The Affordable Care Act and its health insurance markets remain intact this year, although not without changes.
Congress made several unsuccessful attempts in 2018 to repeal the law, also known as Obamacare. But President Donald Trump and his administration have made some changes to the law that will impact this year’s open enrollment. They include:
- Shortening the time for open enrollment to 6 weeks, from Nov. 1 to Dec. 15.
- Ending cost-sharing payments to insurance companies that helped low-income Americans pay for insurance
- Reducing the advertising budget by 90%
- Declaring no penalty for not buying insurance
In the past, the law has made health insurance available to roughly 22 million Americans through government-run Marketplaces, expanded Medicaid coverage, and allowing adult children to stay on their parents' health plans.
But consumers have found rising premiums and dwindling choices in the health insurance marketplaces. Lawmakers continue to discuss options for fixing what many see as a broken system.
As they have worked on different proposals, Republican leaders have outlined broad policy ideas that may be part of a plan to replace the current law.
Here are some of the terms you are likely to hear as the effort to repeal and replace Obamacare moves forward, along with pros and cons of each.
Before the Affordable Care Act became law, insurance companies were allowed to deny people coverage because of a pre-existing medical condition. In the past, those people may have turned to state-based high-risk pools, which provided health insurance to people with medical conditions such as cancer, heart failure, and kidney disease who were unable to find coverage anywhere else.
High-risk insurance pools were active in 35 states for decades before Obamacare became law. The federal government also operated a high-risk pool for a period before the law’s changes took effect.
Pros: Just 10% of the population accounts for nearly two-thirds of health care spending. Separating people with expensive medical care needs from the broader insurance pool is likely to lower health plan premiums overall, says Linda Blumberg, senior fellow with the Urban Institute.
“If the sick people keep getting moved out and are in the high-risk pool, you don’t share in their cost,” she says.
Cons: Coverage in high-risk pools was very expensive, says Sabrina Corlette, research professor with Georgetown University’s Center on Health Insurance Reforms.
Most states charged 150% to 200% more for premiums in their high-risk insurance program. And they often had waiting periods of 6 to 12 months before covering someone with pre-existing health conditions. Plans included annual and lifetime limits on coverage, and deductibles were very high. Most state programs had to limit enrollment to control costs.
They lost money anyhow -- more than $1 billion annually for the 35 state-based programs combined. The high-risk program run by the federal government lost more than $2 billion before closing shop. If new high-risk pools stand any chance at success, Blumberg says, they’re going to need a lot of funding.
“If you take sick people and separate them off from healthy people and give them meaningful coverage, it will cost a boatload of government dollars to do it.”
Selling Insurance Across State Lines
Historically, state governments have regulated insurance companies. Firms that wish to do business must get a license and follow that state’s specific rules. Before the Affordable Care Act became law, there was quite a bit of variation in those rules from one state to another. The law helped to make those rules more uniform.
Trump has proposed loosening existing federal requirements to make it easier for health plans to sell insurance without having to comply with the specific rules of each state in which they choose to do business.
Pros: Allowing insurance companies to sell health care plans across state lines would increase competition among insurers and do away with requirements that drive up costs. Consumers are also likely to have more choice in the variety of insurance products than they do now under the Affordable Care Act.
“You get rid of the lines, it brings in competition. So, instead of having one insurance company taking care of New York, or Texas, you'll have many,” Trump said in February during the CNN-Telemundo Republican debate.
Cons: Selling insurance across state lines is unlikely to save consumers money and may raise costs.
Ed Haislmaier, senior research fellow with The Heritage Foundation, points out that 80% to 90% of insurance premiums are paid to the doctors and hospitals that provide medical care. If you live in Los Angeles and buy a plan in Arkansas, for example, you’ll still end up paying California rates to the doctors there.
The ultimate cost of insurance won’t be dissimilar to a California-regulated plan, Haislmaier says.
In addition, Corlette says, insurers would have a strong incentive to set up shop in states with fewer rules and consumer protections and to sell bare-bone policies to people who are primarily healthy.
“You would very quickly have a race to the bottom,” she says.
That may reduce premiums for people who are healthy, at least for a while. But it would increase costs for people with medical conditions or those who prefer to have insurance with more generous benefits, Blumberg says.
Plans sold across state lines also become difficult to regulate. Consumers with complaints about an out-of-state health plan can’t turn to their state officials for help, she says. That’s not just a problem for consumers. State regulators don’t like the idea either. Although states can create marketplaces to sell insurance across state lines now, none have done so.
“Republican or Democrat, they all hate it because it undermines the state’s regulatory authority,” Blumberg says.
Medicaid Block Grants
Today, Medicaid is paid for by states and by the federal government. As more people become eligible for the program and enroll, the greater the government’s cost.
There are a number of different ways Medicaid block grants could change how the program is funded. But generally, they are designed to reduce the federal government’s spending. These federal grants would provide states with a fixed “block” of money. The funds wouldn’t adjust to changes in the economy or increases in health care or drug costs. Instead, they would grow according to a preset formula no matter how many people enter the program, making spending far more predictable.
“In general, the concept is centered on the federal contribution to Medicaid being more budgeted as opposed to open-ended … in exchange for which states would have more flexibility in how to spend that money,” Haislmaier says.
Pros: With block grants, the federal government determines the fixed amount of money states receive to cover their Medicaid population. That amount would probably be set to grow each year at a lower rate than it has in the past, which reduces spending over time. The Congressional Budget Office (CBO) estimated that one Republican plan to turn Medicaid into block grants would reduce federal spending by $1 trillion over 10 years.
In exchange for less federal money, states face fewer restrictions about how they operate their Medicaid programs.
