Republicans have been vowing to repeal the Affordable Care Act virtually since the moment it was passed. But until the GOP got control of the White House and both chambers of Congress in the most recent election, there was little pressure to put forward a detailed plan for how it would be replaced.
Now that Republicans are the proverbial dog that caught the car, some key concepts keep appearing in Affordable Care Act (ACA) replacement plans being discussed on Capitol Hill: health savings accounts, high risk pools and the ability to sell insurance across state lines.
They are all in the text of the replacement bill released Monday evening, which will be marked up in committees this week.
The ideas are not new but many of them are untested. Policy analysts and economists on the whole say they would cover fewer people, make healthcare less accessible and benefit the wealthy over the middle class and especially those with low incomes.
“These are all what I affectionately refer to as 're-segmenting ideas,'” Linda Blumberg, senior fellow at the Urban Institute Health Policy Center, told Healthcare Dive before the text of the latest bill was released. “They decrease costs to people not using care but push more of the costs to people who need care.”
The provisions do little to help people who cannot afford insurance, which experts say would ultimately result in far fewer people being covered — creating new challenges for many patients, payers and providers.
"[The core Republican concepts for ACA replacement] decrease costs to people not using care but push more of the costs to people who need care.”
Linda Blumberg
Senior Fellow, Urban Institute Health Policy Center
High-risk pools
Repealing the ACA would roll back protections for patients with pre-existing conditions — a number estimated at 52 million people. As a way to cover such people with high risk under an ACA replacement bill, leading Republicans such as House Speaker Paul Ryan have touted high risk pools as a possible solution.
The pools are meant to cover people who have been denied health insurance because of a previous condition or receive a premium quote higher than the level established by the pool. Bundling together people with high risk is meant to offer everyone coverage while keeping costs low for those who are relatively healthy.
Previous efforts to establish working high risk pools have failed and policy analysts say the funding required far exceeds the amount put forward in the latest GOP draft bill or any previous plans.
While the pools would mean lower costs for some who have few health needs, Blumberg said, they would also substantially increase costs for those who do need services. Before the ACA, about 35 states used high-risk pools, but they didn’t work well due to a lack of adequate funding: The state pools were forced to have limitations, such as annual and lifetime spending caps, high deductibles and premiums and some exclusions for people with pre-existing conditions.
“For the people who could get into them and could afford the prices . . . those pools saved their lives," Blumberg said. “But they couldn’t serve as many people as needed them by a long shot because the cost is really prohibitive when you’re not sharing that risk.”
“So you can do it," she added. "But it would cost you enormously in federal investment and nobody has talked about making an investment to that level.”
"So you can do [high-risk pools], but it would cost you enormously in federal investment and nobody has talked about making an investment to that level.”
Linda Blumberg
Senior Fellow, Urban Institute Health Policy Center
Conservatives putting forward the idea of high risk pools have acknowledged the high cost involved, projecting that as much as $20 billion a year would be needed.
High risk pools have also existed under the ACA in the form of the Pre-existing Condition Insurance Plan (PCIP) that covered people with pre-existing conditions until the provisions protecting their coverage went into effect in 2014. States using the PCIP quickly ran out of funding and had to impose enrollment restrictions. Eventually, new enrollment was stopped entirely to make sure that existing claims could be paid. Challenges in predicting costs limited any efforts to ease spending needs.
A Health Affairs analysis of the PCIP found wide variation in enrollee claims across and within states as well as major differences in actual spending and original allotments.
The effect of using more high-risk pools for insurers would depend on how they are administered, but without more funding than has been proposed, the programs would likely collapse before they could get started.
Selling insurance across state lines
The ability to sell health insurance across state lines actually was a part of the ACA, but no payers decided to take advantage of it. The ACA required insurers to have permission to sell in another state and had regulations that served as barriers to entry for payers.
The idea itself is relatively straightforward and proponents say it would increase competition and therefore drive down prices.
