Assessing the Impact of the House GOP Health Bill

Assessing the Impact of the House GOP Health Bill

Legislation would force nearly all participants in the nation’s health system to adjust

What the GOP Health Bill's Passage Means

The GOP health bill likely faces an uncertain future in the Senate, but its passage by the House has immediate political impacts. WSJ's Gerald F. Seib details three key takeaways. Photo: Getty

By

Stephanie Armour

Updated May 5, 2017 6:51 a.m. ET

The House Republican health bill is driven by one big idea: Insurers and markets, rather than government, should be empowered to find ways to provide health insurance to a broad set of people at affordable prices.
The bill that narrowly passed the House on Thursday creates a mechanism to free insurers to sell a wider variety of products—including less-comprehensive plans now barred by law—and to price them in new ways, potentially raising premiums for older and sicker Americans.
The bill ends the requirement that individuals carry insurance or pay a penalty, substituting a price increase for those who choose to go without coverage and buy it later. It gives states more freedom to experiment with their Medicaid programs.
Republicans are betting that these changes will engender competition, draw healthier people into the insurance pool and cut premium prices overall. Democrats, who uniformly opposed the bill Thursday, said many participants and providers in the health system will face higher costs and be worse off than under the Affordable Care Act, commonly known as Obamacare.

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The Trump Presidency

If the Senate approves the bill as is, here’s how it could affect sectors of the health system.

Employers

Employers would be freed from a number of the law’s taxes and requirements, most notably a requirement that larger companies offer health insurance to their employees or pay a penalty. How many employers would drop coverage as a result is unclear. In a significant change, the bill delays a tax on high-cost employer health plans until 2026.

GOP Health-Care Bill: Full Coverage

• GOP Approves Bill to Replace Most of Affordable Care Act
• Capital Journal: The Balance Sheet for Republicans After Big Health Vote
• Assessing the Impact of the Bill
• Senators Set to Write Their Own Version of GOP Health Bill
• Health Bill Jeopardizes Out-of-Pocket Caps in Employer Plans
• The Tough Senate Math for the GOP Health Plan
• Bill Moving Ahead Without Updated CBO Score
• Heard on the Street: Wall Street Shouldn’t Ignore Health-Care Overhaul
• New Health Bill or Old, Insurers Signal They’re Ready to Make Big Changes
• Which Lawmakers Helped Pass The Bill?
• How the Health-Care Bill Would Affect You
• House Bill Makes Health Care a Swing Factor for Midterms

Hospitals, Doctors

Hospitals would take a financial hit under the legislation, as nonpartisan reports indicate it would leave millions more people without health-insurance coverage. Hospitals would be hit the hardest in states that expanded their Medicaid programs.
An increase in the uninsured population would leave hospitals to cover more write-offs under financial-assistance programs and more losses from unpaid medical bills. Groups such as the American Hospital Association have warned hospitals stand to lose billions of dollars.
Groups representing doctors have come out strongly against a repeal of the ACA, saying it would leave more patients without insurance. So far, the changes aren’t expected to significantly alter a shift to paying physicians for outcomes, as opposed to paying them for the number of tests and procedures they perform—an ACA initiative that has drawn mixed reaction in the industry.

Health Insurers

The House Republican bill holds at least one major benefit for health insurers—the elimination of a tax on health plans that the industry has fought for years that helps fund the law. But it doesn’t solve the industry’s most urgent concern as companies make plans for next year’s ACA exchanges, since the bill fails to lock in federal funding that helps pay low-income enrollees’ health costs. Without the funding, many insurers may hike premiums sharply or pull back from the exchanges.
The bill also ends enforcement of the mandate for people to buy insurance, which could drive up costs in the insurance marketplaces if healthy, younger people opt not to get insurance.
Over time, the bill could have far greater effects, as subsidies that currently help lower-income people buy ACA plans change to more-limited tax credits that could reduce consumer sign-ups.

Those With Pre-Existing Conditions

The legislation is a mixed bag for people with pre-existing medical conditions. Insurers would still be barred from denying coverage to people with health problems. But in states that obtain federal waivers, insurers could charge these people higher premiums for about a year if they have a gap in coverage. States would have to set up programs that help these people obtain coverage, however.
A last-minute amendment would provide $8 billion over five years to help people with pre-existing conditions pay for health expenses such as out-of-pocket costs.

Higher Earners

Middle-income earners who don’t get coverage at work would be eligible for tax credits. But the credits would shrink for individuals making more than $75,000 or households making more than $150,000.
High-income earners would also benefit. The bill repeals a 0.9% tax on high-income people’s wages, starting in 2023. It also repeals a 3.8% tax on investment income as of Jan. 1, 2017, on wealthier taxpayers.

Medicaid users

People who rely on Medicaid will feel much of the brunt of the House legislation if it survives in the Senate. That is because the proposal phases out and then ends the law’s Medicaid expansion. The rolls of Medicaid and a related program have swelled to about 16 million since 2014 when the expansion provisions kicked in.
The bill would let people who were covered by states that expanded Medicaid remain on the program with federal funding, as long as they were signed up before 2020. But it would halt any money for any new beneficiaries. In addition, funding for Medicaid would be completely overhauled.
The end result would be less federal funding for the program. Republicans said that would help stabilize and preserve Medicaid and provide states with more innovative ways to save costs, such as imposing work requirements.

Older Americans

Older Americans who aren’t yet on Medicare likely would see overall higher costs under the legislation.
Under the ACA, insurers couldn’t vary the amount they charge older patients compared with younger patients by more than a 3-to-1 ratio, which helped keep premiums for older people lower.
The House GOP bill expands that and lets insurers change that ratio to 5-to-1, and states could obtain federal waivers that extend that ratio even higher.
Republicans have also taken steps to cushion the blow. Concerned about higher premiums, Republicans provide refundable tax credits in the bill for people who don’t get insurance at work. The amount of the credit increases with age. In a late addition to the bill, House lawmakers created an extra pot of money to enhance tax credits offered to people ages 50 to 64 to help them buy health insurance.

Younger Americans

Young, healthy Americans stand to gain from the repeal legislation because they would be able to buy less-comprehensive health plans with lower premiums in states that pursue waivers to roll back regulations on what benefits insurers must offer.
These consumers would also benefit from refundable tax credits that help them afford coverage. People under age 30 would be eligible for a credit of $2,000 a year, increasing on a sliding scale to $4,000 for those over 60.
Those who wanted to go without coverage would no longer have to pay a penalty for doing so. But if they later tried to get insurance after a gap in coverage, they would be subject to a 30% price boost on their premiums for about one year.

State governments

States could expect to pay more for the cost of their residents’ health care because the House Republican bill would usher in steep cuts to Medicaid by changing the way the program is funded.
States would also spend more to help cover the costs of people without insurance who need health care. A 2016 study by the Robert Wood Johnson Foundation and Urban Institute that examined a possible ACA repeal found state spending would increase by $68.5 billion by 2026, due to Medicaid cuts and more uncompensated care.
Some states are likely to try to minimize the impact by seeking federal approval for new requirements on Medicaid beneficiaries that could include work requirements, drug testing and lifetime limits on benefits.