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Republicans' new ACA replacer, dissected

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Republicans have included a number of provisions that could cause problems for health insurers in a new proposal for replacing the Affordable Care Act.

The proposal, outlined in a 37-page document with the title “A Better Way,” could help insurers sell health coverage in multiple states, by letting states join together to form multistate health insurance regulation compacts.

A second provision could give insurers more flexibility to charge older consumers more for coverage.

A third could help insurers punish consumers who game the system by waiting until they get sick to pay for coverage. That provision would let insurers increase rates for consumers who fail to buy coverage when they are young, or who go for long periods without having coverage.

But, like earlier Republican ACA overhaul bill proposals, the new proposal would keep some ACA consumer protection provisions that have been popular with voters but expose insurers to health claim proposal.

Related: Ryan seeks to end ACA while keeping its most popular parts

The proposal could also limit or eliminate some of the defenses insurers have used to manage health claim risk, and it could force insurers to compete harder to hold on to enrollees.

For a look at some provisions in the proposal that might please consumers and employers but concern health insurers, read on:


Some health policy observers say the big gorillas in the health insurance market are just too big. (Photo: Thinkstock)

1. The proposal could tighten the antitrust rules that apply to health insurers.

The new proposal calls for policymakers to study the possibility of eliminating a law that gives health insurers some relief from the requirements of the McCarran-Ferguson Act.

The McCarran-Ferguson Act keeps companies from joining together to form trusts that hurt consumers.

Insurers say their limited federal antitrust exemption simply gives them the ability to work together to develop standard forms, and to pool information about their claims, so they can do a better job of projecting future losses and setting prices.

The authors of the new Republican proposal acknowledge that what eliminating the limited exemption would do is controversial, but they propose having the U.S. Government Accountability Office look into whether eliminating the federal exemption, and changing state antitrust rules, could due to the level of competition in the health insurance market. 

Related: Groups Assail Antitrust Repeal


Republicans say they fear the Obama administration will try to reduce employer use of self-insured health plans by classifying stop-loss insurance as group health insurance. (Illustration: Thinkstock)

2. For employers, the proposal could make using a self-insured health plan more attractive.

The Affordable Care Act exempts employers that self-insure their health plans, rather than relying on health insurance from outside insurers, from some ACA requirements.

The sponsors of the plans have argued that they already must comply with some ACA mandates, and that they are exempted from some other ACA mandates because employers with self-insured plans have an obvious economic incentive to minimize claim costs and administrative costs.

Some employers that self-insure use stop-loss insurance, or insurance for health plans, to minimize their exposure to catastrophic health claim risk.

The authors of the new Republican proposal say some fear that federal regulators will try to discourage employers from self-insuring, and using stop-loss, by classifying group health stop-loss insurance as group health insurance.

The proposal authors say they want to preserve employers’ ability to self-insure by creating a clear statutory distinction between stop-loss insurance and group health insurance.

Related: Self-insured plans seek PPACA protection

Piggy bank in a vise

Health insurers have argued that they need tough defenses against antiselection, such as purchase mandates, to make offering coverage without medical underwriting economically feasible. (Photo: Thinkstock)

3. The proposal would eliminate the current ACA “shared responsibility” penalty system that encourages individuals to buy health coverage and large and midsize employers to offer health benefits.

The ACA lets issuers of major medical coverage use information about location when deciding whether to sell an applicant coverage. An issuer can consider an applicant’s age, location and tobacco use when setting premiums. An issuer cannot use any other information about an applicant’s health status when setting premiums.

When members of Congress were debating the proposals that created the ACA, America’s Health Insurance Plans said the ACA would have to include a health insurance purchase mandate to make the ban on medical underwriting practical. 

Otherwise, insurers said, letting sick people buy major medical coverage would drive up claim costs and premiums, healthy people would stop buying health coverage, and only sick people would continue to buy coverage.

In the new proposal, Republicans propose keeping the ACA ban on issuer use of personal health status information when issuers are deciding whether to sell an applicant major medical coverage. “No American should ever be denied coverage or face a coverage exclusion on the basis of a pre-existing condition,” according to the proposal text. “Our plan ensures every American, healthy or sick, will have the comfort to knowing they cannot be denied a plan from a health issuer.”

Republicans say they would also keep the ACA ban on lifetime limits on individual benefits payments.

Insurers would have to offer coverage at standard premium rates to all consumers, including those with serious health problems, who had always had individual or group health coverage.

An issuer could charge more for applicants who had gone without health coverage. The Republicans say in the new proposal that they would provide $25 billion in funding for risk pools for uninsured people with health problems who needed help getting affordable health coverage. But health insurers would, apparently, still be on the hook for providing standard-rate health coverage for continuously insured people with serious health problems.

Related: As Panel Meets, AHIP Makes Guaranteed Issue Offer

BackpackRepublicans say their health care tax credit would be as easy to move from plan to plan as a backpack. (Photo: iStock)

4. The proposal would replace the current exchange plan premium tax credit system with a new health care “backpack” tax credit.

The Republicans say in the new proposal that they want to replace the current Affordable Care Act public exchange insurance tax credit, which works only with exchange plans, with a much more portable tax credit.

A consumer could use the so-called health care “backpack” tax credit for health care services, dental services or over-the-counter drugs as well as for health insurance, Republicans say in the new proposal.

A health insurer might have to compete with other insurers, and also with dentists, eyeglass makers and sellers of aspirin, for its share of an enrollee’s backpack tax money.


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