American Health Care Act: Repealing and Replacing Obamacare

One of the signature legislation under President Obama is the Affordable Health Care Act (ACA) or widely known as Obamacare. If you have not read my article explaining Obamacare yet, I would suggest you follow the link here to get some background information http://odecon-1.blogspot.com/2014/12/the-rise-of-obamacare.html. Just do it, will you?

https://goo.gl/L9s6nm

Let’s be honest, Obamacare is not perfect. No social policy, especially of this magnitude and profound effect to the society, would be perfect in any possible way. However, one of the proud thing that Obamacare has achieved that it helps expand the health insurance coverage to an additional 20 million Americans who were not insured before the bill was passed. That is a lot of people getting insured which means it has helped save many lives and prevented many families from going bankrupt. Let’s face it: healthcare is America is very expensive. Another benefit of Obamacare is that it prevents insurer from rejection health insurance coverage based on pre-existing condition (a medical condition that you have before you get health insurance coverage). Additionally, young adults can stay under their parents’ health insurance until they are 26. ACA also provides subsidy if a person over the age of 26 do not receive health insurance from their employer and cannot afford to buy health insurance.

Obamacare seems like a pretty sweet deal, but it also comes with a cost. You see, one of the problems caused by Obamacare is the rise in insurance premium. As more sick people getting health insurance coverage and the healthy ones are reluctant to buy the health insurance (some would choose to pay penalty), insurance companies have to increase the insurance premium to cover for the medical expense, operation expense and to make profit. Let’s take a look the rise in health insurance premium in some of the states in the U.S. Insurance premium in Arizona has risen by 116 percent in a year. (http://www.washingtontimes.com/news/2016/oct/28/key-facts-about-rising-arizona-health-insurance-pr/). Another problem is that some insurers choose to leave their operation in some counties in some states in the U.S. For example, from Paul Ryan’s presentation, we can that insurance options are disappearing fast because insurers are leaving some counties behind. An increasing number of counties in the U.S. only has one insurer.

The Republicans have been wanting to repeal Obamacare for years now. There has not been a better time to get rid of this controversial bill, since the Republicans are controlling the White House, House of Representatives and Senate. But the problem is what kind of healthcare plan are they going to replace Obamacare with? After months of hearing the talk of repealing and replacing Obamacare, now we can learn about the Republicans’ plan. Paul Ryan proposes a new healthcare bill and it is called American Health Care Act. Here is the summary that I can briefly discuss. I don’t claim to be an expert, as I have to admit: some parts of the new bill is very confusing and need further research to have a better understanding. But I’ll try my best to explain it.

What remains from Obamacare?

Okay, we’ve talked about the problems of Obamacare and here are the solutions that the Republicans believe will fix it. But let’s first start with which main features of Obamacare are still in the AHCA. First, children are allowed stay under their parents’ health insurance until they are 26. Second, insurance companies will not be able to reject coverage for people with pre-existing conditions. Okay, so Republicans do agree with some of the benefits of Obamacare.

What is new?

Now let’s discuss what is new.

No Individual Mandate

The controversial individual mandate (you need to buy health insurance or pay a penalty) is gone. Many Republicans hate Obamacare because of this individual mandate. They think that it’s the government restricting freedom of choice and telling people what to do. From our article on Obamacare (did you follow the link above?), there is good reason for making people buy health insurance. The health insurance system needs those healthy individuals to also buy health insurance which is a way to pay for the unhealthy individuals. The whole insurance market system will collapse if only unhealthy people buy the health coverage.

Risk Pool

As for those with pre-existing condition, AHCA proposes a model where those with pre-existing conditions will be grouped into one risk pool. The insurance premium (the money you pay to get health insurance coverage) for this pool must be very high, since they have a higher chance of getting sick and requiring medical attention. According to AHCA, this risk pool will receive support from the state budget with the support from the federal government to subsidize this risk pool. AHCA also proposes that states should have a re-insurance program for those with pre-existing conditions. Those who benefit from this proposal is the healthy one, because as unhealthy individuals are removed from the healthy pool, the insurance premium for this low-risk group should stabilize or even decrease.

Medicaid, Tax Credit and Health Saving Account

As for the Medicaid (a social program to support poor people and disabled people), the federal government will send per capita block grant to the states which Paul Ryan believes is a way to give back power to the states. The poor who can’t afford health insurance may see a huge drop in their health subsidy. Instead, there will also be a tax credit for those who do not receive health insurance from their employers. The tax credit ranges from $2,000 to $14,000 based on age. AHCA also expands health saving accounts (HAS) for families as well.

Whether AHCA will help lower insurance premium, provide more options and provide quality health care to its citizen, as promised by Paul Ryan, remains to be seen. Well, the outcome will be in a few more years. But first, the bill will need to be passed by the House of Representatives and Senate first. So far, it’s not very popular among both the Republicans and Democrats. Rand Paul calls it Obamacare Light. Others call it Obamacare 2.0. There are always winners and losers of a social policy. As for now, the losers seem to be the poor people who can’t afford health insurance and those with pre-existing conditions.