Gary Waters/Ikon Images/Getty Images
Gary Waters/Ikon Images/Getty Images
The Republican bill to repeal and replace the Affordable Care Act would make significant changes to the U.S. health insurance system. It would unwind many of the taxes and coverage mandates of the law, also known as Obamacare. And it would gradually overhaul Medicaid.
The bill would affect incomes and health coverage for millions of Americans. Some people would be better off. Others would be worse off. The original bill could change as it makes its way through Congress, but here's an early forecast of some of the winners and losers.
Young, healthy people who should find cheaper insurance policies
Under Obamacare, insurance companies selling on the individual market are required to offer relatively robust coverage, and they can only charge their oldest customers three times as much as the youngest. This means young, healthy customers sometimes have to buy more coverage than they want, and pay a higher price for it. (That's one reason buy-in among young people has fallen short of expectations and why the resulting "risk pool" has been older, sicker, and more costly than expected.) The GOP replacement plan would allow insurance companies to sell more stripped-down polices, and they could charge their oldest customers five times as much as the youngest. The result should be cheaper, more attractive policies for the young and healthy. S&P Global Market Intelligence predicts the average premium for a 21-year-old would drop by about 20 percent, to around $2,600 per year, much of which would be covered by the plan's $2,000 tax credit. "Two-thousand dollars for someone in their 20s does go a long way, which is why we think there will be more people in that age group who can afford it and will sign up," says Deep Banerjee, director at S&P Global Ratings.
Residents of low-cost states
Subsidies for insurance customers under the Affordable Care Act are pegged to actual insurance costs in each region: higher where insurance (and medical care) are costly; lower where policies are more affordable. Under the GOP replacement plan, tax credits for each age group would be the same nationwide. That would be a boon for people in areas where insurance costs are low relative to the credits. (This interactive map from the Kaiser Family Foundation shows how the costs vary by state.)
Wealthy people who would see a tax break
Obamacare is funded in part through higher taxes on the wealthy, including a 3.8 percent tax on investment income and a 0.9 percent payroll tax for individuals making more than $200,000 and couples making more than $250,000. The GOP replacement plan would eliminate these taxes, giving a windfall to the wealthy. "Clearly the biggest winners are those people," says Roberton Williams of the nonpartisan Tax Policy Center, who notes the tax savings on $1 million in investment income would be $38,000. "That's not chicken feed."
Libertarians who want to take the risk
People who simply don't want to purchase insurance would no longer face a tax penalty for failing to do so. The penalty under Obamacare for 2016 was $695 or 2.5 percent of income.
Older, sicker people who would likely have to pay more for insurance
Under the GOP replacement plan, insurance companies could charge their oldest customers five times as much as their youngest — up from a maximum 3-to-1 ratio under Obamacare. S&P predicts the average premium for a 64-year-old would jump nearly 30 percent, to $13,125. The GOP plan's maximum tax credit of $4,000 would cover less than a third of that. S&P's Banerjee notes: "$3,500 or $4,000 for someone in their 50s and 60s really doesn't go a long way."
Residents of high-cost states
Unlike the insurance subsidies in Obamacare, tax credits in the GOP plan don't vary with regional insurance costs. So people who live in areas where health care and insurance policies are expensive may end up paying more for their own coverage.
The GOP replacement plan preserves Medicaid as-is through 2019, including the Affordable Care Act expansion, which is funded almost entirely by the federal government. Beginning in 2020, the GOP plan would limit the federal contribution on a per capita basis, while shifting control of Medicaid to the states. Depending on what happens to costs, states could be forced to provide skimpier coverage, reduce their Medicaid rolls, or both. S&P estimates there would be 4 to 6 million fewer Medicaid recipients by 2024.
For hospitals, the 20 million Americans who gained coverage under the Affordable Care Act means 20 million more paying customers. To the extent the GOP replacement results in fewer people having insurance, hospitals could be forced to provide more uncompensated care. The American Hospital Association urged lawmakers to "make continued coverage a priority," so as to avoid harmful impacts on "the backbone of the nation's health care safety net."
"There really needs to be an understanding of the fact that real lives are impacted," says Karen Teitelbaum, CEO of Sinai Health System in Chicago. "People who were just getting used to having care may feel that they don't have the choice now in terms of primary care physicians and good prenatal care. I'd hate to see people go back to using the emergency department or waiting till they're so sick that there's a very high cost to human life with this."
Not Affected (Directly)
People who get health care through an employer
Around half of all Americans get health care coverage through a workplace policy. These people would be largely unaffected if Obamacare gives way to the GOP replacement plan. The Affordable Care Act included a tax on so-called "Cadillac" insurance policies, but Congress has already postponed the effective date to 2020. The GOP plan would push that back further, to 2025. A survey by the Kaiser Family Foundation shows costs for employer-provided insurance have been rising relatively slowly in recent years, since the Affordable Care Act took effect. The slow growth in premiums has been partly offset, though, by rising deductibles and co-pays.
Win Some/Lose Some
Although insurance companies expected to benefit from additional customers under Obamacare, many companies have lost money trying to serve the individual market. S&P predicts insurance company profitability would improve under the GOP replacement plan. However, insurance companies could lose out on a growth opportunity in managing Medicaid for states.