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Six Suggested Affordable Care Act Replacement Plans from the Republican Party: A High Level Overview
6 Suggested Affordable Care Act Replacement Plans from the Republican Party: A High Level Overview

Republicans have been rolling out their suggestions for replacing Patient Protection and Affordable Care Act (ACA). The number and the differences between the plans show the disparity within the party on how to reverse the direction that ACA is taking the country. Additionally, leaks from the Republican conclave in Philadelphia last month show that the Republicans are nowhere near an agreement, or even a consensus, on a replacement for ACA. The divisions among the Republicans not only include ideas on what the replacement of ACA should be, but on how quickly to repeal the law, how long it should take to phase it out, and whether a replacement needs to be passed at the same time. The Republicans, however, are united around one idea — that there must be some sort of health care reform.

Currently, there are six different plans that are being touted by various senators, representatives and the Republican Party. Two plans, one offered by House Speaker Paul Ryan and the other from Health and Human Services Secretary nominee Tom Price, are expected to be the most important guides to a replacement. Below is a high-level summary of each of those proposals and several other ideas Republicans have suggested in recent months.

The Ryan Plan (“A Better Way”)

Announced in June 2016, Ryan’s plan is a board framework for repealing and replacing ACA that draws from many conservative ideas to reform health care.

  • Repeals ACA, including individual and employer mandates, private market rules, standard for minimum benefits and cost sharing, and premium and cost sharing subsidiaries.
  • Retains requirement to extend dependent coverage to age 26.
  • Provides for one-time open enrollment — Insurers must accept people with pre-existing conditions during a one-time enrollment period. Individuals can obtain coverage at other times, but failure to sign up during open enrollment forfeits continuous coverage protections and leads to higher premiums for a period in the future.
  • For pre-existing conditions, commits $25 billion to set up high-risk pools.
  • Provides individuals without employer coverage, Medicare, or Medicaid with a refundable, flat, age-adjusted tax credit for the purchase of health insurance in the individual market, regardless of income.
  • For individuals with employer coverage, it expands the use of tax-free health savings accounts; caps the tax exclusion for employer-sponsored coverage to encourage buying lower-cost plans; and exempts employee pre-tax contributions to Health Savings Accounts (HSA) from counting toward the annual cap.
  • Encourages expanded use by employers of direct, or defined contribution, payment arrangements, such as health reimbursement accounts (HRAs), which would allow employees to purchase coverage in the individual market.
  • Starting in 2019, gradually phases down extra federal money for expansion population until it reaches a state's normal level.
  • States can choose either a per capita allotment or block grant from the federal government to help fund their Medicaid programs. Block grant funding would be determined using a base year and would assume that States transition individuals currently enrolled in the Medicaid expansion into other coverage.
  • States would have flexibility in how Medicaid funds are spent, except that they would be required to provide required services to mandatory populations, including dual eligibles.
  • Repeals FY 2018-2020 Medicaid DSH cuts and FY 2018-2019 Medicare DSH cuts, and creates a national pool of uncompensated care (UCC) funds for DSH hospitals beginning in FY 2021. Requires distribution of UCC funds to be based on federally-collected data defined as charity care only.
  • Changes Medicare-related provisions in ACA by including:
    • Repealing the Center for Medicare and Medicaid Innovation (CMMI), beginning in 2020.
    • Repealing the Independent Payment Advisory Board (IPAB).
    • Repealing the moratorium on physician-owned hospitals.

The Price Plan (“Empowering Patients First Act”)

Rep. Tom Price, who is undergoing the Senate confirmation process to lead HHS, introduced his latest plan in May 2015.

