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ISSUE

Dismantling Obamacare

Published:2017-Jan-23
Last Updated:2017-Feb-03
Principal Writer:Barry Shatzman

Issue Sections

Understanding The Issue
Legislative & Executive Acts
Court Cases
What You Can Do

Reported News

Health Care Policy

Related Bills

Concurrent Resolution FY2017

2017 (SConRes3)

Related Court Cases

(2018) Texas v. United States
(2015) King v. Burwell
(2014) House v. Azar
(2012) NFIB v. Sebelius

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What is this about?

President Trump and Republicans in Congress have stated an intent to repeal the Patient Protection and Affordable Care Act - also known as ObamaCare.

They also have said they plan to replace it, but have not agreed on what the replacement health care policy might be like.

In this discussion we'll explain attempts to dismantle Obamacare and what it could mean to you..

ObamaCare provides previously unattainable protections

As the nation's public policy for health care, ObamaCare specifies how much Americans should pay for health care insurance and the types of care that the insurance must cover.

It continues the nation's basic model for health care that, for most Americans, for-profit insurance companies pay for a portion of our health care using money we pay to them as premiums.

ObamaCare added several tangible protections to Americans that did not exist before. These protections include...

o If you have a pre-existing condition, you still can have health care coverage. The cost of that coverage cannot be increased because of the condition.

o If you are diagnosed with a serious health problem (such as cancer), your insurance company cannot rescind your policy.

o Insurance companies cannot limit the amount they will pay over the lifetime of an insured person.

o Health insurance plans must pay for preventive procedures such as colonoscopies and mammograms.

o Insurance companies must spend at least 80 cents of every premium dollar on health care services. They cannot take more than 20 percent of premiums for profit and overhead.

o Insurance companies must justify large rate increases.

o Children can be insured on their parents' policy until they're 26 years old.

o The federal government subsidizes part of the cost of premiums to those who earn less than 4 times the federal poverty level. It adds additional financial assistance for those who make less than 2.5 times the federal poverty level.

o It offers virtually free health care to those with incomes less than the federal poverty level, through Medicaid Expansion.

The law also requires that most people obtain health care insurance. This requirement has became known as the mandate.

What can Congress do?

In the 2017-2018 Congress, Republicans held a majority in both houses of Congress, providing a almost clear path to repeal the law.

However, to repeal the law - or to approve a replacement - effectively would require 60 votes in the Senate because any bill can be filibustered. Without a replacement offering the same protections as the ObamaCare currently provides, it is unlikely that enough Democrats would allow that to happen.

The Republican majority in the Senate has another mechanism at its disposal - known as budget reconciliation. Reconciliation bills can be passed with a simple majority. Filibusters are not allowed.

There's a catch, however. Under current Senate rules, reconciliation can be used only for issues that directly affect spending or revenue (taxes). In other words, reconciliation cannot be used to alter protections provided by the law - such as the requirement that insurance companies do not discriminate against someone with pre-existing conditions.

But they still can do a lot. For example, things they likely could do include...

o Reduce or eliminate federal money to states to pay for Medicaid Expansion.

o Reduce or eliminate the subsidies on policies bought through the Insurance exchanges (i.e. healthcare.gov).

o Eliminate the tax penalty to individuals who are required to have health care coverage but choose to go without.

o Eliminate the tax penalties on large employers who do not offer health care insurance to their employees.

o Reduce extra taxes such as taxes on those with very high incomes and on certain companies in health-care related industries.

Starting in 2019, Democrats control the House

In 2019, Democrats became the majority party in the House of Representatives.

As a result, Republicans no longer have the ability to pass reconciliation bills. Any bills (including those that would end ObamaCare, require support from Democrats.

How would the law be affected?

The components of ObamaCare all are interwoven, so breaking one has the potential of making the entire health care policy unworkable.

For example...

Medicaid

Prior to ObamaCare, each state had its own criteria for Medicaid eligibility.

Medicaid Expansion allowed states to increase coverage to anyone earning less than the federal poverty level at little cost to the state. With no federal money to pay for Medicaid Expansion, health care for those Americans who were not covered before ObamaCare would again be uncovered (unless a state decided to now pay for coverage it didn't pay for before).

Subsidies

The federal government helps people pay for insurance through subsidies. So if an insurance company is charging $1,000 a month for a policy and the government's subsidy is $700, you would pay only $300.

If Congress cancels those subsidies, you would need to pay the entire $1,000 in order to keep your coverage.

Mandate

The mandate to maintain coverage is enforced by the tax penalty for not having it. If that penalty is eliminated, many might choose to go without coverage - especially those who consider themselves to be in good health. From an insurance company's point of view, that would mean less income to cover the expenses of the less healthy customers who remain. Those expenses would be covered by raising premiums for their remaining customers.

Eliminating the tax penalties on large employers who do not offer health care insurance to their employees means that fewer employees will get insurance from their employer. They will need to buy insurance on their own (effectively a pay cut) or go without coverage.

Taxes

Many of the cost benefits of ObamaCare (Medicaid Expansion, subsidies) are paid for by extra taxes on those with very high incomes and on certain companies in health-care related industries. Eliminating these taxes would mean the federal government would need to find the money to pay for these benefits from somewhere else (or not pay them).

The effect of these things combined would make insurance unaffordable for most people - while those earning very high incomes would save money on their taxes.

Fewer insured, higher premiums

The Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) studied what would happen if the PPACA were dismantled this year. The largest effects would start next year, as insurance companies and people already have plans locked in for this year.

They estimate...

o In 2018, the number of uninsured Americans would increase by 18 million.

o In 10 years, one out of every five Americans under age 65 would be uninsured.

o In 2018, premiums for plans purchased on the exchange would increase by 20 percent over what they already are projected to increase.

o Premiums would double over the next 10 years.

o With fewer people buying insurance (mostly the least healthy who cost insurance companies the most), insurance companies would leave the market - reducing competition.

o Half of the U.S. population would live an an area that had no insurers offering policies on the exchanges.

The healthiest could buy coverage outside the exchange

The previous section discusses health coverage plans purchased through a state's exchange. Unless Obamacare is repealed, those plans still would need to cover everyone - regardless of their health situation.

Without the mandate, people would be free to buy policies outside the exchanges. Those policies, however, might not cover things such as preventive care that ObamaCare requires. They also would be able to discriminate against those with pre-existing conditions - making insurance for those people even more costly.

When Obamacare was being debated, President Barack Obama famously said people could keep their plan if they wanted. That turned out to be untrue for many, because their plans did not cover the essential health benefits that Obamacare requires.

Plans to replace ObamaCare offer fewer protections

There have been, and continue to be, a wide range of proposals to replace ObamaCare as the country's healthcare policy.

They include a 2016 policy analysis by Rep. Paul Ryan and a 2015 bill proposed by Rep. Tom Price (Price later became secretary of Health and Human Services, which would administer any health care policy).

A few concepts in these proposals are common to several other proposals...

o Individuals and families would be encouraged to pay for health care through health savings accounts. These provide tax advantages for those with high incomes. They do nothing for those who do not have high incomes.

o Insurance companies would be allowed to sell policies outside of their state. Each state regulates its insurance companies - some providing more protections than others. This would allow all insurance companies to be based in states that offer the fewest consumer protections because they still would be able to sell to employers and residents in states with more protections.

In our discussion of health care policy, we list criteria that we feel should be used to evaluate any national health care policy.


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