The impact of the Republican plan to replace the Affordable Care Act on Americans has been and continues to be a point of heated debate.
What hasn’t been discussed much is the impact of the American Health Care Act on insurers and on employers. Even more importantly, what do insurers and employers think about Trumpcare and the potential it has to stabilize health care in general?
How AHCA Works
It’s important to note that to date there is no American Health Care Act. So far there is just a proposal. Much remains to be done in Congress just to get something ready for President Trump to sign. For now, here are the basics:
AHCA eliminates both the individual and employer mandates and replaces them with a 30% surcharge for lapse in coverage. Obamacare’s subsidies are replaced by age-based refundable tax credits and Medicaid subsidies to states are capped starting in 2020.
Insurers can charge older people up to 5 times as much as younger customers, HSAs are expanded with higher limits and the Cadillac tax on high cost employer plans is eliminated but reinstated in 2025. Taxes on investment income and high income eliminated.
All 10 essential health benefits under Obamacare are retained plus no ban on pre-existing conditions, dependents can stay on parents’ plan until age 26 and no lifetime or annual limits.
Not A Good Thing Says AHIP
America's Health Insurance Plans (AHIP), a leading trade group of health insurers, has come out against the Republican health care plan in a letter sent to House GOP leaders. AHIP represents Cigna Corp. (NYSE:CIA), Allstate (NYSE:ALLA)-PB, Anthem (NYSE:AFLB), and Humana (NYSE:HUMC).
Basically, AHIP has two major problems with the plan. It objects to GOP tax-credit structure, which fails to take income and place of residency into account like Obamacare. In addition, AHIP objects strenuously to AHCA’s changes to Medicaid funding which it said could "result in unnecessary disruptions in the coverage and care" for Medicaid patients.
Impact On Medicaid
Among other insurers, Centene (NYSE:CNCA) may suffer the most. That’s because Centene is the largest Medicaid-focused insurer in the country. Under Obamacare, Centene’s net income jumped at an annualized rate of 50.5%.
With the AHCA designed to cap Medicaid subsidies starting in 2020, Centene would likely lose business and potential customers.
Business Friendly Approach
Some facets of the AHCA could be helpful to the bottom line of businesses. Repealing penalties for failure to comply with the employer mandate effectively nullifies that part of the ACA. Delaying the Cadillac Tax until 2025 doesn’t eliminate the tax but does provide companies with breathing room to consider alternative approaches.
Expansion of HSAs could help make high deductible plans more attractive and ultimately result in lower health care costs according to some experts. Elimination of taxes on medical devices and health insurers provides an immediate benefit and rolling back expensive and complicated employer reporting requirements could boost savings for companies and help nudge up the bottom line.