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Life Health > Health Insurance

GOP ACA change bill may favor commercial health

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The new Republican American Health Care Act draft could give health insurers an incentive to like their individual commercial health units a little more and their Medicaid units less.

A analysis suggests that the newly released draft could keep total support for individual commercial health coverage users about the same over the next 10 years but cut federal Medicaid funding by about 11 percent to 14 percent.

The House Republicans today posted a new, searchable version of the AHCA bill. A copy of the new, searchable text is available here.

Related: The big new House Republican ACA change draft is here

Like the version of the AHCA released Monday, which was not searchable, and an earlier version of the proposal leaked in February, the new version is a bill that would change Affordable Care Act spending and revenue-raising provisions, not a bill that would repeal and replace most or all of the ACA.

Drafters used that approach because Republicans hold just 52 seats in the Senate. Getting an ordinary bill through the Senate traditionally takes 60 votes. Senate traditions let a budget measure get through with just 51 votes.

The current AHCA verbiage is just a draft.

Sen. Rob Portman, R-Ohio, has joined with three other Republican senators to argue that the draft would cut Medicaid funding too much.

“We believe Medicaid needs to be reformed, but reform should not come at the cost of disruption in access to health care for our country’s most vulnerable and sickest individuals,” Portman wrote to Senate Majority Leader Mitch McConnell.

Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska also signed the letter.

Rep. Mark Walker, R-N.C., the leader of the House Republican Study Committee, has opposed similar proposals in the past, arguing that they looked too much like Obamacare. At press time, he had not yet weighed in on the new draft.

But, if the new AHCA draft took effect as is, it would eliminate the ACA individual and employer “shared responsibility” provisions, or coverage mandates.

The draft also would:

        • Eliminate the need for Medicaid coverage to meet ACA essential health benefits package requirements, and the need for major medical plans to cover about 60 percent of the actuarial value of the EHB package.

        • Let insurers sell coverage outside their state of domicile.

        • Widen the gap between what insurers charge the youngest adult enrollees and the oldest enrollees.

        • Replace the current income-based ACA exchange plan premium tax credits with age-based premium tax credits that could be used to buy coverage inside or outside the exchange system, with credit amounts ranging from $2,000 for people younger than 30 to $4,000 for people ages 60 or older.

        • Change the federal Medicaid funding formula.

        • Delay the onset of the ACA “Cadillac plan tax,” or 40 percent excise tax on high-cost employer-provided health benefits.

        • Kill the health insurer tax.

Old versions of the AHCA draft would have provided funding for grants states could spend on market stabilization programs, to replace the existing ACA risk corridors program, and that ACA reinsurance program that expired at the end of 2016. The Patient and State Stability Fund could provide $100 billion in grant funding through 2026.

The new AHCA draft might lead some insurers to rethink their strategies. (Image: Thinkstock)

The new AHCA draft might lead some insurers to rethink their strategies. (Image: Thinkstock)

Possible effects

Crude calculations suggest that the AHCA changes could hit Medicaid plans harder than commercial coverage issuers.


Government figures show that Medicaid and the Children’s Health Insurance Program now provide coverage for about 72 million people.

The AHCA draft could cut Medicaid spending by $560 billion over 10 years, according to Richard Fiesta, executive director of the Alliance for Retired Americans, a group that opposes the proposal.

The latest government National Health Expenditure projections show the federal government will account for $362 billion of Medicaid’s $567 billion in 2017 spending, and is on track to contribute about $4 trillion of the $7 trillion to be spent on the program through 2025.

Analysts at Standard & Poor’s predict the proposal will cut Medicaid enrollment by 4 million to 6 million. That would reduce total Medicaid enrollment by 8 percent.

But it’s possible that the cuts could be good for insurers with strong managed Medicaid units. Michael Neidorff, chairman of St. Louis-based Centene Corp., said in February that tight Medicaid budgets could create opportunities for carriers that know how to keep costs down.

Commercial individual major medical 

Commercial insurers cover about 19 million people through individual and family major medical plans, according to Mark Farrah Associates. About 12 million of those people got their coverage through the Affordable Care Act exchange system this year, and about 10 million are using the current ACA premium tax credit subsidy to pay for their coverage.

The Congressional Budget Office has estimated the government will spend $45 billion this year on ACA premium tax credit subsidies and cost-sharing reduction subsidies, and nothing on the expired ACA reinsurance program, the expired ACA risk corridors profit margin protection program or the ACA risk-adjustment program.

The CBO shows all commercial market programs together could lead to about $900 billion in federal support for health insurers over 10 years.

The S&P analysts predict the AHCA draft provisions could cut individual health enrollment by 2 million to 4 million, or about 10 percent to 20 percent.

In 2015, insurers received about $3,800 in premium tax credit subsidy support per tax credit user, according to Internal Revenue Service data.

But only the 10 million ACA exchange users who meet the strict income requirements for the subsidy can use it. The AHCA subsidy would have a much higher income cut-off, and all buyers in the individual market could use it.

Because insurers would no longer have to meet the current ACA benefits richness standards, they might be attract some of the moderately high-income people who are now uninsured with cheaper individual products.

If an average of 20 million people received an average of $3,000 in tax credits per year, for 10 years, that would send health insurers $600 billion in tax credit subsidy money.

Insurers would probably end up getting most of the $100 billion in AHCA draft federal stabilization grant money.

The AHCA draft also would eliminate $145 billion in ACA health insurer taxes, and it could eliminate $49 billion in Cadillac plan taxes.

Those items combined could add up to close to $900 billion over 10 years, or an amount comparable to the total amount of support shown in the CBO ACA support projections.


Although the AHCA draft system could be kind to insurers, many skeptics say the provisions that would make it generous and popular, such as the elimination of mandates and taxes, eliminate most obvious sources of program funding.

The Committee for a Responsible Federal Budget, for example, says drafters should have kept a provision seen in some earlier drafts, which would have raised money by capping the group health insurance premium tax exclusion.

Mark Rouck, an analyst at Fitch Ratings, says the draft would give insurers some benefits flexibility, but that it does not give them much underwriting flexibility.

Other AHCA draft provisions could expose insurers to more competition, Rouck says.

“Significantly increased competition can theoretically drive down pricing if insurers become very aggressive, which could pressure financial health if it goes too far,” Rouck says.


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