huge issue in the Medicare world, which has a similar policy. If you don’t sign up for Part B by a certain deadline, you will pay a higher rate for the rest of your life. Many consumers fail to understand all of the rules around this very well. The likelihood that millions of individual health insurance consumers will all understand the concept of continuous coverage is slim.
When the individual mandate is repealed, many healthy consumers will say “Great! I didn’t need coverage, anyway. I could get cheaper coverage now that plans don’t have to be ACA-compliant, but I think I’d rather save the $75 per month and take my chances.”
Some people will also find themselves in precarious financial situations. Perhaps they lose their job or are about to be kicked out of their apartment, and maintaining continuous coverage is simply not their highest priority.
Likely, many of these people will be lower-income. And inevitably, some of them will get heart disease, or diabetes, or a cancer diagnosis, and wind up with expensive premiums that they can’t pay. Those consumers will be right back where they were before the ACA—sick, uninsured, and unable to afford coverage. Of course, people could have found themselves in this position under the ACA, too. But the lack of an annual fine could cause there to be more people who decide not to get coverage.
As you can see, people currently frustrated with the ACA may see some relief under Republican health reform. But other groups of people will not, and some may actually be worse off. These potential consequences will certainly be part of healthcare debates in 2017, and it remains to be seen which policies will make their way into law.