What You Need to Know: Quickly Understand the Not-So-Subtle Differences between “ACA” Repeal and “AHCA” Replacement

Learn the proposed changes to the ACA, now labeled the AHCA

Jodi JohnsonMarch 13, 2017

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Before we dive into a compare and contrast to understand the differences between the current ACA and the new AHCA, let’s briefly paint a picture of the politics at play.

Late on Monday, March 6, republican leadership unveiled their model for Affordable Care Act (ACA) replacement legislation, the “American Health Care Act (AHCA).” Anticipated since well before inauguration day, the new legislation has the endorsement of the White House – but outside the walls of 1600 Pennsylvania Avenue, its detractors hail from both sides of the aisle, and far beyond the beltway. Unsurprisingly, opposition from the Democratic Party is unanimous and absolute.

A Tale of Two Tweets: The Internal GOP Battle

President Trump has thrown his support behind the bill, and encouraged party opponents to fall in line. He has indicated that the bill represents a starting point for negotiations, but he also has made it clear that this is his first big fight as Commander in Chief. Yet it is still uncertain where he ultimately stands on some of the more contentious issues that divide republican lawmakers.

Within the GOP, House republican opponents found an early voice in Ohio Congressman Jim Jordan, a leading member of the House Freedom Caucus. In the Senate, Kentucky Senator Rand Paul has been a noisy dissident for many weeks, rallying against a number of the plan’s provisions and any action that falls short of a full repeal.

Less than 24 hours after House leadership unveiled the American Health Care Act (AHCA), Jordan and Paul teased their reintroduction of the 2015 ACA repeal and replace plan, which enjoyed widespread partisan support in both houses of Congress. That bill appeals to the more conservative members of the party, while the new plan represents legislation with a more centrist approach. As the committees debated and the week wore on, the internal debate raged and republican battle lines were drawn, even before outside groups could react.

Compare & Contrast: A High-Level Look at the Plan

Before we dive into the larger policy implications of the legislation and opposition beyond the Republican Party, let’s first take a look at what the new plan is and is not, in comparison to the ACA. We’ll also briefly touch on the major sticking points that have fueled the GOP infighting.

Individual and Employer Mandates

The AHCA eliminates the ACA’s individual mandate that requires most Americans to purchase health insurance or face a financial penalty. The repeal is retroactive to the end of 2015, meaning that no penalties would be enforceable for 2016 income taxes due this April. It also eliminates the employer mandate, which similarly imposed penalties on employers with 50 or more employees who failed to offer insurance coverage to at least 95% of their full-time employees.

Among republicans, rolling back this requirement has unanimous approval, although it was key to ensuring the presence of young, healthy enrollees in the risk pool under the ACA. Without it, how do you ensure a healthy risk pool and market stability going forward?

Continuous Coverage Penalty

The AHCA answer to that question appears to be the imposition of a penalty for failure to maintain continuous health insurance coverage. Late enrollees (those with a lapse in coverage) for non-group coverage would be subject to a 30% surcharge on premiums for that plan year. A lapse in coverage is defined as a period of 63 days or longer without insurance during the 12-month look back period prior to the date of enrollment.

Pre-existing Condition Limitation

A bit of good news for many is the continuation of the ACA ban on pre-existing condition limitations or exclusions.  Other republican replacement plans over the years did not prohibit such exclusions, but President Trump promised to safeguard this popular provision post-election, and the AHCA maintains this provision.

Dependent Coverage to Age 26

Another widely popular provision retained in the new legislation is the extension of dependent children coverage under parents’ plans until age 26. President Trump had indicated that this, too, would be retained, and the AHCA reflects that.

Age-Based Premium Caps

While the ACA capped premium rates for older enrollees at no more than three times those of younger individuals, the AHCA increases that ratio to five to one, unless states adopt an alternative. This cost change for older Americans in the individual market, along with the impact to Medicaid and Medicare, has activated a powerful enemy to AHCA passage in the AARP.

Essential Health Benefits

The ACA guaranteed coverage of ten essential health benefits for individual and small-group plan enrollees. Under the AHCA, however, this requirement will end in 2019 (ostensibly to coincide with the end of Cost Sharing Reduction subsidies, as discussed below). This change enables healthcare policies with less than the ten essential benefits in order to package AHCA plans with lower premiums.

Annual & Lifetime Limits

The AHCA retains the prohibition on annual and lifetime limitations.

Advanced Premium Tax Credits

The new AHCA legislation outlines advance-able, refundable tax credits that would replace the existing “advanced premium tax credits (APTC)” under the ACA. Unlike previous plans, the AHCA plan proposes credits that would be both bracketed by age group and limited by income. Those under age 30 would be eligible for a $2,000 annual credit, with a range maximum of $4,000 for those 60 and over. The full credit would only be available to those with an individual income of no more than $75,000, or $150,000 for married couples filing jointly. Those earning more would see the credits phase out—for each additional $1,000 in income, the credit would be reduced by $100.

