It really depends on where you get your health insurance. In 2015, about half of all Americans with health insurance (49 percent) got their coverage through their employers in what is called the large and small group markets. Federal programs like Medicare and the VA cover about 16 percent of America’s insured population.
For these Americans, changes made by the AHCA to Medicaid and the ACA marketplaces will have pretty limited impact unless you lose your job or your employer drops your coverage.
The remainder of Americans who get individual coverage through private insurance or Medicaid will be much more affected, some significantly. The answer required a little explanation and a little bit of history.
The Individual Insurance Market
About 7 percent of Americans (over 21.8 million people in 2015) now get their health insurance through the individual insurance market (rather than through an employer or a federal program). That’s up by about 11 million people since 2013, before the Affordable Care Act (ACA) and the market places were fully implemented.
Prior to the ACA the individual insurance market was a lot like the wild-west, with frequent plan changes, high premiums, regular premium rate increases and consumers routinely popping in and out of the market. Customers with pre-existing conditions were excluded from the market and women and the elderly were frequently charged far more than younger and healthier enrollees.
The ACA marketplaces gave individual health insurance consumers greater leverage by creating a larger and more diverse risk pool. The elimination of pre-existing condition exclusions and the introduction of community rating, which requires insurance companies to offer policies within a given region at the same price to everyone without medical underwriting, made individual health insurance policies more affordable and attractive. ACA subsidies known as Advanced Premium Tax Credits, for individuals and families with incomes under 400 percent of the Federal Poverty Level suddenly made previously unaffordable coverage, affordable.
How Well Did the ACA Reforms Work?
Under the ACA, premiums were still volatile, but the subsidies lessened that impact. It was hoped that the subsidies combined with the ACA’s individual mandate to buy insurance or pay a tax penalty, would bring younger and healthier people into the individual market risk pool to help cover the costs of older and less healthy policy holders. Unfortunately, that risk pool is still skewed toward a more unhealthy population.
Reimbursement protections for insurance companies that took on riskier clients were reduced or eliminated by congressional and administrative changes. Funding for new COOP insurers was significantly cut causing many of these new competitors to fail, although some would have failed anyway. As a result of higher claims and decreasing profits, several major insurance companies made the decision to exit the market leaving limited offering in some regions, especially rural areas. Opponents of the ACA say that these are all signs that the marketplaces are failing, while supporters say this is a temporary market correction that will work itself out as long as the government keeps its commitment to making the marketplaces work.
How Will the AHCA Affect the Market Places?
Under the American Health Care Act, the market places will continue to exist, but without some key provisions that made them work.
Under the AHCA, the individual mandate that required Americans to purchase insurance will come to an end. That may incentivize younger and healthier enrollees in the individual market to stay out of it or leave it. Remember that the first Supreme Court case challenging the ACA’s individual mandate was decided in part because of the concern that the justices had about the detrimental impact that scrapping the mandate would have on the individual market. Now under the AHCA it would go away.
The ACA’s Advanced Premium Tax Credits (which are based on age, income, and the regional cost of healthcare) will now be based upon age alone. The AHCA tax credits will be substantially less for older and low income people. Those are people between 50 and 64 years of age making $40,000 year. It is arguable that AHCA subsidies for this population will be wholly insufficient to meet the need. For rural Coloradans 50 to 60 years of age making under $40,000 per year, subsidies will drop by 56 to 70 percent and that might make coverage completely unaffordable.
Lower subsidies and the elimination of the individual mandate could damage the current marketplace risk pools, leading to higher premiums and declining enrollment that could be used to offset claims costs. Uncertainty about the future of the market and the direction of health care reform in general could cause consumers and insurance companies to leave the marketplaces. Administration regulation and funding changes that limit public education and open enrollment periods could further damage the market places.
Elimination of Medicaid expansions by 2020 and further cuts to traditional Medicaid through the implementation of per capita federal block grant funding (which could reduce Colorado Medicaid funding by 25% over 10 years) will cause more people (600,000 in Colorado) to fall into the ranks of the uninsured unless AHCA high-risk pool funding is massively increased. Those people are unlikely to find adequate and affordable alternative private coverage in the revised AHCA insurance marketplaces.
Finally, if a state does get a waiver to eliminate the ACA community rating provisions (allowing insurance companies to charge people with pre-existing conditions more) marketplace enrollment will significantly decrease. If a state, does succeed in getting a waiver to eliminate the ACA’s essential health benefit package (that requires insurance pans to cover a wide range of conditions and treatments) marketplaces would be able to sell “limited-benefit plans” that have lower premiums but cover much less. For some younger consumers, that type of plan coupled with subsidies could potentially increase marketplace enrollment.