On Friday, March 24, President Donald Trump and Speaker Paul Ryan made the decision to pull the American Health Care Act—the reconciliation bill that was designed to repeal sections of the Affordable Care Act—after it became obvious they didn’t have the votes to send the proposed legislation to the United States Senate. The House Freedom Caucus, a group of about three dozen highly conservative Republican lawmakers, is being blamed for the bill’s failure as the majority of its members refused to support the legislation. Their argument was that they had promised their constituents they would repeal and replace Obamacare but the Ryan plan stopped short of accomplishing that goal; instead, they referred to the bill as “Obamacare-lite” since many of the law’s provisions would remain.

Before deciding to walk away from the deal, President Trump visited with Freedom Caucus members, made some concessions, and then met with more moderate Republican lawmakers who were unhappy with the changes. In the end, it was clear that the party wasn’t united behind the bill, so instead of putting lawmakers on record with a vote for or against the unpopular proposal, President Trump agreed with Paul Ryan that it was better to withdraw the bill.

Obviously, this leaves us with a lot of questions:

  • What was in the American Health Care Act (and the amendments to the AHCA), and why was it so unpopular?
  • What was Paul Ryan’s “three step plan” to repeal and replace the Affordable Care Act, and are steps two and three still applicable now that his bill appears to be dead?
  • Are President Trump and Republican leaders really willing to let the Affordable Care Act “explode,” as they have said publicly, or will they make legislative and regulatory changes to help repair the struggling health care law?
  • Is there any chance of a bipartisan solution, or will Democrats push for a single-payer solution?
  • What in the world do we tell our clients?

Most of the answers are just a guess at this point, but we’ll share our thoughts on each of these questions. As the answers change, we’ll certainly let you know. 

The American Health Care Act

The American Health Care Act was introduced in the House on March 6, 2017 and it was pulled sometime around 4pm ET on March 24, 2017. The day before it was introduced, Senator Rand Paul was running around the U.S. House and knocking on closed doors with the hope of tracking down and making a copy of the legislation that he and his staff could review. He was unsuccessful in these efforts. In its short life, the bill made it out of committee, was modified by a “Manager’s Amendments,” and was changed yet again when President Trump agreed to the proposal to remove the essential health benefits from the ACA as of January 1, 2018. Here are the high points of the legislation (after the amendments):

  • The ACA’s Medicaid expansion would be rolled back over time and replaced with per-capita or block grants to the states. States would have the option of including a work requirement for non-disabled adults.
  • The ACA’s premium tax credits would transition into new age-adjusted income tax credits for people with health insurance. The credits would start at $2,000 for people in their 20s and increase to $4,000 for people in their 60s.
  • The individual and employer mandate penalties would immediately be reduced to zero. The individual mandate would then be replaced with a continuous coverage incentive that charges people who have gone without health coverage for 63 days or longer in the previous twelve months an additional 30% for the next twelve months.
  • The cost sharing subsidies currently available to people below 250% of the federal poverty level who purchase silver coverage through the federal or state marketplace would be phased out. In their place, the AHCA would create a stability fund, providing states with grants that they could use to help high risk individuals get coverage, stabilize the individual market, promote preventive care, reduce out of pocket costs, and more.
  • Most of the ACA’s taxes, including the taxes on insurance companies, pharmaceutical companies, and DME providers, would be repealed this year.
  • The popular guaranteed issue provision and Age 26 rule would remain, and age band rating would increase from 3-to-1 and 5-to-1.  The essential benefits requirement would be eliminated.

Because the Congressional Budget Office reported that the amended bill did not significantly reduce the deficit but that up to 24 million people would lose their health coverage, millions of people felt they would lose their current financial assistance, and premiums for older adults would increase significantly, the legislation was unpopular among the American people.