  • Repeals ACA entirely, including individual and employer mandates, private insurance rules, standards for minimum benefits and maximum cost sharing, premium and cost sharing subsidies, dependent coverage to age 26, single risk pool rating standard, age limits, gender rating prohibition, rate review requirements, and expanded Medicaid.
  • Encourages use of HSAs with one-time refundable tax credit of $1,000; raises annual tax-free contribution limit to $5,500; Allows tax-free transfer of HSA balances at death to any beneficiary.
  • Those without employer coverage will get refundable, age-adjusted tax credits to buy coverage. Provides $900 per child, $1,200 for those ages 18-35, $2,100 for those 35-50 and $3,000 for those older than 50. Credit can be applied to any individual health insurance policy sold by a licensed insurer, including short term policies, but not excepted benefits (e.g., insurance only for specific disease); excess credit can be contributed to HSA.
  • Expands the use of tax-free health savings accounts for employees with employer provided coverage. Caps the tax exclusion for employer-sponsored coverage at $20,000 for a family and $8,000 for an individual (indexed to CPI), to encourage buying lower-cost plans. No requirement for large employers to provide health benefits that meet minimum value and affordability standards.
  • Eliminates constraints on physicians’ ability to enter into private contracts with Medicare beneficiaries for the amount they can charge Medicare beneficiaries for services, and allow patients with private contracts to seek some reimbursement from Medicare.
  • States encouraged to establish high-risk pools for individuals with pre-existing conditions, charged premiums at least 150 percent of standard rates. Alternatively, States can establish reinsurance pools or other risk adjustment mechanisms used for purpose of subsidizing private health insurance. Provides for Federal grant support of $1 billion per year for three years.
  • Repeals all Medicare provisions in the ACA, including:
    • Benefit expansions (preventive benefits, close Part D donut hole)
    • Savings provisions that reduce updates in payments to providers and modify payments to Medicare Advantage plans
    • Quality, payment and delivery system provisions, including the Center for Medicare and Medicaid Innovations
    • Independent Payment Advisory Board
    • Medicare premiums increases for higher income Medicare beneficiaries (Parts B and D)

The Republican Study Committee Plan (“The American Health Care Reform Act”)

The Republican Study Committee introduced its plan to replace the ACA, called “The American Health Care Reform Act.” Representative Phil Roe from Tennessee sponsored the legislation in a bill he submitted on Jan. 4, 2017.

  •  Full repeal of ACA and related provisions, including Medicaid expansion, effective Jan. 1, 2018.
  • Those individuals without employer coverage would get a tax deduction for buying insurance - $7,500 for individuals and $20,500 for families (indexed to CPI).
  • Eliminates the tax exclusion for employer-paid health insurance and the self-employed health deduction, but gives the employees a tax deduction for buying insurance. Employers retain ability to deduct payments for employees’ health benefits as a business expense.
  • Expands the existing HIPAA guaranteed coverage for those with pre-existing conditions when there is no break in coverage and provides $25 billion over a decade for state-run high risk pools. Insurers must cover those with pre-existing conditions as long as they maintain continuous coverage. Customers can switch insurers, but they cannot have a gap between plans.
  • Expands the use of tax-free health savings accounts. Allows Medicare beneficiaries enrolled only in Part A to continue to contribute to their HSA accounts after turning 65 if they are otherwise eligible to contribute to an HSA. Allows HSAs to be used to pay premiums for long-term care insurance, COBRA coverage and HSA-qualified policies regardless of circumstances.
  • Allows individuals to purchase health insurance licensed or approved by any state. Insurance sold in a secondary state will still be subject to the consumer protections and fraud and abuse laws of the policyholder’s state of residence.
  • Allows small businesses to pool together through Association Health Plans to leverage lower cost health insurance on behalf of their employees.
  • Creates a legal safe harbor for physicians who follow evidence-based best practice guidelines by providing: (1) a voluntary right of removal to federal court so long as there is a federal payer (including Medicare and Medicaid) or a federal statute; (2) a mandatory independent medical review panel pre-discovery; and (3) an increased burden of proof for plaintiffs to overcome summary judgment from the standard of “preponderance of the evidence” to that of “clear and convincing” after a finding of non- negligence by the review panel.

The Cassidy/Collins Plan (“Patient Freedom Act”)

On Jan. 23, 2017, Senators Bill Cassidy and Susan Collins announced a plan:

