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February 27, 2017

A GOP ACA replacement draft bill leaked. Here's what we know.

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    This story has been updated

    A draft Republican bill to replace the Affordable Care Act (ACA) leaked to Politico on Friday would transition Medicaid to a per-capita allotment model, replace the ACA's income-based premium subsidies with age-based tax credits, and eliminate the law's individual mandate.

    According to Reuters, House staffers declined to comment on the authenticity of the leaked proposal, which was dated Feb. 10. President Trump and Republican lawmakers have said they would present a plan for repealing and replacing Obamacare in the coming weeks.

    The draft plan broadly adheres to proposals previously floated by House Speaker Paul Ryan (R-Wis.) and HHS Secretary Tom Price when he served in the House.

    Compared with prior GOP replacement plans, however, the bill offers "more generous financial support for those who buy their own plans ... and lower penalties for Americans who do not maintain continuous insurance coverage," Vox reports.

    Some of the plan's provisions would be implemented immediately, while others would not take effect until 2020.

    Draft plan details

    Plan would end individual mandate, but create other protections for pre-existing conditions

    The GOP's draft proposal would eliminate the ACA's individual mandate as of last year, meaning that individuals who did not have coverage in 2016 would not have to pay any penalty.

    According to Vox, the proposal would maintain a key plank of the ACA's transformation of the individual market: the ban on insurers' denying coverage to individuals who have pre-existing conditions. Insurers also would be prohibited from charging more to such individuals as long as they maintain continuous insurance coverage. However, if an individual experiences a lapse in coverage, insurers could charge up to 130 percent of the standard rate for the individual's first year of coverage. After one year, the individual would pay the lower standard rate.

    Can lawmakers cover preexisting conditions without a mandate?

    According to Vox, the proposed penalty would be lower than the 150 percent charge above the standard rate that Price proposed in his 2015 Empowering Patients First Act. Price also would have allowed insurers to charge that higher price for 18 months.

    Other changes to the individual market

    Further, the new GOP proposal would allow insurers to charge older beneficiaries up to five times as much as younger individuals. The ACA restricts the premiums for older individuals to three times the cost of younger enrollees.

    The bill also would eliminate the ACA's essential health benefits package and instead allow states to determine which benefits would be considered "essential." According to Vox, this could allow insurers to offer smaller benefits packages, which may appeal more to younger healthy people. However, it also could raise the cost of more comprehensive coverage, according to Vox.

    The GOP draft plan also would increase the amount of money people could put in Health Savings Accounts to meet their deductible and out out-of-pocket costs.

    Exchange subsidies would be replaced by tax credits

    The GOP plan also in 2020 would replace the ACA's federal subsidies to help individuals purchase exchange plans, which vary based on income level and premium prices in different geographic locations, with refundable tax credits that would be based only on age. Tax credits would range from $2,000 for an individual under age 30 to $4,000 for an individual between age 60 and 64. The tax credits would not be available to individuals on Medicare, according to CNN Money. 

    According to CNN Money, the tax credits proposed in the GOP plan may not be sufficient to make coverage affordable for everyone, particularly older persons who would be charged more for plans under the GOP proposal. The plan would, however, benefit households with incomes above 400 percent of the federal poverty level—$47,520 for an individual or $97,200 for a family of four—who purchase exchange plans, as they currently do not qualify for ACA subsidies but would be eligible for the proposed tax credits, CNN Money reports.

    The effectiveness of such tax credits at spurring the purchase of insurance remains disputed. The Washington Post reports that the Congressional Budget Office (CBO) privately told lawmakers that the GOP's new, age-based tax credits "would cost the government a lot of money and would enable relatively few additional Americans to get insurance."

    State innovation grants would support coverage for high-cost individuals

    The proposal would allocate $15 billion in both 2018 and 2019 and $10 billion each year through 2026"state innovation grants" to help states cover "high-risk individuals" or to "help stabilize premiums for health insurance in the individual market." States could use this funding in a variety of ways, including reducing insurers' cost of covering high-risk individuals, reducing policyholders' out-of-pocket costs, or providing financial assistance to high-risk enrollees in the individual market.

