Republican U.S. Sen. Susan Collins joined a Louisiana senator Monday to unveil new legislation aimed at replacing the Affordable Care Act.
The Patient Freedom Act of 2017, announced last week, would increase Americans’ access to affordable health care by giving states more flexibility in regulating health insurance, according to Collins and co-sponsor U.S. Sen. Bill Cassidy, a Republican from Louisiana.
The bill presents states with three options:
Door #1: The ACA is here to stay. If a state likes the ACA, it can keep it. (Anyone else hearing echoes of President Barack Obama’s oft-repeated and oft-maligned, “If you like your plan, you can keep your plan” comments about the health reform law?) This includes the provisions people like, such as subsidies that help consumers afford their coverage, as well as the less popular requirements, such as the mandates that large companies provide insurance and that everyone has coverage. The bill actually repeals the section of the ACA that imposes the mandates but allows states to reinstate it.
In places such as Maine, where the governor and legislative Republicans have resisted the ACA, this option might more accurately be described as, “If you like your plan and your state government decides to play along, you can keep it, as long as your insurer continues to participate,” Mitchell Stein, a Maine health policy consultant, said.
It also may not give states a way to fix any known problems with the ACA, he said.
For the sake of simplicity, we’ll skip ahead to:
Door #3: No thanks, Uncle Sam. States can decline all federal funding set aside through the ACA and devise their own programs. But they have to keep some consumer protections required under the ACA.
Collins and Cassidy don’t expect many states to jump on these two options, though. They see the most potential in:
Door #2: Keep the money, cut the cord. States receive 95 percent of the federal money they were due under the ACA. Those funds are now used to pay for the subsidies and for Medicaid expansion. States could receive the money in one of two ways — either as a grant based on the number of beneficiaries or in the form of tax credits consumers use to help pay for insurance. In both cases, the money is deposited into a Roth health savings account, “meaning the money will go directly to the patient.”
The financial assistance would benefit about the same population that now relies on Obamacare insurance — people who buy their own plans rather than getting it through work or government programs, such as Medicaid and Medicare. In Maine, that’s about 75,000 people. But the bill aims to serve more people, including the 30 million Americans who remain uninsured under the ACA.
Collins and Cassidy are calling this the “default option,” because states could automatically enroll uninsured individuals in “basic health care coverage” unless the person opts out. That’s designed to ensure that enough healthy people enroll to offset higher costs for sicker ones but stops short of mandating it.
That coverage would be a high-deductible health plan with additional coverage for prescription medications. People who can afford it could choose to buy a more generous plan.
States choosing this option would get extra funding to use for “population health initiatives.”
The senators propose that states would pick one of these options in 2018 and implement them in 2019, so no one loses coverage during the transition.
The bill would keep some of the ACA’s consumer protections:
— Prohibiting insurers from setting annual and lifetime limits.
— Prohibiting insurers from excluding people with pre-existing conditions.
— Young adults could stay on their parents’ plan until age 26.
— Coverage for mental health and substance abuse would stay.
It also establishes several new protections:
— Limiting out-of-network fees for emergency medical care paid for with the HSA.
— Health providers must publish “cash prices” for services paid for with an HSA or with cash.
As they say, the devil is in the details. The proposal is sparking plenty of questions and criticism, including doubts about its chance of passing. Democrats attacked it as falling short of the ACA’s protections and conservative Republicans who want to repeal the law are unlikely to support it, according to the New York Times. It leaves ACA taxes in place to fund its provisions, which supporters of the law like but many Republicans oppose.
Collins said she sees the bill as a “good faith effort” that remains open to refinements.
Here are some of the major questions and sticking points:
How much money goes into the HSAs? With Option 2, states would get that pile of ACA money, then divide it up as tax credits among residents who earn too much to qualify for Medicaid but less than $90,000 per year for an individual or $150,000 for married couples. The credits would gradually reduce from that income level up to $190,000/$250,000.
But it’s hard to say how much money you’d get if you fall into that group. No one has done the math yet, as far as I’ve seen. All we know is that older people who live in areas where medical costs are higher would get more.
Individuals also could contribute their own money into the HSAs, as well as their employers. The maximum amount would be $5,000 for an individual and $10,000 for a married couple — plus another $1,000 for anyone older than 55. That limit doesn’t include the federal tax credits, so for people who get them, more than $5,000 or $10,000 could be contributed each year.
Consumers could use the HSA money to pay for medical care and out-of-pocket costs, such as deductibles, co-pays and monthly premiums.
Whether the HSAs would be adequate to cover those costs is a huge question. Say you need one surgical procedure that’s not covered by your plan — $10,000 could disappear in a blink.
The senators contend that premiums will be lower under this plan, but the bill sets no limits on premiums, co-insurance or deductibles.
Unlike the ACA subsidies, this financial leg up isn’t as closely tied to income. That’s got health advocates worried that many people won’t be able to afford decent coverage. The bill aims to take a smaller pot of money — because of the 5 percent cut to ACA funds — and distribute it evenly to more people than the ACA currently serves. That will necessarily mean lower subsidies for people who earn just a little too much to qualify for Medicaid, Loren Adler, associate director of the Center for Health Policy at the Brookings Institution, noted on Twitter.
He projects that states with the highest premiums, and therefore subsidies, would get the most money.
What counts as “basic” health coverage? The bill eliminates “essential health benefits” the ACA requires insurers to offer as part of all plans they sell. Those are non-negotiables, such as paying for hospitalization, outpatient care and pregnancy and maternity care. Critics of the ACA say this requirement forces Americans to pay for coverage they don’t need and can’t afford. But supporters of the law are worried that without this requirement, insurers will sell barebones plans. Stein points out that even though the bill still prevents insurers from imposing lifetime caps, the loss of essential health benefits renders that protection meaningless, because the caps would apply only to covered services.
We also don’t know exactly how high the deductibles would be for that basic health plan.
What about people with pre-existing conditions? Collins and Cassidy said the bill would protect people with pre-existing health issues, but not in the same way the ACA protects them.
Insurers would still have to offer those people insurance, though they could charge them higher premiums if those individuals have any interruption in coverage.
The first time around, anyone could enroll in any type of plan without medical underwriting, or that delightful process in which insurers quiz you about your health and charge you more if you have certain ailments.
After that, consumers could pick only the basic plan without underwriting. But if they drop their insurance and then decide they need more generous coverage, they open themselves up to both medical underwriting and paying a penalty.
Critics argue that the bill punts major decisions about ACA repeal to the states, and this is a major one. People with pre-existing conditions tend to be the sickest and most expensive to insure, and states, including Maine, have wrestled with how to cover them for years.
What does this mean for states like Maine that didn’t expand Medicaid? Those states would apparently receive the 95 percent of the money they were due under the ACA for the tax subsidies plus 95 percent of the money they would have received if they’d expanded.
What if you have health insurance through work? Low-income residents with health insurance through their jobs could receive partial tax credits, which would vary based on how much their employer kicks in towards the premium. Employer plans would have to keep the ACA limits on out-of-pocket costs and lifetime limits, plus cover preventive services.