Everything You Need to Know About the American Health Care Act
Below is an unbiased list of everything you need to know about the American Health Care Act (the ObamaCare replacement plan some call TrumpCare).
What is the American Health Care Act?
The American Health Care Act (AHCA), sometimes called TrumpCare or RyanCare, is a proposed replacement for ObamaCare AKA the Affordable Care Act (ACA).
House Republicans released their long-awaited repeal and replace plan back on March 6th, 2017, and some changes have already been made since then.
Trump supports the plan but has referred to it as “a first step” rather than a final product.
Although we don’t know if it will pass yet, or what other changes might be made, the facts below explain the facts we have. We’ll update this page as we know more.
TIP: All the information below can be confirmed by the CBO report on the AHCA and the AHCA itself. See our full summary of each provision in the American Health Care Act here. You can also see a summary from the Kaiser Family Foundation for a comparison.
A Summary of what the American Health Care Act Does
The American Health Care Act (AHCA):
- Repeals the mandates for both individuals to pay a fee for not having coverage and for large employers to insure their employees. Technically, it repeals the fees for the individual and employer mandates, not the mandates themselves.
- Freezes Medicaid funding to states beginning in 2018 or 2020; exact dates are being discussed.
- Eliminates most of ObamaCare’s taxes on those with higher incomes, employers, and industry.
- Replaces tax credits and out-of-pocket assistance based on income with tax credits based on age although some income-based assistance, like Medicaid, remains.
The plan also does some very controversial things like defunding Planned Parenthood and taking large amounts of cost assistance away from Seniors who haven’t reached Medicare age, but on the plus side, it leaves some very important provisions of the ACA in place. The plan has a price tag that comes in under the ACA saving $337 billion over the decade but leaving 52 million without coverage by 2026. We will discuss pros and cons, but these are the basics.
FACT: The CBO recently scored the ObamaCare repeal and replace plan (American Health Care Act). According to the CBO, the American Health Care Act reduces the deficit by $337 billion over the decade and increases the uninsured by 24 million by 2026 for a total of 52 million uninsureds vs. the ACA’s 26 million by the same date. Most uninsured will choose not to get coverage or will lose Medicaid coverage, but some reduction in the uninsured population will come from those who lose employer plans and those priced out of coverage. However, this is expected to be offset by less expensive plans and more relaxed standards over time. Prices go up at first but come down over time. One should consider ObamaCare’s prices are also projected to come down over time, so there is no simple answer to which plan’s cost is better or worse here; instead, each has financial pros and cons.
What is Different About the American Health Care Act and the Affordable Care Act? – Difference Between ObamaCare and the New Replacement Plan
The AHCA keeps a lot of the ACA in place, but it changes a lot too. To illustrate what it does and doesn’t keep we have used a list where what it doesn’t keep is strikes out (see the original list for the ACA here):
TIP: It is important to note that the Republicans plan is like other repeal and replace bills. The current bill is designed to address budget items only, and some of the following are not budget-related. Some of these provisions could still be repealed down the road.
- Letting young adults stay on their parents’ plan until 26
- Stopping insurance companies from denying you coverage or charging you more based on health status
- Stopping insurance companies from dropping you when you are sick or if you make an honest mistake on your application
- Preventing gender discrimination TIP: It doesn’t remove all gender discrimination bans or bring back a ratio for women, but it does change a lot for women.
- Stopping insurance companies from imposing unjustified rate hikes
- Doing away with lifetime and annual dollar limits
- Giving you the right to a rapid appeal of insurance company decisions
Expanding coverage to tens of millions by subsidizing health insurance costs through the Health Insurance Marketplaces(HealthCare.Gov and the state-run Marketplaces) TIP: Open enrollment and healthcare.gov will continue, but some details have changed, including those related to cost assistance. Expanding Medicaid to millions in states that chose to expand the programTIP: Medicaid expansion is frozen, so it will no longer be “expanded.” Providing tax breaks to small businesses for offering health insurance to their employeesTIP: Small employer tax breaks are gone. Requiring large businesses to insure employeesTIP: The mandate to offer coverage to full-time workers is gone.
- Requiring all insurers to cover people with pre-existing conditions
- Making CHIP easier for kids to get (questionable)
- Improving Medicare for seniors (questionable)
- Ensuring all plans
cover minimum benefits and ten essential benefits including free preventive care, OB-GYN services with no referrals, free birth control, and coverage for emergency room visits out-of-network. TIP: The requirement to cover OB-GYN, birth control services, and other essential benefits on all plans are some of the benefits, rights, and protections that all Americans lose, but that women lose specifically.
ON DEFUNDING MEDICAID: Federal funding for Medicaid continues for states that expanded coverage under the Affordable Care Act through 2019 (or 2017 depending on the final bill). However, starting January 1, 2020, federal funding to those states will continue but be frozen based on how many were covered by the end of 2019 (or 2017). Then, beginning in 2020, Medicaid funding to states will be a fixed amount based on the total number of Medicaid enrollees (per capita), and not based on the actual cost of Medicaid services provided to individual recipients. This will decrease the number of people eligible for Medicaid over time, especially as the population increases over time. This means, logically, more and more of our poorest will be without healthcare options each year (or the quality or cost of coverage must go down), but it also means spending will be kept in line.