This is part of the reason the moniker “Obama-care Lite” has been widely applied to the bill by its republican opponents. The “refundable” nature of the credit, to more conservative circles, amounts to just another flavor of an entitlement program. Many in those ranks favor deductions, which reduce taxable income. Credits reduce taxes.

Cost Sharing Reduction

Under the ACA, some lower-income enrollees were also eligible for Cost Sharing Reduction (CSR) subsidies, which reduced out-of-pocket expenses much like the advanced premium tax credits reduced the amount of premium paid. Under the AHCA, these out-of-pocket subsidies are eliminated altogether, beginning with plan year 2020.

Cadillac Tax

An interesting note is that while most of the ACA taxes are repealed under the AHCA, the “Cadillac” tax is not. This tax on the most generous employer-provided health plans had been delayed until 2020 under the ACA, and the AHCA further pushes back implementation until 2025. But the tax had been widely criticized from both sides of the aisle, and was fully expected to be repealed. This one is a bit of a head-scratcher.

Planned Parenthood

The AHCA also defunds Planned Parenthood, an issue which has always been a major bone of contention between the parties. The bill denies all federal family planning grants or Medicaid reimbursement to the organization, presumably because they provide abortion services to women—although the Hyde Amendment already prohibits the use of federal funds to pay for abortion procedures.

Medicaid

The AHCA reimagines the Medicaid program, and frankly the topic needs separate treatment in a separate blog for a deep dive analysis. But in summary, starting in 2019, the AHCA converts Medicaid from its current entitlement structure to a program administered on a state-by-state basis, with capped federal funding provided on a per capita basis for each state’s enrollee population.

The bill also rolls back the Medicaid expansion that took place under the ACA in 31 states and the District of Columbia.  For those states, beginning in 2020, the 90% federal contribution given under the ACA to cover the expansion population would be restricted to current program participants, and funding at that level would be provided to only that closed and diminishing population until the group would ultimately be phased out.

Medicaid, too, is a major point of contention among republicans. Of the Medicaid expansion states, half of those did so under republican leadership. And republicans in Congress are equally concerned about an end to expansion leaving large numbers of their constituents uninsured.

Health Savings Accounts

Currently, maximum HSA contributions are $3,400 for individuals and $6,750 for families. The AHCA increases these to at least $6,550 and $13,100, respectively, and allows spouses to make additional contributions.

Insurance Sales Across State Lines

Conspicuously absent from the AHCA is any provision that calls for allowing insurance sales across state lines, one of President Trump’s campaign-trail promises on healthcare reform. And, perhaps ironically, this is also a provision of Rand Paul’s plan, so perhaps this represents an area for future compromise or adjustment. Many economists agree that opening up sales across state lines could potentially lower premiums by increasing risk pools for states with unhealthier populations.

The “Need” for Speed

While criticism of some or all of these AHCA provisions has come from across the political spectrum and the nation, the speed at which republicans are moving to dismantle the ACA has also caused some concern. The House Ways & Means and Energy & Commerce committees both began the markup process on their respective portions on March 8, and after marathon sessions, both were approved on March 9. Now the bill just needs Budget committee approval before being presented for a full House vote.

Some of this urgency may be borne of necessity—republicans are using the budget reconciliation process to repeal revenue-related provisions of the ACA, as it only requires a simple majority and isn’t subject to filibuster. Because of this, they have only a narrow window allowed by the budget resolution passed in January for fiscal year 2017 budget changes. Even so, the window wasn’t so narrow that they needed to move within hours of introducing the bill.

The stated goal is to deliver a bill to the President’s desk before Congress’ Easter break on April 10, but critics have leveled accusations that the breakneck (no pun intended) pace is driven by a desire to push approvals as far as possible before the nonpartisan Congressional Budget Office (CBO) analysis is complete, revealing the true costs of the bill and the impact on uninsured rates.

In any case, the CBO analysis will be forthcoming regardless, and certainly before the full floor vote. That may give additional republicans pause. Arkansas Senator Tom Cotton echoed the concerns of many when he tweeted, “To my friends in the House: pause, start over. Get it right, don’t get it fast.”

Friendly Fire

Keep in mind, the current front-line battle that’s raging is among republicans; we haven’t even reached the stage where legislation would require a super-majority in Congress and the approval of some democrats. As unfriendly as some of the back-and-forth may be, this is merely friendly fire.

As Mark Twain said about the weather in New England, “If you don’t like it, wait 15 minutes.” The same could be said about the war that is just beginning around the future of healthcare. I’m not sure if the climate will necessarily improve, but it’s safe to say it will change. The war hasn’t even begun yet.

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