But there are unanswered questions about which states would regulate insurance plans and how that framework would be established. It is also not clear what agency would be charged with ensuring consumer protections. The replacement plans being considered do not answer these questions, meaning states could be left on their own in trying to regulate out-of-state plans.
An issue brief from The American Academy of Actuaries argues that allowing insurers to sell plans in other states would create a race to the bottom that would result in skimpier coverage. If one state had consumer protection requirements, it would lead to adverse selection in coverage and issue and rating rules as payers flock to states with fewer regulations.
Allowing insurers to sell plans in other states would create a race to the bottom that would result in skimpier coverage, according to the American Academy of Actuaries.
“Those insurers (that sell across state lines) would attract the healthier residents of other states, whereas states with more required benefits or a greater floor on benefit generosity would attract less-healthy enrollees,” according to the report.
Insurers, particularly smaller ones, would have trouble negotiating provider networks in states where they have few customers.
Health savings accounts
Health savings accounts (HSA) — personal, non-taxed savings accounts that can be used for certain health expenditures — are in general a bipartisan idea. Usually associated with high deductible health plans, they generally benefit those with fewer expenses and in higher tax brackets.
Most Republican replacement plans rely on HSAs more heavily than the ACA and allow people to put more money into them for more services. This increases their attractiveness to higher income people but does very little to help those with middle or low incomes.
One proposal from Sens. Bill Cassidy (R-LA) and Susan Collins (R-ME) would create Roth HSAs. They would be available to anyone, not just those with high deductible plans, and could be used to pay for health insurance premiums in addition to other costs.
Relying more heavily on HSAs to help replace the ACA increases their attractiveness to higher income people but does very little to help those with middle or low incomes.
In a white paper from the Center on Budget and Policy Priorities (CBPP), the authors state that this method would not be an adequate replacement for the ACA cost-sharing subsidies because it offers little help to people in low tax brackets or with no federal income tax liability.
It would also effectively give the wealthy a tax sheltering opportunity. Some plans have no caps on what can be contributed to an HSA, meaning people who have maxed out retirement account contributions could use an HSA in a similar way.
Households with incomes over $100,000 account for 70% of all HSA contributions, according to CBPP data. “The proposal thus would transfer resources up the income scale in reverse Robin Hood-fashion and likely would leave millions of Americans underinsured or uninsured,” according to the report.
The bottom line
These policy ideas popular among conservatives could certainly push health insurance costs down for some — like those with few healthcare needs and reliable income — but they also would undoubtedly offer fewer benefits to those with low incomes and high healthcare costs.
“The value of the policies that insurers are offering is going to go down under all these options,” Blumberg said. “They’re going to end up attracting the higher needs population and they can’t sustain that.”
Hospitals would see significant revenue losses if millions lose coverage under repeal of the ACA and are unable to afford new coverage under the replacement plans the GOP has put forward. Some executives have warned they would have to cut vital services, such as behavioral health.
A report prepared for the American Hospital Association found that hospital revenues would decrease nearly $400 billion between 2018 and 2026 with ACA repeal. The plans put forward by Republicans would barely dent that projection, experts say.
Hospital revenues are projected to decrease by $400 billion between 2018 and 2026 under ACA repeal, according to the AHA.
The leaders of the American Hospital Association and Federation of American Hospitals have written to President Donald Trump asking him not to repeal the ACA without an adequate replacement.
“Losses of this magnitude cannot be sustained and will adversely impact patients’ access to care, decimate hospitals’ and health systems’ ability to provide services, weaken local economies that hospitals help sustain and grow, and result in massive job losses,” they wrote. “As you know, hospitals are often the largest employer in many communities, and more than half of a hospital’s budget is devoted to supporting the salaries and benefits of caregivers who provide 24/7 coverage, which cannot be replaced.”
Republicans continue to debate whether, how and when to replace the ACA. Just as the reform law had major impacts on the industry, the process of finding alternatives will have significant consequences as well.
