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ObamaCare Repeal: What it Would Mean to Consumers

A primary goal of Donald Trump and the GOP Congress is to repeal and replace “Obamacare,” which means some or all of the Affordable Care Act of 2010 (“ACA”). No one, including me, seems to know what “replace” means. The new president has promised “insurance for everybody.” His nominee to lead the federal Department of Health and Human Services has offered a proposal that, whatever its merits, falls well short of this goal. So your guess is as good as mine. But I can address “repeal,” a process Congress has already begun.

What does “Obamacare repeal” mean?

Let’s get our terminology straight first.

“The Affordable Care Act” or “ACA” is a massive 2010 law that reformed private insurance, Medicare, Medicaid and other government programs. You can go here to read it all. It changed how the Medicare and Medicaid programs pay health practitioners, funded annual check ups, extended health care in rural America, promoted “wellness,” pushed for improved health care quality, increased access to vaccines, promoted growth of the health care workforce (such as nurse practitioners and rural physicians), promoted information transparency about nursing homes and other health providers, cracked down on health fraud, and much more.

“ObamaCare” may mean, depending on who’s talking, the entire ACA or only certain parts of it. I think when most people refer to “Obamacare,” they mean these parts of the ACA: the insurance mandate (buy insurance or pay a tax), health insurance exchanges, premium subsidies, insurance reforms (see below), and related tax increases. They may also mean Medicaid expansion, at least in states that have opted for it. THIS IS WHAT I’M FOCUSING ON HERE!

“Private health plans” means health plans sold by private insurance companies to consumers or employers, or that you get through your employer. It includes plans sold on “health insurance exchanges.” It does not include government run programs, such as Medicare or Medicaid.

“Medicare” means the federal health program for people age 65 or older, and certain others.

“Medicaid” means the federally funded, state run, health program for people of limited means.

“Repeal” could mean either repeal of the entire ACA (as per at least one bill introduced in the new Congress) or just certain “ObamaCare” parts (as per this conservative website description of last year’s effort, vetoed by President Obama).

Many people, including some key Republicans (and this author!) fear total repeal of the ACA would result in chaos in the health care system, so I doubt that will happen. For that reason, and because I think it’s what most people mean by “Obamacare,” I will outline the impact on American consumers of repealing just those parts of the ACA that affect private health insurance and Medicaid expansion.

Repeal Will Affect EVERYONE with Private Health Plans

If the insurance reform provisions of the ACA are repealed, here’s what will change for everyone with “private” coverage, whether through your employer or purchased directly by you:

  • No Mandate, No Penalty. The ACA imposes an annual tax penalty for those without health insurance: the greater of (1) $695 per adult and $347.50 per child (up to $2085 per family) or (2) 2.5% of household income above the tax return filing threshold. With repeal, the penalty goes away. (Note: the ACA allows some exemptions from the mandate: those who cannot afford coverage because it costs more than 8% of income, are suffering a hardship, have incomes less than the Federal Poverty Level, are Indian tribe members or in jail.)

  • No Premium Subsidy. Currently, people who enroll for individual or family coverage on “health insurance exchanges” may qualify for a tax credit to help pay for their insurance. This applies if your income is between 100-400 % of the federal poverty line (currently meaning between $24,300 and $97,200 for a family of four). Following repeal, you pay it all.

  • No Guaranteed Issue. Right now, the health plan must allow you to sign up for coverage, regardless of any pre-existing condition. After repeal, you may be denied coverage if you have had certain illnesses or injuries.

  • Pre-Existing Conditions. The ACA does not allow your health plan to deny coverage for any injury or illness that occurred before you signed up. After repeal, insurers could again deny coverage for any past injury or illness (although President-Elect Trump has said he’d like to keep this).

