Last week, by a narrow 2-vote margin, Congress passed proposed changes in rules for health insurance in the US, called the American Health Care Act (AHCA). The bill now goes on to the Senate. But what's in AHCA? What does it fundamentally change about health insurance? The answer is almost everything. If this becomes law, AHCA will repeal most provisions of the Affordable Care Act (known as ACA or Obamacare). There's not much of a replacement, though. AHCA brings us back to the pre-ACA rules for health insurance, rather than setting up new governing laws. 

 What will happen if this becomes law? Here's a starting list of what I felt were some of the most important things to know. 

•States can decide if they will allow pre-ACA rules for pre-existing conditions
Currently under the Affordable Care Act, health insurance companies can't deny you or charge you more for pre-existing conditions. 

•Legal surcharges for age (up to 5x)
Under the current ACA rules, the surcharges are capped at 3 times a younger person. AHCA would allow up to 5 times. 

•Dismantling of the Marketplace?
The AHCA bill doesn't give us a clear answer. The Marketplace is great because you can compare plans side by side, by zipcode.  Will consumers be able to see prices and compare plans side by side? We don't know. 

•Stripping of essential health benefits
Under the current Affordable Care Act there are 10 essential health benefits like doctor's visits, surgery, prescription drug coverage, mental healthcare, and maternity care. Before ACA, most individual insurance companies outright refused to cover any mental health, maternity care, or prescription drugs. We could be looking at a return to the days when insurance companies get to decide what they cover and what they do not. 

•Subsidies for premiums based solely on age AND No subsidies for cost sharing reductions
Proposed subsidies range from $2,000 to $4,000 per year. For everyone below 400% of the Federal Poverty Level (yearly income of $48,240 for an individual,  $98,400 for a family of 4) that would mean a sharp increase in premiums. I personally would pay approximately $1,480 in yearly premiums for my current plan. 
AHCA also takes away cost sharing reductions, which help reduce out of pocket costs (deductibles, out of pocket maximums, copays) for lower income people. The new rule would make it so a millionaire and a person on Social Security disability pay the same premiums, deductibles, and out of pocket maximums. 

•No regulations for out of pocket maximums or deductibles
The current Affordable Care Act mandates that insurance companies have a maximum out of pocket every year for each person. The number in 2017 is $7,150 for an out of pocket maximum and $6,550 for a deductible. Under AHCA, there would be no mandated limit, and insurance companies could simply choose how much you have to spend before they cover you. 

•Bringing back lifetime limits for employer-based plans
Before the current Affordable Care Act, insurance companies could choose an amount that they would pay up to, then you would have no coverage. Most were around $500,000 to $1million per lifetime. Anyone who has had a serious condition like cancer knows that a single year can cost around these limits. The Affordable Care Act turned this practice on its head--ACA mandates that plans cannot set any lifetime limits and must cover you when you get sick! These rules will be repealed under AHCA. 

•Bringing back high risk pools
Before the Affordable Care Act, when companies could deny people based on their health, we had high risk pools. In Wisconsin, it was called HIRSP. Risk pools are expensive insurance options run by the state and funded by premiums of members. HIRSP was extremely expensive (often half or more of a person's monthly income) and had a 6 month wait period during which a person had to pay premiums but couldn't get any healthcare. AHCA proposes going back to this model. 

•Block granting Medicaid, and ending expansion
Currently in Wisconsin, BadgerCare Plus covers almost everyone without access to other insurance who are under 100% of the Federal Poverty Level.  Keep in mind that the governor is currently in the process of trying to change this so that a person can only be on BadgerCare for 4 years of their lifetime. But even further,  under AHCA, Wisconsin would be able to cap enrollments so no one new can get into the program (and there is no doubt that the current governor would do so). That means if you lose your job and don't have income, you won't have any access to insurance unless you buy it at full price. 

The Affordable Care Act can be pricey, and it isn't perfect. But it's much better than AHCA. The current administration and leaders in Congress have made no promises that AHCA will be more affordable. We need to do much better than simply repealing the Affordable Care Act and replacing it with air.  Whatever your side on this issue,  I encourage you to call your Senator to voice your opinion. 