Three Step Repeal & Replace Plan

Freedom Caucus members were upset that the AHCA was not a full repeal of the Affordable Care Act, but, as Paul Ryan explained, it wasn’t meant to be. A full repeal would require 60 votes in the Senate, which seemed unlikely since Republicans only enjoy a two seat majority. As a result, Speaker Paul Ryan, HHS Secretary Tom Price, and others developed a three-step plan to repeal major portions of President Obama’s signature legislation and replace them with lower-cost and more effective solutions.

Step one, Ryan explained, was to pass the American Health Care Act. The Act was introduced as a budget reconciliation bill, which only requires a simple majority vote in the Senate.

Step two was to make additional changes through regulatory action. The Affordable Care Act says “the Secretary shall” more than a thousand times, assigning much of the responsibility for implementing the law to the heads of Health and Human Services, the Department of Labor, and the Treasury Department. Former HHS Secretaries Kathleen Sebelius and Sylvia Mathews Burwell had a big role in writing the rules that insurers, employers, and individuals had to play by for the past several years, and current Secretary Tom Price has the ability to undo many of those rules.

Step three was to pass additional legislation to further modify the Affordable Care Act. The theory was that Democrats may actually support some of these future bills after the passage of the AHCA and the regulatory changes. This, of course, is debatable, but there were several other ideas that weren’t included in the American Health Care Act. For example:

  • Selling insurance across state lines
  • Speed to market for prescription drugs
  • Pooling for small employers
  • Capping the employer mandate
  • Requiring price transparency from health care providers
  • Further expanding Health Savings Accounts

Even with the failure of step one (for now), there’s no reason the administration and GOP lawmakers cannot work on steps two or three. But will they?

The “Implosion” of Obamacare

President Trump and Speaker Ryan have both predicted that, with the failure of the AHCA, Obamacare will implode (or explode, one of the two) “very quickly.” The question is whether they will truly let the current law fail or take steps to keep it afloat. Again, steps two and three of Paul Ryan’s plan were intended to follow step one, but the steps are not fully reliant on the other steps; there’s nothing that says regulators can’t go ahead and make some regulatory rule changes and lawmakers can’t make some law changes aimed at stabilizing the market, reducing premiums, and expanding coverage.

Repair the Law or Medicare for All?

Some of the necessary changes to fix the ACA, though, will require Democratic support. President Trump has said that he welcomes their ideas and predicted in a recent tweet that “Democrats will make a deal with me on healthcare as soon as Obama Care folds - not long.”

The real question, though, is whether Democrats will be willing to work with Republicans or if they will instead take this opportunity to garner support for a single-payer, Medicare for All proposal like the one introduced by Bernie Sanders. This idea is addressed in a recent New York Times article that explains why single payer may not be a bad idea. Because “people have little knowledge” of the various treatment options available and because “policy language describing insurance coverage is notoriously complex and technical,” consumers “simply cannot make informed quality comparisons in this industry.”

One of the main ideas behind the Republicans’ free market approach to health care “is that buyers must be able to compare the quality of offerings of different sellers,” but author Robert H. Frank argues that this isn’t currently the case. Therefore, the push by Senator Sanders and others for a Medicare-for-All type system could gain some traction among the American people.

What to Tell Your Clients

In this time of uncertainty, it might be tempting to take a “wait and see” approach, but brokers must be careful to resist this temptation. Instead, we should help our clients recognize that health insurance and health care are complicated issues that are difficult to “fix” overnight. None of the current proposals on either side of the aisle is certain to pass, and any changes that are made will not happen right away; there’s always a transition period.

In the short-term, and possibly in the long-term, we may continue to witness rising premiums, deductibles, and out-of-pocket limits and adjustments to prescription formularies and provider networks to help keep costs under control. The policies available to consumers will likely have higher out of pocket costs, and they’ll need to purchase additional insurance to round out their health coverage.

You can start selling supplemental coverage now. It will help give your clients a little peace of mind of knowing they have help paying high out-of-pocket costs that other coverage may not, and it’s a great way to grow your block of business. Be sure to check out the AHCP Carriers Page for the numerous solutions we can add to your product portfolio.