Republicans Unveil Their Obamacare Replacement

The plan is for people to pay for more of their health care.

National Journal
Sam Baker
Jan. 27, 2014, 8:56 a.m.

A trio of Sen­ate Re­pub­lic­ans on Monday in­tro­duced their plan to re­place Obama­care with a new sys­tem that is built largely around mak­ing in­di­vidu­als re­spons­ible for a high­er por­tion of their health care costs.

GOP lead­er­ship is still mired in a years-long tug-of-war between of­fer­ing an Obama­care al­tern­at­ive and throw­ing stones from the side­lines. A plan makes the party look ser­i­ous about health care policy, but put­ting pro­pos­als on pa­per car­ries its own risks be­cause in health care, there are trade-offs to everything.

That de­bate not­with­stand­ing, three Re­pub­lic­ans with long back­grounds in health care policy — Sens. Or­rin Hatch, Richard Burr, and Tom Coburn — have put to­geth­er a frame­work they say should take the place of Obama­care if a Re­pub­lic­an pres­id­ent and Con­gress were to re­peal the law after the 2016 elec­tions.

In es­sence, the plan at­tempts to lower health care costs by mak­ing people shoulder a great­er share of those costs — or “sens­it­iz­ing” con­sumers to the ac­tu­al cost of health care, as Sen­ate aides put it in a meet­ing with re­port­ers on Monday.

Most people don’t re­cog­nize how much their em­ploy­er con­trib­utes to their health care plan and don’t see the costs the in­sur­ance com­pany cov­ers: If people are spend­ing more of their own money, many con­ser­vat­ives ar­gue, they’ll be smarter con­sumers. Over­all costs will come down, the ar­gu­ment goes, if con­sumers have more “skin in the game.”

Here’s how the latest plan would go about mak­ing that shift:

Many people with em­ploy­er-based health in­sur­ance would pay more.

About 85 per­cent of Amer­ic­ans get health be­ne­fits through their job. Those health care be­ne­fits have two kinds of tax pro­tec­tions. First, the em­ploy­er can de­duct its costs. Second, the em­ploy­ees’ share of their premi­ums comes out of their paychecks be­fore taxes are taken out. The GOP plan would cap that ex­clu­sion, so that only 65 per­cent of the av­er­age plan’s costs would be tax-ex­empt.

If your plan is in line with the av­er­age, you’d pay taxes on 35 per­cent of your premi­um. If it’s above av­er­age, you’d pay taxes on more. If it’s be­low av­er­age, you’d pay taxes on less. The idea is to make con­sumers more aware of how much their health care plan costs (by mak­ing them pay part of it), so that em­ploy­ees will go to their bosses and ask for cheap­er plans.

Some people with preex­ist­ing con­di­tions would pay more.

Obama­care re­quires in­surers to cov­er people with preex­ist­ing con­di­tions. The GOP plan would ex­tend that re­quire­ment only to people who have had con­tinu­ous cov­er­age. So, if you lost your job and im­me­di­ately bought in­sur­ance on your own, you’d be pro­tec­ted. If you let your cov­er­age lapse, you’d have to pay more be­cause of your preex­ist­ing con­di­tion.

This is, in es­sence, a re­place­ment for Obama­care’s in­di­vidu­al man­date. Rather than dir­ectly fin­ing people who don’t buy in­sur­ance, Re­pub­lic­ans would al­low in­sur­ance com­pan­ies to charge those people more. Both policies aim to cre­ate a fin­an­cial in­cent­ive for people to re­main covered. The key dif­fer­ence is that young, healthy people will primar­ily be the ones pay­ing the pen­alty un­der Obama­care, while the GOP ver­sion is aimed at people who are un­healthy.

People would move from Medi­caid to private in­sur­ance.

Obama­care gives states the op­tion of ex­pand­ing Medi­caid eli­gib­il­ity. The GOP plan would re­peal the ex­pan­sion and also nar­row the field of people who re­ceive Medi­caid. The Medi­caid pro­pos­al is what’s known in wonkese as a “per cap­ita cap” — in short, re­struc­tur­ing Medi­caid fin­an­cing to en­sure it cov­ers cer­tain pop­u­la­tions in each state. In this vis­ion, the pro­gram would primar­ily serve moth­ers, preg­nant wo­men, and the dis­abled. Oth­er low-in­come people would likely move in­stead to private in­sur­ance.

The plan re­places Obama­care’s tax sub­sidies.

Obama­care of­fers tax cred­its to help people af­ford their in­sur­ance premi­ums if they buy in­sur­ance on their own, rather than get­ting it through an em­ploy­er. The GOP plan does, too, but the cred­its are smal­ler. Un­der Obama­care, sub­sidies are avail­able to people whose in­comes are up to four times high­er than the poverty line. The GOP would roll them back to three times the poverty line.

Obama­care’s sub­sidies are pegged to the cost of a typ­ic­al in­sur­ance plan; un­der the GOP pro­pos­al, it’s a fixed dol­lar amount. Un­der Obama­care, the size of your par­tic­u­lar sub­sidy changes based on your in­come (poorer con­sumers get a big­ger sub­sidy). Un­der the GOP plan, it slides based on age. (Every in­di­vidu­al between 18 and 34 gets a $1,650 tax cred­it, no mat­ter how much money he or she makes, if these in­di­vidu­als don’t get cov­er­age through an em­ploy­er.)

Most of Obama­care’s man­dates/con­sumer pro­tec­tions would go away.

De­pend­ing on your per­spect­ive, Obama­care either of­fers con­sumers the peace of mind that their in­sur­ance will cov­er them when they need it, or im­poses costly new be­ne­fits that con­sumers may not want. However you see those policies, they’d go away.

Hatch, Burr, and Coburn would re­peal the pro­vi­sion re­quir­ing in­sur­ance com­pan­ies to cov­er cer­tain be­ne­fits, in­clud­ing pre­vent­ive care. They would let in­surers re­in­state an­nu­al caps on the be­ne­fits they’ll pay out, which Obama­care elim­in­ated. And most re­stric­tions on how in­surers set their premi­ums — say, pro­hib­it­ing them from char­ging wo­men more than men — would van­ish.

The only man­date that would re­main is a ban on life­time lim­its. Re­pub­lic­ans be­lieve that re­mov­ing cov­er­age man­dates would bring down the cost of in­sur­ance so that con­sumers’ dol­lars — and their tax cred­its — would go fur­ther.

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