That allows states greater flexibility to design their Medicaid programs in ways that best meet the needs of their residents.
Cons: “It will squeeze the amount of money the states will receive for the program, and it doesn’t adjust with what’s going on in the economy,” Blumberg says.
Today, if the economy goes south and more people sink into poverty, more people then become eligible to get insurance coverage under Medicaid. Under block grants, it’s unlikely that state Medicaid programs could accommodate an expansion.
“Block grants won’t adjust for the fact that more poor people need insurance,” Blumberg says. They also don’t keep up with the rising cost of medical care.
Blumberg says that while states will have more flexibility, block grants will provide fewer protections for people with low incomes and no protection at all for people who suffer economically when the economy declines. The same CBO analysis said the lower expenses would stem from denying roughly 14 million people access to Medicaid.
Health Savings Accounts
Trump has proposed expanding the use of health savings accounts, or HSAs, as an alternative to Obamacare.
HSAs are investment accounts -- like a 401(k) retirement or a 529 college savings plan -- that can be opened by anyone enrolled in a qualified health insurance plan.
These accounts have been around since 2004. Today, nearly 1 in 5 people with work-based health insurance are enrolled in an HSA.
A number of Republican plans would nearly double the maximum yearly amount of funds you would be allowed to place in an HSA, which is currently $3,450 for individuals and $6,900 for families.
In addition, Trump has said he intends to allow HSA funds to be used by any member of a family without penalty. They would also become part of a person’s estate and could be passed on to heirs without having to pay a death penalty.
Pros: HSAs offer real tax advantages. The money you deposit goes in tax-free, which lowers your taxable income. Your HSA money also accumulates tax-free and can be withdrawn tax-free as long as it is spent on qualified health care costs.
“They’re a great tax shelter,” Corlette says.
Another argument for expanding the use of HSAs: Because they’re paired with high-deductible health care plans that require people to spend thousands of dollars before insurance kicks in, they become smarter health care shoppers by comparing prices and more carefully using health care services.
Cons: The same argument for expanding HSAs -- that more people will face higher deductibles -- is also a common argument against them.
According to Blumberg, this is another way of shifting the burden of high medical costs onto individuals.
Critics argue that HSAs primarily benefit young and healthy people who don't use a lot of medical services. They also help those with high incomes who have the extra money to set aside and are more likely to benefit from the investment tax breaks. People with low incomes are unlikely to have the extra money to invest in these accounts, opponents say.
And, a recent study found that nearly 3 in 10 people with low incomes enrolled in high-deductible health care plans paired with HSAs routinely spent more than 20% of their after-tax income on medical costs -- even when their employer contributed money to the account to help cover their expenses.
In addition, people in lower-income brackets or who earn too little to pay federal income taxes (about $10,000 for an individual) receive no tax benefit from these policies.
Tax Credits for Health Insurance Premiums
Republicans in Congress have developed Obamacare replacement plans that help people better afford health insurance with the use of tax credits.
These tax credits adjust with age rather than income, as current law requires. Under Obamacare, people with lower incomes receive more financial assistance to buy insurance. Currently, Obamacare limits the amount insurance plans can charge for older people by capping the difference between a young adult and an older adult at a 3:1 ratio. The plans that base the tax credit on age often eliminate that restriction.
Pros: This approach limits how much the federal government spends on tax credits to help people afford insurance, Corlette says.
Proponents also say it offers more people financial help to buy insurance, and more flexibility when choosing insurance plans. Most Republican plans do away with current requirements for insurers to cover a core set of essential health benefits. That allows more variety in the type of plans insurers can offer. Health care plans that don’t cover services such as maternity or prescription drugs are less expensive. So although tax credits offered in these replacement plans are far less generous than those available through Obamacare, because the plans would cover fewer benefits, they would also be less costly.
Like Obamacare, a number of Republican plans allow people to apply tax credits in advance as a way of lowering their monthly premium costs.
Cons: Blumberg says the fact that the tax credits don’t vary by income means that no matter how much money you earn, the financial assistance is the same.
“You’re prioritizing giving the rich a tax cut they don’t need and short-changing the guy down the street who does need assistance,” she says.
In addition, Corlette says that tax credits outlined in some plans would rise with general inflation but are not tied to medical inflation.
“The problem with that is medical inflation has tended to grow much faster than general inflation, so if that historic trend continues, the value of the tax credit shrinks over time.”
Allowing Drug Imports From Other Countries
In his interview for Time magazine’s "Person of the Year,” Trump said, “I’m going to bring down drug prices. I don’t like what’s happened with drug prices.”
Trump’s website outlines broad plans for health care, which include “allowing consumers access to imported, safe and dependable drugs from overseas.” The idea has typically been supported by many Democrats as well, including Trump opponent Hillary Clinton.
Although it’s unclear how this would work, experts say it’s likely that various programs or insurers would be allowed to make deals in order to bring medications from other countries to Americans.
Pros: By allowing Americans to legally buy medications from other countries in which the government regulates the price of drugs, they’ll save on their medication costs.
Cons: “What this policy is saying is that we won’t regulate drug prices here in the U.S., but we’ll take advantage of the fact that other countries do,” Blumberg says.
And, because it’s likely that insurers or other third parties would help facilitate sales, Haislmaier says any hoped-for cost savings will probably be eaten up by middlemen.
“You go to Canada and buy drugs and get them cheaper because they regulate prices and we don’t. You buy it for $100 instead of $200. What happens when you get a middleman to do it for you? Someone goes to Canada and they don’t sell it to you for $100, they sell it to you for $190. They pocket $90.”
Given potential problems with this approach, Haislmaier is skeptical about the likelihood of policies allowing drugs to be imported from overseas being included in any future health plans.
“I don’t see it taking place.”