    Medicaid would transition to a per-capita allotment model

    The GOP draft bill also would overhaul the way the federal government pays for Medicaid. Currently, states and the federal government split the cost of the traditional Medicaid population, with federal reimbursements ranging from 50 percent to 74 percent depending on the state. However, there are no limits on how high those costs can grow.

    The GOP bill proposes shifting to a per capita model in which the federal government would provide states with capped payments based on the number of beneficiaries in their state. According to CNN Money, the amount per state would be based on the state's average spending for fiscal year 2016, with an adjustment for inflation.

    States that expanded Medicaid under the ACA would still be able to cover their expansion populations, but they would receive less money to do so than envisioned by the ACA, Politico reports. Under the ACA, the government paid 100 percent of the costs of expansion for the first three years, after which reimbursements decline slowly until it reaches 90 percent in by 2020.

    Meet the Republican governors who want to save Medicaid expansion

    The bill also would eliminate federal funding for Planned Parenthood and prohibit the use of tax credits to pay for plans that cover abortion.

    Draft bill would repeal ACA taxes

    The GOP draft bill would eliminate all taxes imposed by the ACA. According to Politico, it outlines just one way to cover the costs of the new tax credits and innovation grants: capping the tax exclusion on employer health plans to the 90th percentile of plan costs nationwide—meaning the 10 percent of plans with the highest premiums would pay taxes on a portion of their premiums.

    Proposals to tax costly employer plans have widespread support among health care economists, but businesses and unions have opposed such proposals in the past. The ACA's Cadillac tax, which aims to achieve a similar effect by imposing a 40 percent excise tax on especially high-cost health plans, was delayed until 2020 due to push back from employers and union.

    CBO will "score" a final version of the bill, estimating how many people it would be likely to cover and its impact on the federal budget. NPR's "Shots" reports that one House staffer said lawmakers are testing different scenarios with CBO, comparing cost and coverage levels, and fine tuning the legislation.


    According to CNN Money, it is unclear whether some of the provisions outlined in the draft bill would be permitted to pass through the budget reconciliation process, which Republicans have said they will use to repeal the ACA. Legislation passed under reconciliation must be related to federal spending and revenues, and experts say insurance reforms, such as eliminating the ACA's essential health benefits and increasing the age ban ratio, may not be allowed.

    As GOP aims to 'repeal and replace,' new poll shows rising support for ACA


    According to Politico, Republicans still have disagreements on the size and form of the tax credits. For instance, Price wants the tax credits to be slightly reduced for most age groups from the levels contemplated in the plan, Politico reports.  But CNN Money reports that Ohio Gov. John Kasich (R) in a meeting with President Trump on Friday said the tax credits—and the draft legislation overall—were "inadequate" and "not acceptable."

    Separately, Rep. Tom Cole (R-Okla.) said Republicans when discussing the bill’s actual fiscal impact "should err on the side of being cautious, rather than make grandiose claims."

    Several Democrats criticized the proposal. Senate Democratic Leader Charles Schumer (D-N.Y.) called the proposal "a recipe for disaster." He said, "Republicans are determined to put insurance companies back in charge, make health insurance more expensive for millions of Americans, restrict women's access to vital health services by defunding Planned Parenthood, shift costs to states and dismantle Medicaid, while kicking millions more off of their plan."

    Rep. Steny Hoyer (D-Md.) said, "Not only would it force working families to pay more for less coverage, it would make drastic cuts to Medicaid and cause millions to lose their coverage altogether" (Demko, Politico, 2/24; Luhby, CNN Money, 2/25; Kliff, Vox, 2/24; Kodjak, "Shots," NPR, 2/24; Sullivan, The Hill, 2/24; Goldstein/Eilperin, Washington Post, 2/24; Howell, Washington Times, 2/26; Bryan, Business Insider, 2/24).

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    Organizations must balance acquisition efforts with retention tactics. Our study outlines 10 ways to build a consumer platform strategy that encourages long-term loyalty.


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