When Donald J. Trump ran for president, he promised to repeal the Affordable Care Act “Day One.” Although he has moderated that position, big changes could be coming.Obamacare, formally known as the Affordable Health Care Act, is a health insurance reform law enacted in 2010. It fundamentally transformed the health insurance industry in the United States by:
- Requiring all Americans to have coverage and penalizing those who do not.
- Outlawing the practice of insurers charging extra or not offering coverage to people with pre-existing medical conditions.
- Offering government subsidies to low-income families who qualify.
Trump told audiences during his campaign that he wanted to repeal the law immediately, calling it a “catastrophe.” House Speaker Paul D. Ryan (R-Wis.) and other congressional Republicans have concurred.
A Kaiser Family Foundation poll reveals that opponents of the law say that ObamaCare is too costly for the government and individuals to bear and is an overreach of the government’s powers. Proponents point to the fact that more people have coverage now and more affordable access to healthcare and preventive services.
While we can’t predict the future, we have gained some hints as to what will happen if ObamaCare becomes TrumpCare.
What Will Remain the Same
Now that he’s been elected, Trump has been talking about keeping some aspects of the law, particularly two that are popular with citizens: prohibiting insurers from denying coverage to people who have pre-existing conditions and allowing young adults to stay on their parents’ insurance until they are age 26.
Trump would like to get rid of the individual mandate that requires people to purchase health care insurance or pay a penalty — instead leaving it to individuals to decide if they want to buy coverage. However, eliminating the mandate could have serious consequences. Having universal or near-universal health insurance coverage is key to making the Affordable Care Act’s “take all comers” requirement work.
In any developed country, including the U.S., the sickest 10 percent of individuals account for two-thirds of total healthcare costs, according research by the Henry J. Kaiser Family Foundation. Insurers rely on having a mix of healthy and unhealthy individuals to control costs. If the mandate were eliminated, a number of healthy individuals will leave the insurance market, leaving the insured pool sicker overall. That pushes insurers’ costs up, forcing them to increase rates to remain profitable. When that happens, more people will drop out of the market. At a certain point, only the very sickest people — those who know they will use their coverage — will buy health insurance and the system collapses.
The Trump administration may also propose changes to the Medicare and Medicaid programs. Trump wants to provide block grants to states to fund Medicaid, which provides coverage to people living below the poverty line. A block grant allows each state to spend its Medicaid funds as it sees fit.
Trump made Health Savings Accounts (HSAs) a major part of his health insurance campaign platform. You can put aside pre-tax dollars in an HSA to cover medical expenses. Any funds you withdraw to pay for qualified healthcare expenses will not be taxed. Currently, only people with a high-deductible health insurance plan (HDHP) and no other health insurance qualify for an HSA. Trump wants to make HSAs available to anyone.
Another idea Trump floated was creating high-risk health pool insurance programs to help people with pre-existing health problems. Thirty-five states had these programs before the Affordable Care Act effectively eliminated them. Although all had their own rules and regulations, most shared several characteristics: rates usually 150-200 percent higher than medically underwritten individual policies in the market; exclusions of pre-existing conditions, usually for 6-12 months; lifetime and annual limits; and high deductibles. (Source: Issue Brief: High-Risk Pools for Uninsurable Individuals, by Karen Pollitz, August 1, 2016, Henry J. Kaiser Family Foundation)
Trump also called for transparency in costs that healthcare providers charge so consumers can make more informed decisions.
One Affordable Care Act provision that both Trump and most of Congress seem to agree on is the elimination of the 40 percent excise tax on high-dollar plans, the so-called “Cadillac Tax.” The goal of the Cadillac Tax was to fund some of the Affordable Care Act’s mandates, including certain research and benchmarking projects. To date, nobody has proposed a way to replace the funds that were to be generated from that tax.
Proponents of change want a plan that reduces government intervention and lowers healthcare costs. Analysts both for and against the Affordable Care Act agree that dismantling parts of the law will not be easy.
The Congressional Budget Office forecasts that changing or repealing the law would cause the deficit to grow by $353 billion and the number of people with health insurance to fall by 24 million. Making piecemeal changes could also cause instability in insurance markets, since the law is built on interlocking provisions. For instance, Trump’s desire to retain the Affordable Care Act’s prohibition on pre-existing condition exclusions while eliminating the individual mandate could discourage healthy people from buying insurance and lead to the collapse of markets.
Many agree that making free-market reforms, such as opening Health Savings Accounts to all Americans and allowing people to buy health insurance over state lines, could make markets more competitive and help reduce costs.
We help our clients understand their coverage and stay informed of major changes in the laws that could affect your coverage. If you have any questions on your health insurance, please contact us.