Phasing Out Obamacare: Why the AHCA Offers A Glimmer of Hope

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On May 4, the House Republican Obamacare replacement bill known as the American Health Care Act (ACHA) was passed. The bill puts insurance companies and free markets rather than government back in charge, allows companies to sell less costly, comprehensive plans, and empowers people to find their own affordable insurance to fit their needs.

The main premise of the bill ends the requirement and penalty mandating coverage. Instead, insurance companies can charge a 30 percent premium for people who let their previous coverage lapse, an incentive to ensure healthy people keep their insurance.

All House Democrats—nearly 200 of them—voted against the bill, while most Republicans voted for it. There were 20 who didn’t, saying that the new legislation strips away too many benefits.
For the most part, passing of the bill is a major victory for the Republicans and President Donald Trump. They say it’s just in time, as the healthcare insurance costs under the Affordable Care Act (ACA), commonly known as Obamacare, are spiraling out of control.

Now that we’re halfway through 2017, many individuals have already seen their costs rise by an average of 25%. It’s a sharp rise; 2015 premiums barely went up at 2 percent, and in 2016, they increased by 7 percent. So 2017 consumers will see nearly triple the increase.

The Department of Health and Human Services data says that for an average 27-year-old consumer, a 2016 plan cost of $242 increases to $302 in 2017. This is the age group that is highly sought by insurers, and the age group on which Obamacare is built. ACA won’t work if this age group doesn’t buy insurance—and they’re not. Millennials are opting just to pay the penalty and move on.

Furthermore, as insurance companies drop out of the failing Obamacare market, about 20 percent of consumers will only have plan options from a single insurer this year. This was all engineered into the ACA plan at its inception. Basically, as premium prices rise, so do government subsidies, to offset the costs. This year, federal subsidies are there to provide an additional $75 per month for about 70 percent of the people. On average, the government subsidy amounts to about $275 per month.

But what will the healthcare market look like under the new regulations?

First, let’s take a stroll down memory lane. The ACA was originally enacted in 2010. It had three main tenets: (1) every American had to purchase private insurance or be financially penalized with a fee (2) massive government subsidies were part of the law and (3) insurers could not turn away the sick or those with pre-existing conditions.

States had the option to build their own state healthcare exchanges, but many opted out, so citizens purchased on the federal exchange. In fact, only 13 states and Washington, DC, have their own exchanges. Over the last six years, Congressional Republicans voted more than 50 times to repeal the law.

The rising costs created a problem for candidate Clinton, who on one hand supported ACA, but on the other had to denounce “skyrocketing out-of-pocket health costs” to get votes.
People with employer plans are fine, as are Americans with government-provided healthcare like Medicare and Medicaid. But people on the exchanges, like small business owners and self-employed individuals, really suffered. In Arizona for example, premiums rose by a whopping 116 percent.

The new bill eliminates the tax credits based on geography and other factors that benefited lower and moderate incomes, and instead gives tax credits based on income and age for any person buying a plan in their state.

Pre-existing conditions would be handled differently. In the current ACA plan, states are not allowed to deny coverage or increase premiums for pre-existing conditions. In the new ACHA plan, people with a pre-existing condition who let coverage lapse can see a premium increase, and states can set up a high-risk pool to cover the sickest people; over 10 years, states would receive $130 billion to fund these pools, and the federal government will have an additional $8 billion fund to help cover high premiums for the sickest as well.

Older customers might be charged up to five times more than younger people under the new plan; currently they’re charged up to three times more. Starting in 2018, the amount that can be contributed to a pre-tax health savings account doubles to $6,550 for an individual contribution and $13,100 for a family.

~ Liberty Planet