  • Discrimination. Under the ACA, health plans may not base your premiums (fees) on gender, health status, claims experience, genetic information or disability (excepting “grandfathered” plans in effect before 2010). ACA repeal would almost surely mean a return of all these factors, including expensive “high risk pools” for those with chronic conditions; and possibly a return to the pre-ACA practice of higher rates for women. See “What About the Exchanges, and More!” below for more on individual and small employer plans.

  • No Lifetime Coverage. The ACA told health plans they could no longer limit the amount they would pay for health care during your lifetime. Repeal would mean the health plan may deny benefits after a certain amount has been spent during your lifetime.

  • Cancellation. The ACA allows health plans to terminate your coverage only if you commit fraud or misrepresentation. Repeal means the health plan may end your coverage for its own reasons even if you’ve done nothing wrong.

  • Deductible Limits. The ACA curbed the rise of “high deductible” health plans by imposing maximum limits on amounts you pay out of pocket before your insurance kicks in. Repeal would allow the health plan to write plans that require you to pay for, say, half of your own health care costs.

  • Dependent Coverage. Under the ACA, children may remain covered under a parent’s plan until age 26. With repeal, dependent coverage could be limited to spouses and children who live at home to adulthood. Again, Trump has said he’d like to keep this.

  • Preventive Health. The ACA requires health plans to cover “preventive health services,” such as annual physicals. I strongly doubt this will go away, because health plans want you to get preventive care. It saves them money in the long run.

  • Simpler Language. The ACA required health plan policy descriptions be simplified. Repeal may mean a return to the complex language that left you baffled about your benefits.

A number of states had already had such laws before the ACA, and those would still apply. But these laws did not and will not apply to health plans that are “self-funded” by employers

What About the Exchanges, and More!

ACA repeal would impact everyone with private health plan coverage. Many people would also be affected in other ways.

  • If your health plan is “fully insured,” as opposed to “self-funded” by an employer, (see this brief article for the distinction: zane benefits): the ACA requires health insurance plans to spend at least 80% or 85% of “premium” on medical costs (depending on plan size), submit to annual review of premium increases, not limit your eligibility based on full time wages, and, for individual and small group plans, provide 4 levels of coverage: Bronze (covers 60% of costs), Silver (70%), Gold (80%) and Platinum (90%). With repeal, this may all go away.

  • The ACA also told individual and small employer (100 or fewer employees) health plans that premium rates must be “community rated” and based only on family structure, geography (where you live), value of the benefits, age (but limited to a 3 to 1 ratio) and tobacco use (limited to 1.5 to 1 ratio). Repeal means a return to greater variance in premium rates.

  • Perhaps most famously, the ACA authorized and funded creation of federal and state online “Health Benefit Insurance Exchanges,” on which you can “shop” for and enroll in individual and family plans. The exchanges also provide comparative information on policies sold in your state. Health insurance policies sold on the exchanges must:

  • Meet all the requirements I’ve already described.

  • Offer at least certain “essential” health benefits.

  • Offer at least one “Silver” and one “Gold” plan (see discussion above).

And, most importantly, if you get coverage through an exchange plan, you may be one of the 9.4 million people who received premium subsidies. ACA repeal would eliminate the exchanges and subsidies, and probably wipe these individuals off the insurance rolls.

  • Repeal would eliminate additional taxes on high earners. The ACA imposed an extra 0.9% tax on earned incomes of greater than $200,000 for individuals and $250,000 for couples. It also imposed a 3.8% Medicare tax on investment gains and increased the tax on long term capital gains from 15% to 20% (which didn’t seem to hit the stock market very hard).

Medicaid Would Shrink

The ACA funded expansion of state health programs for the indigent, known as Medicaid. To date, 32 states, including a number of so-called “Red States,” have opted to accept the funding, resulting in coverage for about 7 million additional Americans. Repeal could result in elimination of funding and loss of coverage for these citizens.

Will it Happen?

I don't know. My guess is some sort of "repeal" is all but certain. But I also think some sort of "replacement" is as well. And, as I said at the outset, no one seems to have a crystal ball about what that will include.

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