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New health reform bill shows why Republicans struggle with replacing ACA

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Sweeping new legislation unveiled by two congressional Republicans to partly repeal and replace the Affordable Care Act highlights the formidable political and policy challenges the GOP faces in taking on a law that has significantly expanded coverage and made popular changes in insurance practices.

The 117-page Health Empowerment Liberty Plan, or HELP, authored by Rep. Pete Sessions, R-Texas, and Sen. Bill Cassidy, R-La., offers libertarian-leaning proposals to help Americans buy health insurance or self-insure, guarantee they aren't discriminated against by insurers based on pre-existing medical conditions, equalize tax benefits for buying coverage, and create a more competitive health care delivery system.

With most Republicans demanding total repeal of the ACA, what's unusual is that the bill would allow people in ACA exchange plans to keep their plans and premium subsidies or switch to a new system under which everyone is eligible to receive a $2,500-per-person refundable tax credit for buying coverage.

“Someone who repeals (Obamacare) is left with nothing,” Rep. Sessions said at a recent news conference to discuss the bill.

But the bill would abolish the ACA's requirements that nearly everyone must have insurance and that larger employers must offer coverage to their workers. And in a provision that's likely to prove controversial, it would limit the tax exclusion for employer health plans to $2,500 per employee, exposing companies and workers to taxes for insurance benefits above that threshold. That's interesting because Republicans in Congress have railed against the ACA's Cadillac tax on higher-value employer plans.

“Someone who dislikes the Cadillac tax seems to be offering a proposal that functions very similar to the Cadillac tax,” said Ron Pollack, executive director of Families USA, a key figure in helping pass the Affordable Care Act.

But Joe Antos, a health policy expert at the conservative American Enterprise Institute, praised Rep. Sessions and Sen. Cassidy for addressing the health plan tax exclusion issue. Both Democrats and Republicans recognize the exclusion needs to be narrowed or eliminated to control national health care spending, he said, but everyone fears fierce blowback from large employers and labor unions, just as happened with the Cadillac tax. In December, with bipartisan support, Congress postponed the tax for two years, until 2020.

“Sessions and Cassidy are pointing to where we ought to go,” Mr. Antos said. “What they're talking about is potentially the first step in a negotiation that might take place next year, (whether presumptive GOP presidential nominee Donald) Trump or (presumptive Democratic presidential nominee Hillary) Clinton wins the election.”

The Sessions-Cassidy legislation comes as a House Republican task force convened by Speaker Paul Ryan, R-Wis., is set to release a health care reform proposal next month, which is expected to include full repeal of the Patient Protection and Affordable Care Act and restructuring of Medicare and Medicaid.

It's not clear whether the task force members — or Mr. Trump — will consider including elements of the Sessions-Cassidy bill in their proposals. Unlike the Sessions-Cassidy bill, the House task force proposal won't be presented in legislative form, meaning that the Congressional Budget Office won't be able to score it for its budget impact or how many people would gain or lose insurance.

A recent Modern Healthcare survey of 86 top health care industry leaders found that more than two-thirds opposed repealing and replacing the ACA. “I wish that the rhetoric about getting rid of the Affordable Care Act would just cease,” said Dr. Penny Wheeler, CEO of Allina Health System in Minneapolis. “It's wasted noise that our country doesn't need. Focusing attention on what actual aspects of the (law) need to be improved upon would be more of what I'd like people to focus on.”

The HELP Act would offer every adult a refundable tax credit averaging $2,500, adjusted by age and geography but not based on income; every child would be eligible for a tax credit averaging $1,500. People could use the tax credit to buy coverage on their own or have their employer apply it to their health plan at work. Alternatively, they could deposit the money in a health savings account and pay directly for their medical expenses.

People currently enrolled in ACA exchange plans could keep those plans and their premium subsidies. But those who aren't currently enrolled would only be eligible for the bill's new flat-dollar tax credits. These credits would provide less assistance to lower-income people and more to higher-income people, according to John Goodman, a libertarian health economist who helped Rep. Sessions and Sen. Cassidy develop the plan.

Mr. Pollack said replacing the ACA's mean-tested premium subsidies with tax credits for everyone regardless of income would be a poor use of government funds. The ACA subsidy system “ensures that taxpayer help isn't wasted on people who don't need that help,” he said. “This is a major step in the wrong direction.”

Sen. Cassidy said at a recent news conference that states could opt for a system with automatic enrollment that would cover everyone through the new tax credit rather than having people sign up for insurance.

The bill would abolish federal minimum essential benefits, though it would allow states to regulate coverage. People could buy cheaper limited-benefit plans with an annual cap on benefits. Those who buy such plans would receive asset and wage protection if their medical bills exceeded certain thresholds.

It also includes a number of measures to increase transparency and competition, including limits on out-of-network charges, requirements for providers and plans to disclose prices, and deregulation of physician-owned facilities, freestanding surgery centers, and retail clinics.

While it wouldn't touch Medicare, the bill would establish a system of federal block grants to the states for each of four Medicaid populations, based on the number of beneficiaries.

One observer found the HELP Act intriguingly unconventional but confusing. “It seems far more complicated than the ACA, which is far too complicated to begin with,” said Tim Jost, an emeritus law professor at Washington and Lee University who is an expert on the reform law. “I credit them with courage for putting an actual proposal out there rather than platitudes. But if the idea is to come up with a simpler way, it's heading in exactly the wrong direction.”

On top of that, he warned, the bill could severely disrupt the employer-based insurance system that covers most working-age Americans. Faced with sharp new limits on the deductibility of health benefits, employers could terminate their plans and tell their workers to take their new tax credits to the individual insurance market.

“It might be the kind of offbeat thing Trump would like, but I can't imagine mainstream Republicans signing on to anything that looks like actual legislation,” Mr. Jost said.

Mr. Antos also doubted the House Republican task force would adopt any of the more controversial elements of the Sessions-Cassidy bill. “I don't think the task force wants to cut off communications with other Republicans,” he said. “But I don't think they'll embrace it or say 'Hell no' either.”

Harris Meyer writes for Modern Healthcare, a sister publication of Business Insurance.