5 Things You Need to Know About the Obamacare Replacement Plan

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House Republicans on Monday released long-anticipated legislation for replacing Obamacare.  What’s already being coined “Ryancare”, a tip of the hat to House Speaker Paul Ryan, is gathering mixed reviews.  Hardline conservatives criticize the plan for not going far enough, for missing the mark on full repeal and essentially just being a lighter version of Obamacare.  Liberals decry it for gutting essential and popular Obamacare provisions.  

So what exactly is in this plan, and how might it affect your business? Here are five things you need to know:

  1. It replaces subsidies with tax credits.

Advanceable, refundable tax credits will be available based on age to those making between $2,000 to $14,000 annually, and who are seeking healthcare on the individual market (older and poorer Americans would get bigger credits).  This is a huge pivot from an approach Republicans have long criticized: to provide income-based aid to help Americans afford health insurance, effectively making it a subsidy since the tax credits apply to those who don’t pay much in taxes.

The details on the tax credits are as follows:

  • Tax credits ranging from $2,000 per year for those under 30 to $4,000 per year for those over 60.
  • The full credit would be available for individuals earning up to $75,000 a year and up to $150,000 for married couples filing jointly.
  • The credits would phase out for individuals earning more — for each $1,000 in additional income, a person would be entitled to $100 less in credit, meaning a 61-year old could make up to $115,000 and still receive some credit.
  1. The individual mandate is gone. Kind of.  

The new plan gets rid of the overt Obamacare individual mandate (effective for the 2016 tax year), but it does allow insurance companies to charge an elevated 30% fine for those whose insurance lapses for more than two months at any point in the last 12 months. This means that you’re essentially fined in the future for not buying insurance now.  Critics claim this is just a way to a back-door mandate on individual coverage.

  1. Obamacare’s regulatory structure remains largely intact.

Two of Obamacare’s most popular mandates would stay in place: the mandate requiring insurance companies to cover those with pre-existing conditions, and the mandate allowing children to stay on their parents’ plans until the age of 26.

The pre-existing conditions provision is a huge point of contention.  The key criticism of Obamacare was always the notion that government could force insurance companies to cover those with pre-existing conditions. Once they did, opponents claimed, “insurance” wasn’t insurance anymore; it was just subsidized healthcare.  

The Republicans’ attempt to preserve this pre-existing conditions provision of Obamacare means that they’ll also have to do something to protect insurance companies from going bankrupt under the weight of such a mandate.  Providing government subsidies or reinstating the individual mandate are possible solutions, and therein lies the argument.

  1.  The Medicaid expansion would continue until 2020.

Obamacare allows the federal government to pay virtually the entire cost of Medicaid expansion in the states. 31 states, plus the District of Columbia, have adopted the expansion.  This new bill allows the feds to do the same for three years.  Critics fear a future Congress that will be unwilling to cut these subsidies, fearing political backlash.  

  1. The “Cadillac” tax would be delayed.

The latest proposal would delay the ACA’s “Cadillac” tax, a levy on the most generous employer-provided health plans, until 2025. It also retains the tax exclusion for premiums paid for employer-provided health plans.

This is certainly not the full repeal some were hoping for and, in fact, solidifies some of the mandates of the original Obamacare plan.  Personally,  I have doubts as to how far the bill will actually progress.  Hidden in all of this is the blocking of Medicaid funding to Planned Parenthood.  On the surface, that has little to do with your business, but it’s a provision that could cause more moderate Republican senators from states like Alaska and Maine to vote against the bill, making passage less likely.  Without the supermajority in the Senate, Republicans need all the support they can get, and defunding Planned Parenthood might just lose it.

Obviously, there’s a lot to work out. Republicans have indicated they’ll have a more concrete plan this week, so stay tuned.

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