How will Tom Price's plan to replace Obamacare affect you?

February 08, 2017  

Representative Tom Price (R-Ga.), despite resistance from Democrats, has been confirmed as the new Health and Human Services Secretary in a 52 to 47 vote. The former orthopedic surgeon is widely expected to be a central figure in the Trump administration’s repeal and replacement of the Affordable Care Act, otherwise known as Obamacare.

While no one, including Rep. Price, can foresee the future, it is a good bet that any proposed changes to the ACA will start where the new HHS Secretary has already laid groundwork: the Empower Patients First Act, legislation Price has proposed four times in Congress. The EPFA has 58 cosponsors, has been widely endorsed by leading Republicans and has been proposed in the Senate by John McCain (R-Az.).

But what should we expect to change once Rep. Price gets to work? Using Price’s EPFA as a guide, as well as Paul Ryan’s A Better Way proposal, which was largely founded upon the EPFA, we are able to outline likely key changes to the ACA for Consumers, Insurers, Employers, Medicaid Recipients, and Pharmaceutical & Medical Device Companies.

Consumers

Affordable Care Act (ACA) Empower Patients First Act (EPFA)
Tax Credits
The ACA established government-run insurance markets in every state with mandates on individuals and businesses and federal tax credits to subsidize the insurance of lower income Americans. Price’s plan instead would offer fixed tax credits – pegged to a person’s age rather than their income -- so that they can buy their insurance policies in the private market.
What does it mean?
Tax credits would range from $1,200 a year for people 18 to 35 years of age to $3,000 for those 51 and older. In many regions of the country, that would hardly begin to cover the premiums and out-of-pocket costs for a relatively comprehensive health insurance plan.
Penalties
The ACA does not feature a “continuous insurance” penalty. The EPFA would introduce a penalty for not having continuous insurance. If someone allows their policy to lapse, the next time they return to the market they could be charged up to 150% of the standard premiums for the next two years.
What does it mean?
This is a big caveat designed to discourage people from obtaining coverage during an illness and then dropping the policy after recovering. However, enacting a 150% re-entry penalty would mean many people would remain uninsured.
Pre-Existing Conditions
There is no penalty for pre-existing conditions under the ACA. There is no penalty for pre-existing conditions under the Empower Patients First Act provided they had continuous insurance for 18 months before choosing a new policy.
What does it mean?
It is unclear at this time if a policy lapses that pre-existing conditions would be taken into account when an individual tries to get a new policy.

Insurers

Affordable Care Act (ACA) Empower Patients First Act (EPFA)
High-Risk Pools
“High-risk” populations were covered under the ACA, nearly eliminating the need for high-risk pools. Price would provide grants to states to insure the “high-risk” populations.
What does it mean?
His plan proposes to allocate $3 billion into state risk pools over a three-year period.
Selling Across State Lines
The ACA allowed for selling insurance across state lines. The GOP plan would encourage health insurers licensed to sell policies in one state to offer insurance to residents of other states.
What does it mean?

Some states already allow the sale of health insurance across state lines, but this practice has not yet been adopted by health insurers.

 

 

Mandated Benefits Packages
The ACA offers a standard package of benefits and currently limits insurers from charging their oldest enrollee three times as much as their youngest clients. The GOP plan would eliminate Obamacare-style mandates for insurers to include a standard package of benefits such as maternity services and pediatric care.
What does it mean?
This would allow insurers to offer cheaper, less comprehensive policies to younger people who are looking for a bargain.

Employers

Affordable Care Act (ACA) Empower Patients First Act (EPFA)
Tax Caps
Under the ACA, there is no cap on the employer tax exclusion. Price would likely roil businesses by imposing a cap on the amount of money that companies could deduct from their taxes to defray the cost of providing health insurance to their workers.
What does it mean?
Price’s approach would limit the employer tax exclusion for providing health insurance to $8,000 a year for individual policies and $20,000 for families. This exclusion is one of the largest in the federal tax code and costs the government an estimated $260 billion a year in foregone revenue.
Excise Tax
The ACA introduced the Excise or "Cadillac" Tax which is a 40% surcharge on the value of employer-based health premiums above specific thresholds. The GOP package may roll back those tax increases.
What does it mean?
The tax, currently scheduled to be implemented in 2020, may be rolled back.

Medicaid Recipients

Affordable Care Act (ACA) Empower Patients First Act (EPFA)
Expanded Coverage
The ACA expanded Medicaid coverage in 32 states. Price would repeal the expanded Medicaid coverage in 32 states and the District of Columbia for able-bodied single people and leave those current beneficiaries to fend for themselves on the open market, using other tax credits and benefits.
What does it mean?
Current recipients would move to the open market, using other tax credits and benefits.
Medicare Payments
The ACA made major reforms to Medicare payments. The new legislation is expected to leave these changes alone.
What does it mean?
No changes planned to Medicare at this time.

Pharmaceutical & Medical Device Companies

Affordable Care Act (ACA) Empower Patients First Act (EPFA)
Tax Increases
The ACA raised taxes on high incomes, prescription drugs, medical devices and health insurance. The GOP package may roll back those tax increases.
What does it mean?
This could be a positive development for the groups impacted by these tax increases.
Importing Drugs
The ACA does not allow the importation of drugs from other countries, such as Canada. Senate Republicans took their first leap towards repealing Obamacare by introducing an amendment to allow both pharmacies and individuals with prescriptions to order their pharmaceuticals from Canada and other countries where they sell for significantly cheaper prices than in the United States.
What does it mean?
The measure was voted down by Democrats but a similar proposal could be revived under Tom Price's leadership.

As changes in the law are proposed, debated, and passed, we will see more detail – and probably some compromises. Stay tuned for more posts from Cipher on this hugely important development as it progresses.

Sources: 8 Big Changes Under Tom Price’s Obamacare Replacement Plan, NCSL's OUT-OF-STATE HEALTH INSURANCE - ALLOWING PURCHASES


Insights from Dawn Faint, Director of Life Sciences at Cipher - Dawn helps companies in the Life Sciences space map their competitive environment, develop intelligence strategies which identify risks, and position them for future growth. Prior to joining Cipher, Dawn worked for many years in the Healthcare space in leadership roles at Cigna, Schering-Plough, Pharmacia (now Pfizer) and Johnson & Johnson companies Ortho Biotech and Ortho-McNeil, and in the Management Consulting space for Right Management.

 

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