Elements of a Blueprint for ACA Replacement

March 2, 2017, Department, by Oliver Spurgeon, III

2017 March Advocacy ACA Blueprint 410

As the Trump administration’s top healthcare official, Dr. Tom Price will be tasked with fulfilling the president’s biggest campaign promise — repealing and replacing the Affordable Care Act (ACA). With Republicans in the House of Representatives and the U.S. Senate still struggling to find consensus — and looking to the White House for guidance about how to replace the ACA — Secretary Price’s ideas about health insurance coverage, lowering healthcare costs and improving healthcare quality matter now more than ever.

The Empowering Patients First Act, Secretary Price’s ACA replacement bill from the last Congress, has five key components that may serve as a blueprint for an eventual ACA replacement: tax credits, health savings accounts, high-risk pools, selling insurance across state lines and repealing the Medicaid expansion. Below, I’ll dive into each idea and summarize what it means for our healthcare system and for you.

Tax Credits
The Empowering Patients First Act would have provided age-adjusted tax credits, ranging from $900 to $3,000, to help Americans purchase health insurance. While tax credits aren’t a new idea, awarding tax credits based on age, rather than income, isn’t the best way to make healthcare more affordable. Making healthcare cheaper for Bill Gates, simply because he’s older, without taking into account his ability to afford healthcare shouldn’t be our goal. The initial idea behind the ACA is to lower the cost of healthcare, especially out-of-pocket costs, for Americans. People who have the highest healthcare costs aren’t necessarily older but usually have lower incomes and suffer from costly chronic diseases, such as diabetes, arthritis, cancer, strokes and hypertension, that require repeated trips to the doctor.

Health Savings Accounts
In an effort to limit out-of-pocket costs, reduce reliance on insurance to pay for healthcare and encourage consumers to shop for lower prices, the Empowering Patients First Act promoted the use of Health Savings Accounts (HSAs), which allow people to put pre-tax dollars into a savings account to pay for future healthcare expenses. By pairing HSAs with a $1,000 tax credit to pay for initial healthcare costs and prescription drugs, Secretary Price’s bill sought to give consumers more skin in the game.

The good news is that HSAs can be an effective way for people to plan for future healthcare costs. The bad news¸ as revealed in a 2016 study by the Employee Benefit Research Institute, is that in order to save precious HSA dollars, low-income HSA users skipped more trips to the doctor and prescription refills, which eventually led to an increase in emergency room visits and hospitalizations. Pairing a $1,000 tax credit with an HSA, as Secretary Price’s bill would have done, could be an effective way to help Americans pay for common healthcare ailments, prescription refills and improve overall health.

High-Risk Pools
High-risk pools are designed to cover the sickest Americans who, typically, have high medical costs, lots of medical needs and can’t afford to get coverage on their own because of preexisting medical conditions. Before the passage of the ACA, two-thirds of states ran their own high-risk pools, which offered plans that capped spending and had yearlong waiting lists, high deductibles and premiums that for roughly 200,000 enrollees were 200 percent higher than market rates. These pools, however, were always underfunded by states and only covered a small number of folks with preexisting conditions. Because the ACA guarantees coverage for everyone, Americans with preexisting conditions are currently able to access health insurance without needing a high-risk pool.

Secretary Price’s bill would have provided states with $1 billion over several years to re- create high-risk pools. However, these pools would have been able to charge 150 percent of the market rate. Despite the sizable grants provided to states in the bill to reestablish high-risk pools, many questions exist about the long-term costs to states and about Americans’ willingness to tolerate a return to higher premiums, longer waits and lifetime limits after having guaranteed coverage.

Selling Insurance Across State Lines
Selling insurance across state lines has long been a popular idea among conservative policy gurus as a way to lower health insurance costs. But until 2010, with the passage of the ACA, there was no federal law that regulated insurance sales across state lines. Currently, five states allow insurers, licensed in another state, to sell health insurance in their state; however, this is still a relatively new phenomenon. In 2008, Rhode Island was the first state to pass an “out-of-state insurance” law and was soon followed by Wyoming, Georgia, Kentucky and Maine. The ACA permits states to sell insurance policies across state lines,and also allows states to enter into multistate insurance agreements. Under the ACA, an insurer must adhere to licensing, conduct, consumer protection and dispute resolution practices in any state that it sells insurance. In addition, the plans sold across state lines must be as comprehensive as those sold on the ACA’s exchanges.

The Empowering Patients First Act would have required insurers to choose a home state from which to offer licensed coverage and would have allowed them to sell coverage across state lines if their plans met the medical underwriting and quality requirements of the other states. However, Secretary Price’s bill exempted the consumer protection laws of any secondary state from applying to insurers.

To date, this idea has largely been untested or studied. Rhode Island has struggled to create a simple way for out-of-state insurers to contract with its healthcare providers and hospitals.

Repealing the Medicaid Expansion
The final pillar of Rep. Price’s ACA replacement bill would have repealed the Medicaid expansion. Congress is currently wrestling with this issue. Republican leaders in the House, Senate and White House have made repealing the Medicaid expansion a central tenet of their healthcare reform plans; however, they now face the difficult choice of how to continue providing coverage for millions of Americans who gained it through Medicaid as a result of the ACA.

Medicaid, the nation’s primary health insurance option for low-income Americans, children, childless adults and people with disabilities, pays for healthcare for more than 74 million Americans in every state. Over the past decade, it has also helped states provide mental health and substance abuse treatment as opioid addiction rates skyrocketed. The federal government pays the lion’s share of this federal-state program. Many governors, especially those in states that expanded their Medicaid programs, are deeply worried about surging program costs if Congress repeals the Medicaid expansion and federal contributions decline.

Wrapping Up
While there are merits for and against the major principles of Secretary Price’s old ACA reform bill, it’s certain that several of these ideas will appear in whatever concrete plan comes forth from the White House and congressional Republicans later this year.

Solving the mystery of the Medicaid expansion not only is the most challenging program facing congressional Republicans and the White House, but is also the most important provision of the Empowering Patients First Act. The reality of potential coverage gaps and increased costs for all states is now setting in for legislators in Washington, D.C.

Repealing the ACA is no longer an academic exercise and the legislative changes that may follow will have meaningful results on our healthcare system. Congress and the Trump administration must work together to ensure that the upcoming ACA repeal effort maintains coverage for as many Americans as possible — especially for those who gained coverage through the Medicaid expansion — and also ensures that healthcare remains affordable and accessible.

The NRPA Public Policy Team will continue working to keep you up to date on this and other important policy issues related to parks and recs. Feel free to reach out with your ideas, comments and concerns in the meantime.

Oliver Spurgeon, III, former NRPA Manager of Government Affairs.