The House health care bill is a huge step backwards for health insurance

On March 8, members of the U.S. House of Representatives introduced the American Health Care Act (AHCA) in an attempt to repeal and replace the current Affordable Care Act (ACA).

On March 8 and 9, the House Ways and Means and Energy and Commerce Committees “marked up” and advanced the bill with the expectation that it will go for a vote by the entire House soon. If it passes the House, it would then go to the Senate.

As we explain below, the AHCA is huge step backwards for our health care system, and must not be passed by Congress because it will harm the quality of life for millions of Americans, including tens of thousands of people in Nebraska.

 

Budget Reconciliation

Before getting into specifics about the bill, It’s important to note two things about the process being used to pass the AHCA called “budget reconciliation,” which House members began in January.

Under normal legislative rules, it takes 60 votes to overcome a filibuster, but filibusters are not allowed in the Senate in the budget reconciliation process. In other words, ACA opponents can move a bill through reconciliation without having to gather as many supporters as they would if they used the normal legislative process.

Second, budget reconciliation can only be used to modify parts of the ACA that impact the budget (i.e. revenues and spending), not regulations.

Much of the ACA doesn’t impact the budget directly, so Congress can only use budget reconciliation to change parts of the health care law. Other parts, like the essential health benefits that insurance companies have to provide (coverage for preexisting conditions, prescription drugs, etc…), would have to be addressed through separate legislation subject to the normal rules.

Because of this, the Trump Administration and House leadership has described the AHCA is the first phase in a three-phase process, with regulatory changes and more legislation to come later.

 

Impact of the AHCA on Coverage and Affordability

The AHCA proposes to do a lot of things. It keeps some parts of the ACA, eliminates others, and lays out some other big changes, which are explained in this fact sheet.

The bottom line is that the AHCA is a huge step backwards from the ACA in both affordability and quality of health insurance. The Congressional Budget Office (CBO), the nonpartisan office that conducts economic analyses of federal bills, provided its “score,” or fiscal impact analysis, of the AHCA on March 13. The CBO score projected the AHCA would lead to a staggering drop in the number of Americans who have insurance and a big jump in the cost of insurance for many people.

 

Coverage

Under the ACA, more Americans have health insurance than ever before. However, under the House’s AHCA, the CBO projected that 14 million fewer people would have insurance in 2018, and, by 2026, 24 million fewer Americans would have insurance than under the ACA.

Additionally, CBO projected that the AHCA would slash $880 billion in federal funds from Medicaid by 2026. Medicaid is the government-sponsored health insurance program that provides coverage for our most-vulnerable people – mostly children, older adults, and people with disabilities. In Nebraska, Medicaid serves about 230,000 people.

With less federal funding, states would have to decide whether to put more state funds into their Medicaid programs or to cut services, cut Medicaid payments health care providers, or kick people off of Medicaid. With 32 states, including Nebraska, facing budget challenges, it seems unlikely that states will put more money into Medicaid to replace lost federal dollars. This almost certainly would mean many Nebraskans who need coverage the most will lose it.

 

Affordability

The ACA provides tax credits to help people afford insurance. The AHCA keeps the concept of tax credits but dramatically changes the way they work and changes the people who benefit from them.

Under the ACA, tax credits are based on your income. If you make a low income, you get more help, and tax credits go up as your premiums go up. As your income goes up, your financial assistance decreases.

In contrast, the AHCA proposes age-based tax credits where older people get more help than younger people. The credits aren’t based on actual premium costs and range from $2,000/year for people under age 30 to $4,000/year for people over age 60. Some people who currently earn too much money to get tax credits, would be able to receive assistance under the AHCA. But many people who now receive assistance to buy insurance will find that their new, reduced credits aren’t as helpful.

Why is this? First, the AHCA’s tax credits are flat, meaning they aren’t tied to the actual cost of plans or to geographic regions. As plan prices increase, the tax credits stay the same, meaning they may provide the same affordability as the ACA’s tax credits.

Additionally, there can be a large geographic difference in premium costs. The ACA takes this into account, but the AHCA’s flat tax credits would be the same for a 40 year old in New York as a 40 year old in Nebraska even though insurance costs vary greatly between the two states.

Second, the AHCA changes the amount that insurers can charge older people compared to younger people. Under the ACA, older people can only be charged three times as much as younger people for coverage. The AHCA would allow older people to be charged five times as much.

This is designed to draw more younger, healthy people into the insurance market by reducing the cost of their premiums. However, it will drive up premiums for older people. At the same time, while older people can be charged five times as much, their tax credits can only be, at most, two times as much as younger people’s. This means that premiums could become increasingly unaffordable for older Americans.

Additionally, the AHCA also gets rid of “cost-sharing reductions,” which is financial assistance for people with low incomes to help with out-of-pocket costs, like copays or deductibles.

Furthermore, instead of imposing a tax penalty on people who don’t have insurance, the AHCA proposes a “continuous coverage requirement” where people without insurance for 63 or more days can be charged 30 percent higher premiums for one year.

The point of the so-called “individual mandate” is to get as many people into the insurance pool as possible to drive down costs for everyone. There are questions about whether a continuous coverage requirement would be enough of an incentive for healthy people to buy insurance, or if it would result in people waiting to buy insurance until they are sick, which can drive up costs.

 

The Big Takeaways

The ACA is focused on providing assistance to those most in need of support in order to get the most people covered. The idea is that, in order to drive down health care costs, everyone needs to be brought into the system.

To accomplish this goal, the current ACA gives people with lower and middle incomes higher levels of assistance, while wealthier enrollees receive less assistance. People who have health conditions receive higher levels of protections, and people in rural areas where insurance costs can be higher, can get financial assistance that reflects those costs.

In essence, the AHCA flips who is helped. Younger, healthier consumers in urban areas will likely find more affordable coverage, while older consumers and those with health conditions may find it less affordable. This does not solve the problems that people complain about under the ACA and ends up prioritizing people who need less help over those who need more.

Ultimately, the ACA isn’t perfect, but no program ever is from the start. Good lawmaking is an ongoing process – we pass laws with the best intentions, then, in the future when we have more data and practical knowledge, we can return to the same laws and strengthen them to help them work more effectively.

This is what we should do with the ACA. We should build on the coverage gains and market reforms put into place seven years ago, not tear down that progress to create a system where millions of Americans will lose their health coverage.

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