Republican alternative ACA plan: 5 takeaways

In a much-anticipated move, House Republicans unveiled an alternative to the Affordable Care Act (ACA).

Related: How insurers should prepare for future ACA risk adjustments

The 37-page plan, “A Better Way”, unveiled by Speaker Paul D. Ryan (Wisconsin), presented ideas about health savings accounts, high-risk pools and sales of insurance across state lines.

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The plan did not provide a cost estimate, but would would retain the most popular elements of the Affordable Care Act (ACA):

·      Allowing young adults to stay on their parents’ health plan to age 26;

·      Banning insurers from charging people with pre-existing health conditions higher premiums; and

·      Forbidding insurers from dropping coverage if a policyholder becomes ill.

As far as Medicare goes, starting in 2020, the plan would gradually increase the eligibility age from 65 years to eventually reaching 67 years.

Mendelson

“This is a serious and thoughtful effort to retain those elements of the ACA that are most popular with the American people, and eliminate those that aren’t,” says Dan Mendelson, president, Avalere Health. “Americans feel that insurance industry practices of underwriting on the basis of pre-existing conditions and dropping coverage if a policyholder becomes ill are deeply unfair-so the policy retains those facets of the ACA.”

Related: HHS proposes clampdown on short-term health coverage

While Democrats immediately criticized the plan, the plan is an attempt to rectify some of the unintended consequences by the ACA and return power and decision making to the states, according to Bret Schroeder, healthcare expert at PA Consulting Group.

“Many believe that while there are many positive aspects of ACA, the plan oversteps its bounds and imposes undue financial implications that were not clearly thought through before the plan was passed into law,” Schroeder says. “ACA has been criticized by many because healthcare premiums as well as copays have continued to escalate and have not delivered on the promise of ‘making healthcare more affordable.’”

Double-digit premium increases have continued to outstrip wage growth causing angst among consumers.

Schroeder

“The insurers have lost money in the exchange market to the point where they have either dropped out completely or increased premiums and copays across the base,” Schroeder says. “These increases have put financial strain on families causing many to skip not only doctor visits for treatment, but also routine preventative care visits.” 

The ACA also has been criticized for the additional costs to states as they expand Medicaid. According to Schroeder, under the ACA, 31 states have expanded Medicaid to all non-elderly individuals with family incomes below 138% of the federal poverty level.

“At first, ACA picks up the first three years of benefit costs for expansion,” explains Schroeder. “But in 2017 states begin to shoulder a larger and larger share of these benefit costs. For some states, Medicaid costs are currently 20% of the state budget-this expansion puts additional pressure on already strained budgets. To compound this financial burden, the administrative costs will rise to manage these expanded programs. Some estimates place the administrative burden as high as $12 billion by 2020.”

Next: Five things to know about the GOP plan

Here are five things to know about the GOP plan:

#1. The policy eliminates the mandate to purchase-which was the part of the ACA that most Americans had difficulty accepting, and policy that is not achieving the expectations of the backers of the bill, according to Mendelson.

Reid

#2. Tax credits are available for all qualifying plans, not just those offered by government-run exchanges. “The best overall consumer values are currently available off the government exchanges,” David A. Reid, founder and CEO, EaseCentral, says. “However, when a consumer can have a significant portion of their premium paid if they buy from a government exchange the net cost is lower to the individual, even though the plan actually costs more. By allowing credits for any qualifying plan, the consumer will be able to choose among the most competitive plans available.  Ironically, those qualifying for subsidies-those needing the most help-don't get to buy the most competitive plans today.”

In granting subsidies to low-income people who want to purchase insurance, the policy also acknowledges that the ACA has primarily become a vehicle to get insurance to low-income people not eligible for Medicaid.

“So in that respect, this policy feels like it is establishing a compromise with the ACA,” Mendelson says.

#3. The Medicaid provisions of the plan are traditional Republican policy, “and give up much of the control and consistency that Democrats have labored to establish over the past decade in this program,” Mendelson says.

#4.  The plan would create high-risk pools. 

“However, large catastrophic claims can artificially impact an individual carrier's or employer's risk factor,” Reid says. “The total cost of catastrophic claims are driven more by the condition itself and there is less variable cost based on how the condition is managed.  Providers are able to compete when managing much of the care in our system but need a mechanism to re-insure these claims. This creates an environment that fosters better care at lower costs.”

#5. The plan would not completely do away with some Obamacare features. Specific recommendations in the report essentially make changes to provisions in Obamacare or retain insurance market reforms such as no pre-existing condition restrictions, coverage up to age 26, no rescission of coverage and expansion of high-risk pools.

Hoagland

“Therefore, one could conclude that the report does truly support the beginning of a step-by-step conversation the report espouses while advancing some additional approaches such as Association Health Plans [AHPs] to create broader membership pools and interstate compact pools,” says senior vice president, Bipartisan Policy Center, formerly Senate GOP staff. 

“In putting out this plan, Congressman Ryan and colleagues are clearly acknowledging that any effort to repeal the ACA also needs to provide a way to get coverage for low income people, and retain those provisions that are most popular with the American people,” Mendelson says. “This may represent progress in establishing a positive climate for health system change-which really requires bipartisanship to identify the next steps in establishing a consistent, efficient, and equitable healthcare system.”

While the ACA has always been debated passionately along partisan lines, the economic realities of ACA will soon extend beyond a Republican versus Democrat debate, according to Schroeder.

“I expect this to not only be an issue in the upcoming presidential election, but also a key challenge at the state level,” he says.

This plan is the beginning of the conversation, not the end, says Hoagland. “My experience has been that no law as big and expansive as Obamacare is perfect in the first draft,” he says.

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