American Health Care Act IntroducedRobert M. Goldman, CFA
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Late on March 6, 2017, Republicans in the House of Representatives introduced legislation recommendations named the American Health Care Act, which is the much anticipated Affordable Care Act (ACA, or Obamacare) repeal and replace legislation. So begins a legislative process which will move, or not, through the House of Representatives and Senate, and ultimately land on the desk of President Trump.
Relevant legislative recommendations are now in the House of Representatives Ways and Means Committee (the 57 pages of recommendations may be accessed here) and the Energy and Commerce Committee (the 66 pages of recommendations may be accessed here).
The legislation recommendations will be marked-up by both committees on Wednesday March 8, 2017 at 10:30 am est. The Ways and Means Committee hearing will be live streamed and the live stream may be accessed here:
Here’s our basic take (based on the highlights to follow):
- Reduced mandates and lower taxes strike us as good things for America’s economic growth.
- Individuals won’t see significant pocket book changes until 2020, and maybe not even then.
- Most of society now enjoying health insurance premium subsidies under the ACA may end up paying a bit more, but programs to allow for the purchase of insurance across State lines may increase competition and thereby eliminate this increase in premium.
- For the most disadvantaged amongst us, any premium increase is too much. But, States have until 2020 to get these individuals into existing expanded Medicaid programs. After 2020, though, notwithstanding the Patient and State Stability Fund and with no Congressional Budget Office scoring, how society intends to fund healthcare insurance for society’s most disadvantaged is an open question.
Here as we see it are the highlights;
Individual and employer mandates eliminated retroactive to January 1, 2016.
No coverage exclusions or premium differences for those with pre-existing conditions allowed (ACA benefit thus maintained).
Children may stay on parents healthcare plans through the age of 26 (ACA benefit thus maintained).
Insurance premium relief through tax credits based on age (with some modification based on income), from ACA’s insurance premium subsidies based on income, but no change until 2020:
- Premium tax credits (ACA income-based subsidies to help individuals pay for insurance premiums) will remain for 2018 and 2019, and thereafter be eliminated. The premium tax credit for 2018 and 2019 will be extended (beyond what is now allowed under ACA) to non-exchange insurance programs and to catastrophic-only insurance plans.
- Refundable tax credits beginning 2020. These are age based credits ($2,000-4,000 per family member based on age), reduced by $100 for every $1,000 of income over $75,000 (single) or $150,000 (joint filers).
A variety of ACA taxes will be eliminated (but not until 2018) or postponed:
- Eliminated (beginning 2018) include the medical device excise tax, tanning tax, net investment tax, certain brand pharmaceutical taxes, health insurer taxes.
- Postponed until 2025 (from 2020) is the employer Cadillac plan excise tax.
Maximum contribution limits to health savings account increased, and catch-up provisions allowed as of 2018.
Employer tax deductions reinstated, but not until 2018:
- Limits on employer’s deductions for employee remuneration (enacted under ACA) eliminated on healthcare insurance providers.
- Employers’ business expense deduction (reduced under ACA) for retiree prescription drug benefits, irrespective of any federal subsidy.
Medicaid expansion for healthcare insurance altered.
- Medicaid subsidies with respect to healthcare insurance would be converted from anyone eligible to a per capita cap on funding to States. This subsidy would be available for all individuals in the Medicaid expansion as of 2020.
- For those States who opted not to expand Medicaid with respect to healthcare insurance, $100 bln will be available over a five year period to serve as a so-called patient and State stability fund.
No Congressional Budget Office scoring that we see, so the societal costs and benefits seems a bit up in the air.