Editor’s Desk

7 Things You Should Know About the AHCA

Peter Wehrwein
  1. The official name is the American Health Care Act and so the companion initialism is AHCA. Twitter was joking Monday night about how much trouble the addition of that measly H is causing. Other AHCAs like— this one and this one—are going to see more action on their Twitter feeds and clicks on their websites. Nicknames include GOPCare, Ryancare, and Trumpcare. Democrats are using Trumpcare—in the same way that Republicans used Obamacare—because they want to hang any problems on the president. Conservative critics have called it Obamacare Lite because they don't think it goes far enough in overturning the ACA. President Trump does seem to backing the bill. On Tuesday, he said he was proud to support the "replacement plan" and that it followed the guidelines he set out in his Congressional address last week. And his tweets have been supportive.
  2. The bill doesn’t change some of the most popular provisions of the ACA. children will still be allowed to stay on their parents’ policies till age 26 and insurers can’t refuse coverage or charge higher premiums because of pre-existing conditions. It also doesn't touch the ban on lifetime and annual limits. The New York Times put together a helpful side-by-side comparison of the ACA and AHCA for those who want a quick, one-stop look at which parts of the ACA the Republicans are keeping and which parts they want to change.
  3. Although there’s a pressure on the Republicans to pass a bill and get it signed by President Trump, the AHCA would unspool some important parts of the ACA fairly slowly. For example, Medicaid expansion would continue with an enhanced federal funding till 2020. Similarly, the ACA premium tax credits won’t be repealed and replaced till 2020, although Timothy Jost, the Health Affairs must-read on everything ACA-related, said in his post yesterday that there will be important changes in the interim period if the AHCA becomes law. For example, the premium credits could be used to buy off-exchange plans and catastrophic plans. That would seem to be more bad news for the exchanges because one of the main incentives for buying coverage through an exchange the way to get an ACA premium subsidy.
  4. The Congressional Budget Office (CBO) hasn’t “scored” the AHCA, so it’s effect on the federal budget and on the number of uninsured is unknown. As Joe Biden might say, CBO scoring is a big %@! deal—CBO scoring had a major influence on how the ACA was cobbled together—but key House Republicans are talking about pushing the bill through without CBO numbers. Avik Roy, a health care policy expert with impeccable Republican credentials who has devised his own ACA alternative, said in a Forbes commentary on Tuesday that he has problems with the way CBO models health care, but the “AHCA itself contains enough flaws that there can be little doubt that the plan will price millions out of the health insurance market.” Former CMS Administrator Andrew Slavitt tweeted Monday night that "the biggest marketing gimmick is to release it or mark it up, or potentially even vote on it without a CBO score." Republicans are pushing back on the where's-the-CBO-score? story line. At a press conference on Wednesday, Ryan downplayed the lack of CBO scoring and said there will be numbers next week, according to a Washington Post story. The Post also reported that GOP congressional staffers noted that other important pieces of health legislation, like the 21st Century Cures Act, weren't CBO scored, although, presumably, the budget impact here is far more significant.
  5. The AHCA gets rid of the ACA’s individual mandate and replaces it with a 30% “continuous coverage” surcharge. Continuous coverage was in Paul Ryan’s A Better Way proposal last summer, so it wasn’t surprising to see it in the bill that came out last Monday.

    Vox’s Sarah Kliff does a nice job of explaining (exposition is Vox’s stated mission) how the surcharge—and other parts of the AHCA—will work. The gist: If you have a break in insurance coverage of more than two months, insurers could tack a 30% surcharge on your premiums once you buy health insurance again. The surcharge ends after a year. The thinking is that the prospect of the surcharge will give people an incentive to maintain their coverage and keep more people in the insurance pool. The wider the pool, the more stable the market. Conceptually, the surcharge is akin to the Medicare Part B late enrollment fee.

    In his tweetstorm Monday night about the AHCA, Larry Levitt at the Kaiser Family Foundation said the continuous coverage provision will have the opposite of the intended effect: “For people healthy and uninsured, a 30% premium surcharge would actually discourage them from signing up until they get sick.” Roy wrote about the flip side: the surcharge encouraging a disproportionate number of high-risk people to get coverage, so insurers will be covering them at a loss. It is, he wrote, a recipe for adverse selection death spirals. Jost notes that the surcharge will be more expensive in absolute dollars for older Americans because their premiums are higher. And under the AHCA, they might get even more expensive for older American because the bill proposes loosening the age ratios on premiums from the ACA-mandated 3 to 1 to 5 to 1.

  6. The AHCA ditches ACA’s scheme of tax credits to subsidize premiums for insurance bought on the ACA exchanges with a scheme of its own. The ACA credits are tied to income and premiums. The AHCA tax credits are based primarily on age and don’t vary with premiums, a drawback for Americans living in regions of the country with expensive health care and high premiums. Here are the age-banded tax credits as outlined in an issued by the House Ways and Means Committee Monday night:
    • Under age 30: $2,000
    • Between 30 and 39: $2,500
    • Between 40 and 49: $3,000
    • Between 50 and 59: $3,500
    • Over age 60: $4,000
    The tax credits are additive within a family but there is per-family cap of $14,000.

    Previous Republican proposals would have made the tax credits available to anyone buying insurance in the individual market—even affluent Americans. That was done partly in the name of the simplicity.

    But last night’s AHCA phases the credits out starting at incomes of $75,000 ($150,000 for joint filers) at rate of $100 per year for every $1,000 in income. The tax credits are refundable, which means that if your federal income tax bill is less than the credit you are owed, you’ll get the difference as a tax refund. They are also advanceable, which means people can get them when the premiums are due.

    Kaiser tweeted out a chart last night that supports criticism that the AHCA scheme tax disadvantages low-income Americans. According to Kaiser’s calculations, in 2020, on average, a 40-year-old with an income of $20,000 would receive $1,143 more in tax credits under the ACA than under the AHCA ($4,143 vs. $3,000). It's the reverse for 40-year-olds earning $40,000: They would receive $1,979 more under the AHCA than under the ACA ($3,000 vs. $1,021). In addition, Roy pointed out that the AHCA phases out tax credits at a much higher income level than the ACA. This year, the ACA tax credit tapers off at an income of $48,240 whereas under the AHCA it would end at an income of $105,000, by Roy's figuring. (Jost came up with slightly different numbers).

  7. The AHCA would increase amount that Americans can put into health savings accounts to $6,550 per year from the current limit of $3,400. For families, the HSA contribution limit would be $13,100. The new limits match the sum of the annual deductible and out-of-pocket expenses permitted in a high deductible plan, according to the Ways and Means explainer. Republicans have long argued that HSAs are an effective way to put “skin in the game” and create an incentive for individuals to make health care decisions that take into account price and quality. Democrats and the ACA's defenders are castigating this change as another move that will advantage higher earners because only those with higher incomes can afford to sock more money away in the tax-advantaged HSAs.