The Major Changes Under the American Health Care Act
The following are some of the major changes made by the AHCA:
- The Individual Mandate stays, but the fee is retroactively repealed starting December 31, 2015. That means once the law passes no one has to pay the fee from 2016 forward.
- The Employer Mandate stays, but the fee is repealed. That means fewer full-time employees will be offered coverage as there will be no penalty for not offering coverage. It also means employers won’t have to offer coverage or worry about hiring full-time employees. NOTE: Employees will not be able to get tax credits; fewer employers offering insurance means the taxpayer is going to pay for it out of pocket (as they fund tax credits based on age included in the plan).
- The mandate is “essentially” replaced by a Continuous Coverage Provision. Insurers will be required to charge 30% more on premiums for 12 months for those who have a gap in coverage of 63 days or longer. TIP: This is a smart solution in general, but it doesn’t incentivize healthy people to stay in the market as the mandate does; it requires people to have a rainy day fund in case of illness. Those with lower incomes may face very high costs if they re-enter the market.
- Medicaid funding will be frozen by 2020 (date subject to change), and a high-risk pool of sorts will be implemented. This pool helps to offset the newly uninsured. TIP: See details. This issue is complex. Many of the uninsured come from this provision.
- Tax credits will start being based on age rather than income starting in 2020. The new tax credits will be flat ($2,000 for individuals up to age 29 and increase in $500 increments until capping at $4,000 for individuals age 60 and older). Credits will be gradually reduced for individuals with yearly incomes exceeding $75,000 and for households that earn over $150,000.
- Employees won’t have access to tax credits, but after 2020 the new age-based credits can be used for any individual health insurance policy regardless of where it’s purchased.
- Metal tiers and some minimum benefit standards are removed. Thus, the line between catastrophic coverage and major medical coverage will be blurred. TIP: this could mean “junk plans” could once again be sold. It could also mean lower costs, especially after tax credits for those without high Medical costs.
- Ratios for what seniors can be charged by insurers for premiums increase from three times what the youngest enrollees are charged to five times.
- Planned Parenthood will be Defunded; funding would be given to Community Health Centers instead. Many of these do not yet exist and would have to be created.
- The Medicare Part A Tax increase of 0.9% over $200,000 for an individual or $250,000 for a family would be repealed.
- The Medicare Tax on Investment Income of 3.8% over $200,000 for an individual or $250,000 for a family would be repealed.
- Contribution limits for Health Savings Accounts (HSAs) will be increased substantially, but one still needs a High Deductible Account and the money to fund it.
- The Annual contribution limit to health Flexible Spending Accounts (FSAs) will be repealed. The ACA capped this limit.
- The 40% Excise Tax “Cadillac” on high-end employer-sponsored health plans is suspended for tax years 2020 through 2024. This has already been kicked down the road by Democrats and Republicans.
- The 10% tax on tanning beds would be repealed.
- The $500,000 Annual Executive Compensation Limit for Health Insurance Executives will be repealed.
- The tax on brand name drugs will be repealed.
- The tax on health insurers will be repealed.
- The 2.3% tax on medical device manufacturers will be repealed.
The Bottom Line of the Affordable Care Act vs. The American Health Care Act (on ObamaCare vs. TrumpCare/RyanCare)
The bottom line on the ACA vs. AHCA is perhaps best expressed by the following points:
- The American HealthCare Act gives Americans over 400% of the poverty level, large employers, young healthy people, and industry a break via tax cuts and deregulation.
- However, the plan presents some real complications for the sick, poor, low-income workers, seniors, and women due to reduced assistance and the defunding of planned parenthood, higher age ratios for seniors, the freezing of Medicaid, and the focus on tax breaks and HSAs over assistance.
- The bill would reduce federal deficits by $337 billion by 2026.
- But, 24 million will lose coverage due to the mandates, cost assistance, Medicaid expansion being repealed, reduced, and frozen.
- Employees who just got coverage and small employers will lose assistance, but large employers won’t be burdened with the complexities of choosing between health care and full-time employees.
- Single policyholders in the non-group market stand to see premiums that are 15% to 20% higher than under current law, however as the years roll along, costs are projected to come down to prices as much as 10% than the current law. To be fair, this would be true for the ACA too. The prices were projected to spike and then to go down. That is not being acknowledged by Trump or Ryan who instead choose to use terms like “death spiral.”
Thus, the bottom line here is that the law reduces costs for the wealthy, healthy, and young and substantially raises costs for many in other demographics.
The middle class won’t notice much difference unless they get sick and go without coverage. Our poorest people, women, seniors, and low-wage workers will see some new hurdles. Those with higher incomes will most certainly benefit.