Republicans in Congress and the White House have been promising to "make health insurance better" for Americans. The proposed rule changes are potential replacement of the Affordable Care Act don't do much to address costs except to change the way tax credits are structured. The GOP plan also shifts the cost of being uninsured (a tax penalty currently) to a premium hike when you go without insurance for more than 2 months.

So, what do we really need to make health insurance better? 

My first recommendation is strengthening the 80/20 rule in the ACA and cap provider reimbursements for all private health insurance, like the government does with other federal programs. The 80/20 rule in the ACA makes it so that health insurance companies must spend 80% of your premiums on actual health care costs, and can take 20% for administrative costs (re-insurance, salaries, benefits, bonuses, etc for the company). The 80/20 rule was well intended and pretty revolutionary. However, because the government does not set caps on the 80%, if providers are paid more that means the insurance company's 20% is higher, too. 

I advocate for reasonable reimbursement caps for providers. I believe the way forward to reducing costs is for the federal government to set such rates, like states do for Medicaid. These rates would need to be higher than Medicaid rates to balance costs in the health care system. For example, an MRI at a hospital costs upward of $10,000 but at a stand alone clinic it might cost $600 (this is a real life example from my own ankle injury last year). A reasonable cap might be somewhere around $5000, the provider still gets paid but not nearly as much, and the insurance company and the beneficiary both save money. The stand alone clinic can still charge $600, and savvy consumers will price shop. But for those who don't have the ability to shop around (such as an emergency MRI), at least they would be assured that there is a cap on the cost of the procedure. 

Stay tuned for future blog posts with more recommendations for making healthcare better. 
 

The current administration and majority leaders in Congress have made it clear that their plan to replace the Affordable Care Act relies heavily (if not totally) on Health Savings Accounts (HSAs), but most Americans have little experience with HSAs or aren’t aware of exactly how these plans work.

HSAs are separate bank accounts that an individual/family can make contributions to only if the individual/family purchases an HSA-compatible insurance plan known as a High Deductible Health Plan (HDHP). Politicians talking about HSAs usually fail to mention that HSAs must be combined with HDHPs—as you read on please keep in mind that HSA always means a combination of HSA and HDHP. You cannot legally establish an HSA without being enrolled in a compatible HDHP.

HSAs and HDHPs can be very good for people who have excess income to save and who have minimal medical needs. Contributions to HSAs are tax-deductible, which is great for small business owners who deduct such expenses and whose income would otherwise put them in a higher tax bracket. However, contributions are limited to $3,400 for an individual or $6,750 for a family per year. The money in an HSA rolls over every year, so they can be a great way for healthy people to save money now for future medical needs. By law, the maximum deductible can be $6,550 for an individual and $13,100 for a family—and I find these deductibles are typical throughout Wisconsin.

HSAs work well for a small percentage of Americans—people who are very healthy, have high income, and can easily save money every month for their future health needs. HSAs can also work well for middle income earners who have few medical needs, want to save for future health expenses, and are comfortable with the possible financial exposure of having a high deductible plan if they get sick. For people living paycheck to paycheck, saving for an HSA is impossible and can lead to medical and financial disaster.
Even for people solidly middle-class, HSAs could be a financially damaging if someone gets sick. A family with an HSA compatible HDHP can contribute $6,750 to their HSA per year, but a HDHP can have a total deductible of $13,100. This means that in addition to saving $6,750 per year in their HSA ($562.50 per month) the family is exposed to an additional $6,350 in medical bills before the plan pays a cent toward medical care. A family could get up to $13,100 in medical bills for the year—it’s just that a little over half could be saved pre-tax if they thought ahead and contributed to their HSA. Keep in mind too that these amounts are in addition to their monthly premium for the HDHP.
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HSAs should be an option, but not the only option. We all know insurance premiums are high, and I argue that we should get coverage for the amount we pay. HDHP premiums are usually not significantly different from plans with lower deductibles and copays. In deciding if an HDHP and HSA would work for you, I recommend calculating if you could comfortably save $546 per month for an individual or $1,092 for a family in addition to your monthly premium. If these amounts are unrealistic, I do not recommend an HDHP and HSA for you—instead I recommend choosing a Silver plan where you have copays to see doctors before a deductible. Whatever you choose for yourself and/or your employees, I highly recommend you speak to an experienced broker and tax professional about your options and needs.

For more information on the rules for HSAs, please review IRS Publication 969: https://www.irs.gov/uac/about-publication-969

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