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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