  •  Repeals individual mandate, the employer mandate, the actuarial value requirements, the age band requirements, and the benefit mandates.
  • Keeps prohibitions on annual and lifetime limits, prohibition of pre-existing condition exclusions, and prohibitions on discrimination, guaranteed issue and guaranteed renewability, and allows young adults to stay on their parents’ plan until age 26, as well as preserving coverage for mental health and substance use disorders.
  • Gives States the right to choose one of three options:
    • Option 1 allows States to keep ACA as is, use its extra federal dollars for HSA or design their own alternative without any federal assistance by creating a “new market-based system” with federal funding “equal to 95 percent of federal premium tax credits and cost-sharing subsidies” and having “per beneficiary grants or advanceable, refundable tax credits” deposited directly in health savings accounts;
    • Option 2 allows the States to enact a new market-based system that empowers patients while still insuring those with pre-existing conditions are protected. The State could continue to receive funding equal to 95 percent of federal premium tax credits and cost-sharing subsidies, as well as the federal match for Medicaid expansion. States can choose to receive funds in the form of per beneficiary grants or advanceable, refundable tax credits, but in both cases, funds will be deposited in a HSA; and
    • Option 3 would return power to the States to design and regulate insurance markets that work for their specific populations, without any federal assistance.
  • Those without employer coverage would get a HSA, a high-deductible health plan and a basic pharmacy plan. They would get a grant or refundable tax credit to go into their savings account. To pay for the subsidies, States get 95 percent of the federal dollars currently provided through ACA.
  • Retains the exclusion from income of the cost of health insurance provided by Employers.

The Lamar Alexander Plan

Senator Lamar Alexander of Tennessee has been adamant that Congress shouldn't repeal the health care law without concrete steps to replace it in order to ensure that people don't lose coverage.

On Jan. 10, 2017, he stated, “To me, ‘simultaneously’ and ‘concurrently’ mean ACA should be finally repealed only when there are concrete, practical reforms in place that give Americans access to truly affordable health care. The American people deserve health care reform that’s done in the right way, for the right reasons, in the right amount of time. It’s not about developing a quick fix. It’s about working toward long-term solutions that works for everyone.” His transition plan is outlined below.

  •  Initially repeals:
    • Employer mandate penalty;
    • ACA’s restrictions on grandfathered health plans, wellness benefits, and small group plans; and
    • ACA’s restrictions on grandfathered health plans, wellness benefits, small group plans, and provide more flexibility for small businesses so they can work together to buy insurance. 
  • Allows States more flexibility to determine so-called “essential health benefits,” age-rating rules and small group restrictions; expands health savings accounts.
  • Eventually provides tax credits to help lower income Americans buy insurance; and repeal the individual mandate when new insurance market rules are in place.
  • Allows Americans without employer coverage to use ACA subsidies for coverage outside the marketplaces.
  • Allows States more flexibility in their marketplaces through the law's waivers.
  • Expands health savings accounts.
  • Retains the exclusion from income of the cost of health insurance provided by Employers.
  • Give States more flexibility through Medicaid innovations waivers to allow for more flexibility. States will have the authority to further innovate to build more modern health systems.
  • Insurers are required to cover high-risk Americans.
  • When the reforms become concrete, repeal the remaining parts of ACA.

The Rand Paul Plan (“The ACA Replacement Act”)

On Jan. 24, 2017, Senator Rand Paul of Kentucky laid out his own proposal, drawing from many of the other GOP plans.

  • Eliminates ACA’s essential health benefits requirement, and other restrictive coverage and plan requirements, making the low-cost insurance options available to American consumers.
  • Provides tax credits of up to $5,000 for an individual and $10,000 for a family that would go into an HSA.
  • Remove the maximum allowable annual contribution limit to HSAs.
  • Allow the use of HSA funds for insurance premiums and a broader array of health-related expenses, dietary supplements, nutrition and physical exercise expenses, and direct primary care, among others.
  • Individuals who don’t have employer coverage can get group coverage through independent pools and deduct premiums.
  • Individuals with employer coverage have same access to HSAs and tax credits as with individual coverage, receive same deduction for premiums.
  • Repeals Medicaid expansion.
  • Individuals with pre-existing conditions will get a two-year period to enroll in coverage, but they must continuously maintain coverage under HIPAA pre-existing conditions protections.
  • Allows non-economically aligned physicians to negotiate for higher quality health care for their patients.
  • Amends the Internal Revenue Code to allow a physician a tax deduction equal to the amount such physician would otherwise charge for charity medical care or uncompensated care due to bad debt - limited to 10 percent of a physician’s gross income for the taxable year.
  • Enables States to fully exercise current flexibilities afforded to them through Medicaid waivers for creating innovative state plan designs.
  • Creates an interstate market that allows insurers who are licensed to sell policies in one state to offer them to residents of any other state.

To learn more about Carmin D. Grandinetti and his practice, please visit his profile.

  • Partner

    Carmin D. Grandinetti has practiced in the legal field for more than 30 years with a focus in complex strategic transactions involving health care operations, including mergers, acquisitions and dispositions, real estate ...

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