5 things hospitals, insurers should know about Republicans' ACA replacement

House Republicans have released the full text of the long-awaited legislation to repeal and replace the Affordable Care Act (ACA). Titled the “American Health Care Act (AHCA),” the bill would eliminate the ACA’s mandate for individuals to buy insurance and roll back the expansion of Medicaid, while restoring disproportionate share hospital (DSH) payments.

“After years of Obamacare’s broken promises, House Republicans today took an important step,” said House Energy and Commerce Committee Chairman Greg Walden, R-Oregon, whose committee will be the first step in advancing the bill. “We’ve spent the last eight years listening to folks across this country, and today we’re proud to put forth a plan that reflects eight years’ worth of those conversations with families, patients and doctors. Simply put, we have a better way to deliver solutions that put patients—not bureaucrats—first, and we are moving forward united in our efforts to rescue the American people from the mess Obamacare has created.”

Here are five key points about the legislation and the political battle ahead:

1. What hospitals get

The biggest win for hospital lobbyists in the AHCA would be the restoration of DSH payments under Medicaid. The cuts would be restored at different times in different states, with hospitals in non-Medicaid expansion states receiving payments in 2018, while hospitals in states that did expand Medicaid would have to wait until 2020. This would coincide with major changes to Medicaid, placing per capita caps on the program for the first time and ending the extra funding for those enrolling under the ACA's expansion guidelines that same year. 

It also contains a benefit for healthcare CEOs, repealing an ACA provision on tax deductions on pay above $500,000.

“Obamacare added a limitation for certain health insurance providers that exceeds $500,000 paid to an officer, director or employee. This section repeals the limit on the deduction of a covered health insurance provider for compensation attributable to services performed by an applicable individual starting in 2018,” according to a summary of the bill released by the House Ways and Means Committee.

Otherwise, the legislation could spell trouble for hospitals. With an increase in uninsured individuals and fewer people eligible for Medicaid, hospitals may face a sharp rise in uncompensated care costs and bad debt, which could lead to closures.

2. What insurers get

Insurance companies receive more of their favored changes in the bill than the hospital industry. The legislation would permit insurers to charge more for older customers, increasing the permissible age variation ratio to 5:1 rather than the ACA’s 3:1—the same increase Republicans had proposed in 2016.  

While insurers would still have to cover people with pre-existing conditions, the ACA’s ban on denying coverage would be modified. If those customers don’t maintain continuous coverage, defined as any lapse longer than 63 days, they would have to pay a 30 percent “late enrollment surcharge” on top of their premium, beginning in 2019. Unlike the ACA’s individual mandate penalty, the fine would go to the insurer, not the federal government.

3. What stays from the ACA

Many of the ACA’s taxes are jettisoned by the bill, including the medical device tax, the Medicare Hospital Insurance tax increase and the annual fee on health insurers.

What will remain, however, are several popular coverage requirements from the ACA. Children would still be able to remain on their parents’ health plans until the age of 26, insurers wouldn’t be able to impose annual or lifetime limits on coverage and preventive care services would still be included in plans’ essential health benefits.

In other instances, parts of ACA would be changed substantially. The subsidies for insurance premiums would now be based mostly on age, rather than on income, though with some modifications from similar proposals from HHS Secretary Tom Price or drafts of this legislation.

For example, a person under the age of 30 would receive $2,000, while a person between the ages of 60 and 64 would receive $4,000. Credits for any single family would be capped at $14,000. Subsidies would be phased out for an individual making above $75,000 or $150,000 for joint filers, decreasing by “$100 for every $1,000 in income higher than those thresholds.”

4. What’s missing

Because the legislation could potentially be passed through the budget reconciliation process, which allows Republicans to bypass a Democratic filibuster in the Senate, lawmakers are limited in what can be included.

Notably, there’s no mention of allowing insurers to sell plans across state lines, a favorite proposal of President Donald Trump. He tweeted after the bill’s release that the change would be included in the next phases of his healthcare rollout.

The legislation also doesn’t come with an assessment from the Congressional Budget Office (CBO), which would detail how the bill would affect the federal budget and an estimate of how many people could lose insurance coverage under the plan.

5. What politicians are saying

The reaction from politicians outside Republican leadership in the House and Senate is mixed on the Republican side and negative among Democrats.

What could potentially doom the legislation is the opposition of four Senate Republicans. Sens. Rob Portman of Ohio, Lisa Murkowski of Alaska, Cory Gardner of Colorado and Shelley Moore Capito of West Virginia wrote a letter to Senate Majority Leader Mitch McConnell saying they’ll oppose efforts that doesn’t "protect individuals and familes in Medicaid expansion programs" or offer greater flexibility to states managing their Medicaid benefits and eligibility. 

"We believe Medicaid needs to be reformed, but reform should not come at the cost of disruption in access to healthcare for our country's most vulnerable and sickest individuals," the four wrote.

On the other side of the spectrum, Sen. Rand Paul, R-Kentucky, called the bill “Obamacare Lite” after its release.

Assuming the bill passes the House, if any three Republican Senators vote against the bill and Democrats are united in opposition, the legislation wouldn’t pass in the chamber. The top Democrat on the Senate’s health committee indicated the party would vote of as a unified bloc against the bill.

“Trumpcare falls miles short of the promises the President and his party made to families and communities,” said Sen. Patti Murray, D-Washington. “It would take coverage away from people across the country, raise patients’ health care costs, put power back in the hands of insurance companies, and double down on attacks on women’s health by defunding Planned Parenthood. Republicans have now made it absolutely clear they are willing to create chaos and leave families sicker and less financially secure just to score political points—and Senate Democrats are going to fight this harmful effort every step of the way.”