As in Part 1 of this post, the functioning of this replacement law would not just work by balancing the risk pools across the industry and hoping that enough people retain ‘continued coverage’ under the law to facilitate affordable health insurance for healthy people. Fortunately, Republicans have a plan that involves tax credits that are tiered on the basis of income group and age group. Let’s take a look at these tax credits and how they function to make insurance affordable.
1) Tax Credits for Practically Everyone – The Republican alternative lays down a system of tax credits that are available to everyone participating in the individual market, getting insurance from a small business with fewer than 100 employees, and those who do not have access to employer provided coverage after the repeal of employer mandate under the alternative.
2) On the Basis of Income, Tax Credits will be Available till 300% of FPL – This is going to be a major point of contention. While Obamacare offers subsidies up till 400% of the Federal Poverty Line, the alternative proposes to keep that limit at 300% of the FPL. People will end up losing subsidies for only earning $11,770 more than their counterparts at 300% of FPL.
3) Tax Credits on the Basis of Age Group – A completely new offering from the Republican camp, the alternative will have a tax credits system that operates on the basis of three age groups. For people in 18-34 years of age, the tax credits are the lowest, but so are the insurance premiums. For 35-49, people at 200% of FPL will receive $3,190 in tax credits. For the group of 50-64, the tax credits are the highest, with a 200% FPL person receiving $4,690 in tax credits. Although it is an apples to oranges comparison, Republican tax credits will only score over Obamacare tax credits if the insurance plans under the alternative actually cost much lesser than Obamacare plans. To make that happen, Republicans will have to focus on having a risk pool balance that contributes to low insurance premiums, especially for seniors and people in 50-64 age group.
4) The Marketplace Concept will be Sidelined – Under the alternative, there would be no more federal or state marketplaces. Instead, people will shop for health insurance traditionally, which would reinstate the role of brokers and health plans in the market. The catch here is that this might restore the insurance plan hold on the market, and that could ultimately lead to a surge in healthcare costs and spends due to lack of transparency. Further, there will be no limit on the number and type of health insurance plans that could be sold to people.
5) Medicaid Expansion will be Replaced by Block Grants to States – Republicans plan to repeal the Medicaid expansion they have strongly opposed since the very beginning of Obamacare, and instead, have a block grant issued to states which know how to best utilize their available Medicaid budget. These block grants will be equal to the money received before Obamacare, and the added flexibility states would enjoy in spending this money will define a tailored Medicaid spending program in each state. States can focus on spending money where it’s needed the most, but at the same time, take the onus of managing their funds to avoid insufficient funding. Compared to the rising costs of Medicaid under Obamacare, this might work, but it’s still a long shot.
Ideally, the best approach here would be to combine the best things from both Obamacare and Republican alternative to arrive at a health reform that works. Currently, except for a few stumbles, Obamacare is providing affordable health insurance to many. For the Republican alternative, the primary battle would be convincing people that they will receive affordable, assured coverage that functions better than Obamacare insurance they have enjoyed in the last 2 years.
The alternative is susceptible to pitfalls and loopholes that could result in higher insurance premiums for everyone, but there are some aspects that could really do great in the current market.