February 24, 2017

House Releases Obamacare Repeal Policy Brief

The Ways and Means and Energy and Commerce Committees released a policy brief Feb. 17 that broadly outlines key elements of the House of Representatives’ plans for repealing and replacing the Patient Protection and Affordable Care Act (PPACA).

With many GOP members expecting contentious local town hall meetings coinciding with the start of the weeklong President’s Day district work period, Speaker Paul Ryan (R-Wi) instructed the committees to prepare a high-level policy brief that summarizes the major problems plaguing Obamacare and outlines the Republican vision for reforming the current health care system.

The first part of the 19-page document offers numerous startling statistics that paint a dire situation facing PPACA. For example, House Republicans cite 25 percent average premium increases for policies purchased via the insurance exchanges in support of the claim that everyday Americans cannot afford health coverage. Despite promises of expanded competition, the policy brief also highlights that nearly one-third of all U.S. counties currently have only one insurer for the individual market.

In order to correct the many problems plaguing the current health care system, House Republicans pledge a three-pronged strategy of repealing and replacing PPACA, working with Tom Price, secretary of Health and Human Services (HHS) to modify or issue new Obamacare regulations and enacting separate legislation for such disparate concepts as permitting health insurance companies to sell policies across state lines and eliminating the current exemption from Sherman antitrust laws for health insurance companies.

The policy brief also highlights many existing PPACA policies that House Republicans will attempt to repeal. They include rendering the individual and employer mandates moot by zeroing out any financial penalties for policy noncompliance, eliminating annual taxes on health insurance companies, medical device companies, and brand-name prescription drugs and overturning existing limitations on flex spending and health savings accounts (HSA) to purchase over-the-counter health products.

The House Republican plan to replace PPACA consists of four major components, specifically new health care tax credits, expanded access to HSAs, state innovation grants to help cover beneficiaries with pre-existing conditions and overhauling Medicaid.

Health Care Tax Credits
A new section of the tax code that offers universal, refundable tax credits will be key pillar of the House Republican plan to enable all Americans to retain equal access to quality health coverage.

Under PPACA, only poorer individuals or families that meet certain income thresholds are eligible for subsidies to purchase prescriptive insurance policies through the exchanges. The subsidies are given directly to the insurance companies. Beneficiaries who fail to buy policies that meet all Obamacare requirements via the exchanges are ineligible for the subsidies. According to the policy brief, House Republicans view Obamacare’s insurance subsidies as expensive, inefficient and highly rigid.

In lieu of the current process, the policy brief outlines universal, refundable and advanceable tax credits, or monthly government payments to beneficiaries to help offset insurance premiums costs. Traditional refundable tax credits require individuals to wait until they file their taxes the following year before they receive a government payment. Advanceable tax credits would be available to all American citizens and qualified aliens who are not offered insurance coverage either through a government program (e.g., Medicare/Medicaid) or employer-sponsored care.

The amount of the tax credit would be based on an individual’s age. Tax payments could be used to purchase any eligible plan approved by a state and sold in their individual insurance market. Qualified plans include catastrophic coverage which is currently barred under Obamacare. The tax credit can also be used to keep children on a parent’s health insurance plan up until age 26. Individuals who purchase health insurance policies that are less than cost of the tax credit can retain the difference so long as it is deposited into an HSA.

Expanded Access to HSAs
House Republicans plan to use expanded HSAs to ensure equal access to more affordable health insurance policies. HSAs allow individuals and employers to contribute to a tax-preferred account up to specific financial threshold as long as they utilize a high-deductible health plan as their primary form of insurance coverage. Under PPACA, the maximum amount that can be contributed in 2017 to an HSA by both a beneficiary and employer is $3,400 for an individual and $6,750 for a family. According to the policy brief, House Republicans support increasing the maximum HSA contribution amounts to $6,500 and $13,100 for individuals and families, respectively.

State Innovation Grants
The policy brief also confirms House Republicans’ preference to use state high-risk pools as the primary way of retaining the prohibition on insurance companies denying coverage to individuals who have pre-existing health conditions.

Although the details within this section are somewhat vague, it appears that the federal government would provide innovation grants to states to resuscitate dormant high-risk pools that were in operation prior to PPACA. The grants could also be used to cut out-of-pocket costs and promote access to preventive services, though it is presumed that the individual states, rather than the federal government, would be given authority over what they determine to be essential health benefits for beneficiaries.

Medicaid Reform
In general, the House Republican policy brief argues that PPACA’s Medicaid expansion provides overly generous benefits to “able-bodied” Americans and incentivizes states to offer more benefits under the guise of expanded patient access to care. Yet, the Republicans criticize the Medicaid expansion policy for providing insufficient compensation for physicians administering these services, thus undermining the opportunity for lower-income Americans to truly enjoy expanded access to care.

As a result, the policy brief indicates that increased federal funding for states that elected to expand Medicaid under Obamacare will be repealed after a yet-to-be-determined transition period. In lieu of the Obamacare Medicaid expansion, states will have the option of receiving funding based on a per-capita allotment or via a block grant.

Offsets and Timeline
House Republicans failed to include any specifics regarding how they will finance the cost of their PPACA replacement policy or the timeline for enacting the legislation. In order to pay for the new tax credits and expanded HSAs, the American College of Radiology (ACR) government relations office has learned that the GOP continues to debate capping the amount of money employers can deduct from income and payroll taxes associated with providing health insurance benefits to their employees.

While this policy change would undoubtedly raise massive amounts of federal revenue, altering this major pillar of the existing tax code is expected to generate tremendous opposition from many different types of employers. Companies rely on the current system of tax deductions to offer generous health benefit packages to attract qualified employees. Many employers will likely protest that this policy change would make their businesses less competitive.

Despite the lack of consensus around budgetary offsets, House Republicans are expected to move expeditiously in the coming weeks to repeal and replace PPACA. The House Ways and Means and Energy and Commerce Committees could introduce legislation implementing the major aspects of the policy brief next week. Following the introduction of legislation, key committees could schedule full committee legislative “mark-ups,” or opportunities for members who serve on the House Ways and Means or Energy and Commerce committees to offer amendments during the week of March 13. Speaker Ryan also continues to stress the need for the House to pass the PPACA repeal and replace bill by the end of March.

The Senate, however, is moving at a much slower, deliberative pace. It is unclear at this time whether Senate leaders support the House policy brief or are committed to introducing their own legislation. ACR members are encouraged to follow the ACR Advocacy in Action eNews for additional updates on the ongoing effort to repeal and replace PPACA.